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SpongeTech/CEO
Letter Confirms It... |
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In
a blog entry yesterday I was explaining why I felt SpongeTech
Delivery Systems (OTCBB: SPNG) was on the verge of a breakout.
The resistance at the 4.9 cent level has been under attack for some time
now, and the attack has been getting stronger (on higher volume).
In fact, SPNG hit 5 cents yesterday for the first time since December.
Something's gotta' give soon.
 Almost
as if on cue, today the company put their success path in writing. I knew
they were doing well on the sales front - current and projected
- but once again I underestimated those numbers ....which isn't the kind
of problem to complain about.
I want
to hit the highlights from CEO Michael Metter's letter to shareholders,
and offer some of my own comments on them. At the bottom of today's edition
we'll reprint the company's entire press release.
Prepare
to be further convinced.
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It's
All About the Benjamins |
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According
to the letter, SpongeTech is expecting to post sales ofsomewhere near
$3.87 million for their fiscal Q4 (which ended on May 31st). Nice,
but a little perspective may be in order.
What
the letter didn't tell you was just how much growth that $3.87 million
represents. During Q3, they posted revenues of $1.28 million. The quarter
before that, they did $331K in sales.
In
other words, they pushed the top line higher by 286% in Q3, and are
going to raise it around 202% for Q4. I can't wait to see what
happened in Q1, which we're in right now.
 That's
not the big part of the story though. The CEO's letter also put in writing
what their 12 month sales backlog currently is. They've got $27 million
worth of orders to be filled over the course of fiscal 2009. Phenomenal.
Oh, and they're profitable too. Last quarter's net margin
was around 14%. I think Q4's is going to be even better.
If
you've been reading the newsletter for any length of time, then you'll
know I've been pounding the table on SPNG for one simple reason - the
stock is just undervalued on a price-versus-sales basis.
Using
the 12-month revenue forecast of $27 million, and dividing that number
by the current market cap of $9.23 million, you come up with a projected
price/sales ratio of 0.34. Folks, the S&P 500's current P/S ratio
is 2.13, meaning by comparison, you could argue SpongeTech is valued
at about 1/6th of what it should be.
And
don't forget, the sales backlog could be pushed higher between now and
the end of the year.
What
else can I say? I think it's just a matter of time before the market
figures this out and corrects the issue. If they do, current owners could
be very happy shareholders.
I admit
a few months ago I was just thinking about seeing the stock overcome its
undervalued situation (relative to the hefty sales backlog). I really
wasn't thinking about what may happen beyond that, figuring the revenue
growth might start to slow then. Now I'm not so sure ....SpongeTech
actually does have more growth vehicles in the pipeline.
 Metter's
letter also mentioned several new products in the works. Their car care
products we knew about - that's what got them to where they are now.
We've
also learned a little about pet care and child care products that are on
the way. Those two lines will see their official launch in July and August.
For
the first time in a long time, the letter spoke of home care products (which
I assume means household cleaning). The letter also mentioned a new venue
however...pharma and beauty products. We still know very little
about those two ventures. The company has already been in discussions with
some suppliers, and has been testing their patented sponges for use with
personal care products. I think they're a few months down the road, though
both are also multi-million opportunities.
The
point is, SpongeTech doesn't look like they're going to hit a ceiling
anytime soon. Between those five markets, the $27 million backlog is
just a stepping stone.
Every
day I look at this chart I get a little more excited. I just get a feeling
it's coming.
 What
I'm talking about is a breakout move, past 5 cents, and on to who knows
where.
The
chart pretty much speaks for itself. We've peaked at 4.9 cents several
times, and hit 5 cents yesterday.
That's
not the compelling part for me though.
What
I'm convinced by is the volume - there are a lot of buyers behind
the stocks big gains, and very few sellers on the weaker days. Given that
volume is an indication of the market's conviction, 'now' is much different
than prior upswings....this one could actually stick.
By
the way, if you're looking for a fairly easy way to quantify a volume trend
(the volume bars aren't always as explicit as they are with SPNG now),
I suggest an accumulation-distribution line. It's easy to read and interpret.
In
any case, keep an eye out for today's action. A good move above 5 cents
could really spark something, and finally get the stock priced right. The
company is certainly doing their part.
Here's
the whole letter. Good stuff.
SpongeTech(r)
Delivery Systems, Inc. CEO Michael Metter Issues Corporate Update on Company
for Shareholders
Thursday June
5, 2008 9:10 AM EDT
NEW YORK,
NY (PRNewswire)
SpongeTech(r)
Delivery Systems, Inc. (OTCBB: SPNG) has had a lot of activity in the
past several months and we want to take the time to update our shareholders
on some of our recent accomplishments and delve a little into what they
can expect moving forward in the next few quarters.
