WWA Group, Inc.
Rating: Speculative Buy - 12 month price target = $2.00
WWAG $0.79 — (OTC BB) May 30, 2007
Total Revenues (Millions)/ Earnings (loss) per share;
FY (12/04) 11 M / 0.05
FY (12/05) 16.3 M / 0.07
FY (12/06) 17.62 M / 0.07)
FY (12/07) E 25.5 M / 0.20
52 - Week range: $0.50 - $1.35
Shares outstanding as of 30-05-07: 16.6 million
Approximate float: 5.1 million
Market Capitalization $13 million
WWA Group, Inc. is engaged in the auctioning of transportation and industrial equipment. The Company operates its largest auctions at its primary facility in Dubai where 33 large unreserved equipment auctions and five smaller transport auctions have been held since March 2001. WWA Group's primary auctioned items include mobile and stationary earthmoving and construction equipment, such as crawler tractors, excavators, wheel loaders, cranes, trucks and trailers, generators, compressors, agricultural tractors and forklifts. Much of the equipment can be used in multiple industries. The Company also sells light vehicles and other related items, such as boats and motorcycles. All of its auctions are unreserved, meaning that there are no minimum or reserve prices; each and every item is sold to the highest bidder on the day of the auction.
Key Investment Considerations:
I am rating WWA Group (OTCBB: WWAG.OB) with a Speculative Buy rating and a twelve-month price target of $2.00 per share based on an increase in cash flow arising from a larger auction facility, overseas expansion and from investments in shipping and mining.
International Hub:The WWA group are located in Dubai, which is quicly becoming one of the most attractive business hubs on the planet. Dubai’sport, Jebel Ali, constructed in the 1970s, has the largest man-made harbour in the world. Dubai is also increasingly developing as a hub for service industries such as IT and finance, with the establishment of a new Dubai International Financial Centre (DIFC). The population of Dubai has exploded in the last 10 years. There is no evidence that the pace of expansion is slowing.
1968 58,971
1975 183,000
1985 370,800
1995 674,000
2005 1,204,000
Cash Flow: Despite WWA Group being subject to a substantial increase in yard and staff housing rent expenses in the last 2 years, which is a result of a tremendous demand for housing and land within the UAE’s Free Zone, the WWA group has a history of operating cash flow from operations. The company’s attempts to diversify into other regions and markets (see below) should consolidate cash flow, and reduce its exposure to volatility arising from a single revenue stream. In addition, the Jebel Ali Free Zone is an income tax free zone. Therefore, the profits of WWA Group are not taxable in Dubai. WWA Group has determined that undistributed earnings from Dubai will be reinvested in the business indefinitely and that such earnings will not be distributed to the U.S. parent.
Diversification: WWA has embarked on its expanded operations plan to leverage its dominant equipment auction and trading base into a diversified business including shipping and mining activities in the Gulf region that are related to heavy equipment. For example, ownership of a shipping company and control over a large volume of equipment being moved around the world by regular consignors provides vertical integration opportunities that could combine auction services with the ability to meet shipping needs.
WWA Group acquired 32.5% of Power Track Projects in December of 2006. Power Track is engaged in a large scale limestone mining and aggregate production project in Ras Al Khaimah, and is currently managing a project for the government of Ras Al Khaimah, U.A.E., to excavate over 25 million tons of limestone through 2010. The process of removing the limestone is equipment intensive utilizing earthmoving and support equipment working with three crushing machines capable of producing over 10,000 tons of crushed aggregate per day. The WWA group has indicated that Power Track Projects is growing organically, but may require additional funding to fuel growth. The aggregate business is set to grow in line with the growth in construction projects in the U.A.E. and the Gulf region.
In June, 2006, the WWA group announced that it agreed to acquire a company that owns a 3,500 dead-weight-ton shipping vessel specializing in moving heavy equipment to and from the Gulf region and India. The vessel is chartered for the next 42 months to a freight company that handles shipping for WWA and WWA customers. The previous loan agreement and the current acquisition are based on gross revenue from the vessel charter of approximately $1,800,000 per annum, and net profit of approximately $900,000 per annum.
WWA Group to partner with an established Johannesburg based equipment dealer in a 50/50 joint venture company to run equipment auctions in the Republic of South Africa (RSA). The company has indicated there are several synergies with its existing business, and a large amount of potentionally auctionable new and used mining equipment present within the country.
New Auction Site: The WWA Group has been operating in a yard rented on an annual basis from Dubai Ports World since 2002. The companies new site in Jebel Ali will be larger and capable of holding more equipment than the existing site, eliminating the current restraint on growth. The WWA group has signed a 20-year lease on a 1 million square foot property in the Jebel Ali Free Zone, Dubai. WWA Group plans to build a permanent facility on the site for auctions, trading and the refurbishment of heavy equipment.
