750,000 Subscribers/$75 Million EBITDA @ 2015 Is a START For VelaTel (VELA)
As VelaTel Global Communications, Inc. CEO George Alvarez alluded to in his conference call on Monday, VelaTel presents its plan to its major shareholders this week to create a new capital structure for VELA in order to finance the projects on this pro-forma and finance future deals. The replay of Monday's conference call is on the Velatel.com web site�2011 review.
Conference Call Video (Alternative Link)
I am sure this new capital structure will also create a credit facility or PIPE convertible debt facility to repurchase 80-100 million+ shares as over 100 million shares were issued at .45-.70 a share in 2010/2011 for the $100 million+ deployment work/engineering on the 29-city Chinacomm network by the sub-contractor JoinMax. (ALL of this 29-city deployment work is retained by VelaTel and being used by its 2 B-to-B 4G networks in China)
A VELA stock repurchase plan is a NO brainer�if you paid $100 million+ in shares/cash to build a 29 city 4G network in China (or a $100 million skyscraper for that matter) and could BUY BACK the shares you issued representing that work for $10-$20 million, you effectively cut your CAPEX investment by 80% or more. Where else can a company get an AUTOMATIC 300-400% return on their deployed CAPEX?
Especially is the equity you raise converts to the same amount of shares at say a 200% higher price-per-share!
You ALSO remove a significant amount of the excess float in the market AND shake-out short sellers and il! legal sh ort sellers as well. You ALSO get the share price to a level where shares CAN be used as part of VELA's acquisition plans going forward. You ALSO set the framework for the company to do a secondary straight equity offering later in the year AND up-list the trading shares to the Nasdaq or NYSE/AMEX exchanges and get OFF the OTC bulletin boards with their 5% bid/ask spreads.
I assume that since ALL major shareholders will be in attendance (including yours truly) there will be a few positive surprises to be presented by VELA...nobody calls a meeting of one's major shareholders into a small room to tell them BAD news, right? (My lips to God's ears for us long suffering shareholders).
NBT Venture Advisors LLC will present to VELA management a "virtual take private" capital structure using a senior convertible security (senior convertible note/preferred shares with warrants) that secures the company's equity needs for the next 12-18 months AND supplies enough cash to acquire 100 million + shares in the open market. We expect a hearty discussion on possible re-capitalization proposals.
We will complete a new DCF valuation of the company (including the ultra-conservative forecasts and a higher most likely case scenario) AFTER we get through the Thursday and Friday meetings. An independent Fairness Opinion from an investment bank and a placement agent for marketing the deal we will present(we have 10 East and West Coast investment banks aware of our plan and interested in presenting their capabilities to VELA when ready).
We also have numerous hedge fund investors ready to hear and analyze the VELA re-cap plan when it's ready to fly representing over $15 billion in money under management. We have been building these relationships for months in order to facilitate this, our re-cap plan.
A quick eyeball on a per share valuation at 700,000,000 share! s (refle cting 100mm shares repurchased) and 2015 conservative forecasts of 750,000 subscribers/@$78 million EBITDA continues to get us to the .60-.80 a share discounted cash flow valuation and significantly higher on a per subscriber valuation (at current private market value of 4G data networks). This assumes NO other significant carrier development deals by VELA�VELA has pulled off 7 major deals in the last year�more ACCRETIVE deals are surely going to close in the next 12-24 months. For instance, VELA management has already indicated working on more countries in South America in past interviews.
A quick look at valuations of B-to-B wireless broadband network provider TowerStream (TWER $24 million revenues/3500 business subs/$120MM market cap/$75MM value minus excess cash) and Aria Networks in Italy (30k subscriber Wi-Max network which sold a 25% interest at $100MM valuation in September 2011) supports significantly higher valuation scenarios for VELA.
All three of the China subsidiaries are licensed for IPO listings on the Hong Kong Exchange�we assume at least one completes an IPO by 2015 as well.
After these meetings we will produce a full analysis and e-mail to ALL our NBTEquitiesResearch.com subscribers since I now estimate our NBT/VELA "Syndicate" of shares owned exceeds 110 million BEFORE any stock buy-back or convertible debt offering. Make sure you are registered on our site for all our VELA research.
I/NBT continue to hold @8 million VELA shares and hope to never have to sell shares until 2015!
Tobin Smith
Founder and Chairman
NBT Equities Research
www.nbtequitiesresearch.com
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