Message from SpongeTech(r)
CEO, Michael Metter:
Dear Shareholders:
FINANCES
Un-audited revenues
for our fiscal fourth quarter ending May 31, 2008, were approximately $3,875,000;
approximately $600,000 ahead of guidance and an increase of $2,315,000
over our fiscal third quarter.
With our balance
sheet and cash positions, we have greatly improved due to the increased
sales of our products. We do not expect to have any dilutive financing
in the near future.
ORDERS
Confirmed signed
orders for fiscal year 2009, which started four day ago, are $27,000,000.
We see no reason why these orders won't be shipped in their entirety. We
are experiencing strong demand in the United States and very strong demand
from international buyers
MARKETING
Marketing efforts
continue to provide new customers for our "Car Care" products. We are optimistic
that this trend will continue and we hope to announce new retail accounts
in the near future.
We plan to formally
introduce our "Pet Care" as well as our "Child Care" (Puddle Pals) products
during July and August. We have increased our production capacity, purchased
fabrication molds, and increased our sales and support team to handle the
anticipated increased business.
PRODUCTION
Independent sub-contractors
using our patented technology and brand names produce our products here
in the United States. These sub-contractors have adequate capacity to meet
our growing demand.
OPERATIONS
Under the SpongeTech(r)
Delivery Systems corporate umbrella, we plan to operate SpongeTech(r) as
five operating divisions as new products are introduced:
-
Car Care Products
-
Pet Care Products
-
Child Care Products
-
Home Care Products
-
Pharma and Beauty
Products
MANAGEMENT
Management is
actively seeking other opportunities for its patented delivery system.
Our Research and Development team are currently testing and evaluating
new uses for our delivery system. I would like to thank the Management
Team for a great year and they are already set to more than double next
year.
OUTLOOK
We are currently
in negotiations with major retailers who are now evaluating and "test marketing"
our products. For contractual and competitive reasons, we cannot further
elaborate. At this time, I may add, we do not have signed contracts or
firm orders and there is no assurance that our proposals to these clients
will be accepted.
We are also in
negotiations with a major supplier of Brand Name household cleaning products.
Our discussions focus on SpongeTech(r) using its patented technology to
produce various household cleaning products using the Brand Name of our
prospective client. Let me again say, while we are hopeful, there is no
assurance of our entering into a final agreement with this client.
We are also evaluating
and testing our product delivery system using our patented technology in
other products. These include suntan lotion, topical medical uses, beauty
aids, and other hardware and houseware product solutions.
In conclusion,
we are pleased with our progress and look forward to continued growth in
the next year.
Best Regards,
Michael Metter, SpongeTech(r) CEO
For more information,
please contact Investor Relations at 1-877- SPONGE-T, and/or visit the
Company's website at: www.spongetech.com.
About SpongeTech(r)
Delivery Systems, Inc.
SpongeTech(r)
Delivery Systems is a development stage company, which designs, produces,
and markets a unique line of reusable cleaning products for the automotive
aftermarket parts industry. These sponge-based products utilize SpongeTech's(r)
proprietary, patent (and patent-pending) technologies involving hydrophilic
(liquid absorbing) foam and polyurethane matrices. The Company's sponges
are specially configured with an outer contact layer and an inner matrix,
the latter of which comes pre-loaded with specially formulated soaps and
wax that are released when the sponge is wetted and applied to a surface
with minimal pressure. The Company's primary product line has been designed
specifically for automotive/vehicle applications, however, SpongeTech(r)
is currently exploring additional applications for its technology including
an anti-bacterial, kitchen and bath cleaner, as well as a unique 'foaming'
bath sponge for children.
"Safe Harbor Statement"
Under The Private Securities Litigation Reform Act of 1995: The statements
in the press release that relate to the Company's expectations with regard
to the future impact on the Company's results from new products in development
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The results anticipated by any or all of
these forward-looking statements may not occur. Additional risks and uncertainties
are set forth in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2005, the Company's Quarterly Report on Form 10-QSB
for the first quarter ended March 31, 2006. The Company undertakes no obligation
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the
date hereof, or to reflect the occurrence of unanticipated events or changes
in the Company's plans or expectations
Contact:
SpongeTech(r)
Delivery Systems, Inc.
Investor Relations:
Bill Young, 1-877-776-6438
wayoung55@aol.com
or
info@spongetech.com
SOURCE: SpongeTech(r)
Delivery Systems, Inc. |
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