Company Overview:
Auction Business: WWA Group’s business strategy is to increase cash flow from operations and expand operations to new auction sites. Inherent to the companies growth plans is the expansion of lower cost auction methods, such as on-line auctions, video auctions and transportation equipment only auctions, all of which can be held on a more frequent basis than the larger equipment auctions. While smaller in size, these auctions will not interfere with or detract from WWA Group’s major equipment auctions, and the economics of scale at the Dubai facility are efficient for this purpose.
WWA Group's primary auctioned items include mobile and stationary earthmoving and construction equipment, such as crawler tractors, excavators, wheel loaders, cranes, trucks and trailers, generators, compressors, agricultural tractors and forklifts. The Company also sells light vehicles and other related items, such as boats and motorcycles. All of its auctions are unreserved, meaning that there are no minimum or reserve prices; each and every item is sold to the highest bidder on the day of the auction. Consignors are prohibited by contract from bidding on their own consigned items at the auction or in any way artificially affecting the auction results.
Company History and Ownership: On August 8, 2003, the Company (formerly Novamed, Inc.) and World Wide Auctioners (WWA) executed a stock exchange agreement, whereby the Company agreed to acquire 100% of the issued and outstanding shares of World Wide, in exchange for 13,887,447 shares of the Company’s common stock. Subsequent to the merger, the Company changed its name to “WWA Group, Inc.”
It should be noted that Asia4Sale.com, Inc. (now changed names to “Asia8”) owns and controls voting power over approximately 46% of WWA Group’s issued and outstanding stock. Asia8 plans to list as a publicly traded company in 2007, but otherwise, the status of this privately held concern is unknown.
Valuation: Outlook
I am forecasting ’07 revenue of 25 M and EPS of 0.20. I am assuming in my modekl relatively flat growth over the initial half of 07 while the company moves to its new facility, followed by increased revenue towards the end of 07. I have forecast that by Q4 ’07, the company will earn 7 M in revenue with 1.5 M in net income.
Using aforward PE of 15, and using the aforementioned assumptions, I am valuing the company at $3.00 per share. However, I am adding a discount of $1.00 for being a low volume traded OTCBB stock
Summary: I believe that the long run prospects of the Company are positive. Its risk reward ratio advocates purchase of the stock. In the short term however, the stock may be continue to be subject to high volatility.
WWAG $0.79 — (OTC BB) May 30, 2007
Total Revenues (Millions)/ Earnings (loss) per share;
FY (12/04) 11 M / 0.05
FY (12/05) 16.3 M / 0.07
FY (12/06) 17.62 M / 0.07)
FY (12/07) E 25.5 M / 0.20
52 - Week range: $0.50 - $1.35
Shares outstanding as of 30-05-07: 16.6 million
Approximate float: 5.1 million
Market Capitalization $13 million
WWA Group, Inc. is engaged in the auctioning of transportation and industrial equipment. The Company operates its largest auctions at its primary facility in Dubai where 33 large unreserved equipment auctions and five smaller transport auctions have been held since March 2001. WWA Group's primary auctioned items include mobile and stationary earthmoving and construction equipment, such as crawler tractors, excavators, wheel loaders, cranes, trucks and trailers, generators, compressors, agricultural tractors and forklifts. Much of the equipment can be used in multiple industries. The Company also sells light vehicles and other related items, such as boats and motorcycles. All of its auctions are unreserved, meaning that there are no minimum or reserve prices; each and every item is sold to the highest bidder on the day of the auction.
Key Investment Considerations:
I am rating WWA Group (OTCBB: WWAG.OB) with a Speculative Buy rating and a twelve-month price target of $2.00 per share based on an increase in cash flow arising from a larger auction facility, overseas expansion and from investments in shipping and mining.
International Hub:The WWA group are located in Dubai, which is quicly becoming one of the most attractive business hubs on the planet. Dubai’sport, Jebel Ali, constructed in the 1970s, has the largest man-made harbour in the world. Dubai is also increasingly developing as a hub for service industries such as IT and finance, with the establishment of a new Dubai International Financial Centre (DIFC). The population of Dubai has exploded in the last 10 years. There is no evidence that the pace of expansion is slowing.
1968 58,971
1975 183,000
1985 370,800
1995 674,000
2005 1,204,000
Cash Flow: Despite WWA Group being subject to a substantial increase in yard and staff housing rent expenses in the last 2 years, which is a result of a tremendous demand for housing and land within the UAE’s Free Zone, the WWA group has a history of operating cash flow from operations. The company’s attempts to diversify into other regions and markets (see below) should consolidate cash flow, and reduce its exposure to volatility arising from a single revenue stream. In addition, the Jebel Ali Free Zone is an income tax free zone. Therefore, the profits of WWA Group are not taxable in Dubai. WWA Group has determined that undistributed earnings from Dubai will be reinvested in the business indefinitely and that such earnings will not be distributed to the U.S. parent.
