Headline: VelaTel (VELA) and CM Mobile—A NEVER Expire $1000 Call Option With 50X+ Upside…Really
The NBTER research team is always looking for major turnaround opportunities…and this opportunity with an old sponsored research client is now too attractive to pass-up. $1000 of speculative money (i.e., money you would never miss) has the potential to become $50,000 or more if our forecast and analysis is largely correct.
As such, buying VELA shares today is like getting a call option on a stock that NEVER expires…with up to 50X upside or $50,000 to gain and $1200-$1500 downside risk to lose for buying one million shares at current valuation.
Not many times does an investor gets a risk/reward opportunity like that…here is the turnaround and upside story.
The VELA/CM Mobile Turnaround Opportunity
Velatel—the name strikes fear and loathing into our old ChangWave Research subscribers…ah the nightmare.
VELA (then ChinaTel or CHTL) was UP 15X for us is six months 2009-2010…subscribers earned tens of $millions in profit…well those who sold at $2 from our .28 cents entry point.
Then VELA crashed 99.9% DOWN after they invested $220 million+ over the last four years in search of an insurgent mobile network carrier strategy and business model to capitalize on the 5000% growth rate of 4G LTE/broadband wireless technology in China/Hong Kong and Southeast Asia (according to Jupiter Research 2014-2020).
That was then…this is now. We now believe Velatel Global Communications, Inc. (VELA) has actually executed on a significant value creation engine for the company and its long suffering shareholders.
Here is the story…judge for yourself. (Disclosure: entities NBT controls own 25 million VELA shares and have previously been engaged in investor relations and financing engagements for the company).
The Compelling Upside Potential: 40-to-60X Appreciation over 18-36 Months.
It is simple math: for approximately US $6.5 million VELA recently acquired 100% of CM Mobile, a 13-year old licensed mobile virtual network operator or MVNO located in Hong Kong. Over 125,000 prepaid and post-paid customers (mostly frequent business travelers from China who travel to Hong Kong/Taiwan/Macau) use CM Mobile to save 75% OFF roaming charges from their local mobile network operator.
With over US $14 million+ in forecast 2014 revenues and $1.6 million pro-forma 2014 cash flow, VELA recently refinanced CM Mobile at a $10 million valuation or approximately $80 per CM Mobile subscriber (80% of which are pre-paid subscribers)… and VELA still owns 100% of the company.
We will cover the massive 10X-20X CM Mobile growth strategy in a moment…but bear-in-mind…
Currently, the ENTIRE market cap value of VELA is around $1.2 million…yes that is right. As a 100% consolidating subsidiary of Velatel Global, 100% of CM Mobile's revenue and EBITDA cash flow will be reported by VELA in 2014.
That is upward of $1.4 million in EBITDA based on their disclosed financials.
CM Mobile's 2013 cash flow now exceeds VELA market cap…amazing. MVNO companies are valued at 4-8 times EBITA...VELA is now valued at .8X estimated 2014 EBITDA for CM Mobile or less than 1X earnings before interest, depreciation and amortization expense.
Even assuming VELA's equity ownership stake of CM Mobile is reduced to 60% from additional equity capital (and a 25% investment option held by a major $billion mobile network operator is exercised) there is currently @$5 million mispricing of VELA stock valuation vs. CM Mobile or 5-to-1 upside at current valuations.
Again…CM Mobile's current $10 million private market value ($80 per subscriber) and its very real
> $400,000 per quarter cash flow vs. VELA the publicly traded holding company $1.1 million market cap is a massive disconnect in valuation.
The mispricing is primarily due to a set of disastrously dilutive equity financing transactions for VELA over the last 36 months. We will go over how THAT dilution disaster has been largely solved too…at the end of this report.
KEY POINT: With $10M of real value in its 100% owned subsidiary CM Mobile, and $1.2M market cap for VELA…new shareholders get an enormous discount to real private market value of VELA assets. THAT means very limited downside and enormous upside potential as the CM Mobile growth story goes main stream.
OLD shareholders crushed should, in my opinion, throw a few $thousand into VELA from cash lying around in an IRA and NOT LOOK at the stock for a few years…just for the helluva it!
If you have any original shares, you should sell them in late 2014 for tax loss (if they are held in a taxable account).
The Massive CM Mobile Growth Story
A very significant million+ subscriber sharing deal with $billion Singapore mobile network operator StarHub is the main growth catalyst for CM Mobile over the next 12-24 months (which we will address later in this report).
But it's the infrastructure upgrade for CM Mobile that makes massive.....
Tobin Smith
Founder & CEO| NBT Capital Markets LLC
Washington D.C. | Los Angeles | New York | Palo Alto
301-412-8622 (mobile: text = best bet) |240-483-4629 (office) |tsmith@nbtgroupinc.com
http://www.nbtequitiesresearch.com
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