Diversification: WWA has embarked on its expanded operations plan to leverage its dominant equipment auction and trading base into a diversified business including shipping and mining activities in the Gulf region that are related to heavy equipment. For example, ownership of a shipping company and control over a large volume of equipment being moved around the world by regular consignors provides vertical integration opportunities that could combine auction services with the ability to meet shipping needs.
WWA Group acquired 32.5% of Power Track Projects in December of 2006. Power Track is engaged in a large scale limestone mining and aggregate production project in Ras Al Khaimah, and is currently managing a project for the government of Ras Al Khaimah, U.A.E., to excavate over 25 million tons of limestone through 2010. The process of removing the limestone is equipment intensive utilizing earthmoving and support equipment working with three crushing machines capable of producing over 10,000 tons of crushed aggregate per day. The WWA group has indicated that Power Track Projects is growing organically, but may require additional funding to fuel growth. The aggregate business is set to grow in line with the growth in construction projects in the U.A.E. and the Gulf region.
In June, 2006, the WWA group announced that it agreed to acquire a company that owns a 3,500 dead-weight-ton shipping vessel specializing in moving heavy equipment to and from the Gulf region and India. The vessel is chartered for the next 42 months to a freight company that handles shipping for WWA and WWA customers. The previous loan agreement and the current acquisition are based on gross revenue from the vessel charter of approximately $1,800,000 per annum, and net profit of approximately $900,000 per annum.
WWA Group to partner with an established Johannesburg based equipment dealer in a 50/50 joint venture company to run equipment auctions in the Republic of South Africa (RSA). The company has indicated there are several synergies with its existing business, and a large amount of potentionally auctionable new and used mining equipment present within the country.
New Auction Site: The WWA Group has been operating in a yard rented on an annual basis from Dubai Ports World since 2002. The companies new site in Jebel Ali will be larger and capable of holding more equipment than the existing site, eliminating the current restraint on growth. The WWA group has signed a 20-year lease on a 1 million square foot property in the Jebel Ali Free Zone, Dubai. WWA Group plans to build a permanent facility on the site for auctions, trading and the refurbishment of heavy equipment.
Company Overview:
Auction Business: WWA Group’s business strategy is to increase cash flow from operations and expand operations to new auction sites. Inherent to the companies growth plans is the expansion of lower cost auction methods, such as on-line auctions, video auctions and transportation equipment only auctions, all of which can be held on a more frequent basis than the larger equipment auctions. While smaller in size, these auctions will not interfere with or detract from WWA Group’s major equipment auctions, and the economics of scale at the Dubai facility are efficient for this purpose.
WWA Group's primary auctioned items include mobile and stationary earthmoving and construction equipment, such as crawler tractors, excavators, wheel loaders, cranes, trucks and trailers, generators, compressors, agricultural tractors and forklifts. The Company also sells light vehicles and other related items, such as boats and motorcycles. All of its auctions are unreserved, meaning that there are no minimum or reserve prices; each and every item is sold to the highest bidder on the day of the auction. Consignors are prohibited by contract from bidding on their own consigned items at the auction or in any way artificially affecting the auction results.
Company History and Ownership: On August 8, 2003, the Company (formerly Novamed, Inc.) and World Wide Auctioners (WWA) executed a stock exchange agreement, whereby the Company agreed to acquire 100% of the issued and outstanding shares of World Wide, in exchange for 13,887,447 shares of the Company’s common stock. Subsequent to the merger, the Company changed its name to “WWA Group, Inc.”
It should be noted that Asia4Sale.com, Inc. (now changed names to “Asia8”) owns and controls voting power over approximately 46% of WWA Group’s issued and outstanding stock. Asia8 plans to list as a publicly traded company in 2007, but otherwise, the status of this privately held concern is unknown.
Valuation: Outlook
I am forecasting ’07 revenue of 25 M and EPS of 0.20. I am assuming in my modekl relatively flat growth over the initial half of 07 while the company moves to its new facility, followed by increased revenue towards the end of 07. I have forecast that by Q4 ’07, the company will earn 7 M in revenue with 1.5 M in net income.
Using aforward PE of 15, and using the aforementioned assumptions, I am valuing the company at $3.00 per share. However, I am adding a discount of $1.00 for being a low volume traded OTCBB stock
Summary: I believe that the long run prospects of the Company are positive. Its risk reward ratio advocates purchase of the stock. In the short term however, the stock may be continue to be subject to high volatility.
