Tracing its roots to the 2010 CTIA Wireless Expo, TeleFix Communications Holdings, Inc. was founded by entrepreneur and President Mezaun Norman. TeleFix Communications, Inc. is a minority and woman-owned telecommunications services company. TeleFix serves the wireless infrastructure development, upgrade, and repair market with a focus on RF design and testing for converged networks and broadband access. As a Tier Contractor, turnkey supplier, and qualified vendor on behalf of some of the largest technology companies in the U.S., the Company generates revenue through services provided directly to carriers or through these TURF and General Contractors.
With two distinctive areas of expertise – RF and Microwave Engineering, centered on Converged Networks – 3G (UMTS), 4G (LTE), for Cellular, Land Mobile Radio Communications (Two-Way Radio Communications), Broadband (WiFi), and Digital Healthcare industries, TeleFix is poised to deliver high quality and effective services in Design, Project Management, Network Planning, Installation, and Deployment.
The Market Drivers: Carrier Market
Street estimates suggest that in 2012 alone the 3 major wireless carriers will spend a combined $25 billion on wireless infrastructure services and equipment. Much of the expenditure will be on the build-out of 4G networks (refers to a wireless standard that represents the 4TH generation of mobile networks) while maintaining high quality service on their legacy 3G networks.
The Market Drivers: Public Safety Market
In the public safety market there is one major initiative in wireless communications, which is P-25 Interoperability. P-25 is a suite of standards for digital radio communications for use by federal, state and local public safety agencies in the U.S. which enable them to communicate with other agencies and response teams in emergencies.
The current lack of interoperability between radio networks used by these public safety agencies is a major challenge and critical problem as it hinders the execution of a coordinated response and a unified chain of command. To address this issue, many agencies have focused re-engineering the existing infrastructure, which plays into TeleFix’s sweet spot.
TeleFix provides services to the wireless infrastructure development, upgrade and repair markets. These services require trained technicians and engineers to install upgrade and repair equipment and systems at new and existing facilities or sites.
Companies in the space operate in various tiers related to consulting work and engineering expertise. The highest level of general contractor is referred to as a "TURF" contractor, which Carriers have named the regional general contracting companies. The hierarchy looks like the following example in the flow chart below. It should be noted that a Tier 2 or Tier 3 Contractor can work for a higher level Tier Contractor as well as directly for the TURF Contractor. The basic hierarchy of the system is Carrier => TURF Contractor => Tier Contractor => Technician.
The Tier Contractors are the backbone of the wireless infrastructure system and work directly with the TURF contractors. Projects are awarded via Master Contracts Awards to the lowest priced contractors by the TURF Contractors or can be awarded by carriers to TURFs via fixed contract bidding
THE TELFIX ADVANTAGE
With significant advantages over the hundreds of small companies that represent the typical, fragmented competition at the Tier level, TeleFix is in the catbird seat.
The primary advantage the Company owns over the competition is its woman-owned business status, which was obtained after completing a rigorous process. Carriers, government agencies and entities, along with the TURF contractors have diversity programs and set-asides that serve as mandates. These programs require a portion (usually 10%) of the total value of various projects, to be awarded to minority-owned or woman-owned businesses that qualify. TeleFix is a minority and woman-owned business that certainly qualifies under the program guidelines. One of the primary qualifications is ownership holding must be majority held by a minority or a woman and founder Mezaun Norman owns roughly 65% of the company.
If we look at the opportunity just this year, hundreds of millions if not billions will be awarded through these large-scale, multi-year programs.
The second advantage the Company has is its relationship with key contractors and carriers. In the past, TeleFix already acquired turnkey contracts for General Dynamics (NYSE - GD), been certified as a qualified vendor for AT&T, and as a general contractor for Goodman Networks. Other certifications with Tier 1 and NYSE-listed carriers, and contractors are in the works which only raises the barrier to entry for other firms and increases the likelihood that TLFX will be awarded many large contracts.
In fact, management is negotiating a number of contracts which we believe will bear fruit beginning this year.
TeleFix has a number of advantages over other players in the market.
Mezaun Norman, Founder, President, Chief Executive Officer
Mezaun Norman is the President, Chief Executive Officer and Founder of TeleFix Communications Holdings, Inc., of Dallas, Texas. As a visionary entrepreneur, Mezaun has over 15 years of experience in key aspects of Business Administration having launched other successful start-up ventures across varied industries.
Mezaun brings a unique combination of skills to TeleFix’s clients as well as to her role as President and Chief Executive Officer of this highly innovative telecommunications services company. Mezaun is predominantly responsible for implementing the company’s vision, and business strategy to advance its mission, objectives, citizenship, revenue growth, and profitability. She is also responsible for overseeing the Business Development, Marketing, and Sales. Ms. Norman has a degree in International Relations. She is mom to three girls – Athalia 19, a freshman at Baylor University, Marissa 15, and Rhiane 13. She resides in McKinney, Texas with her husband Andrew, a Telecommunications Engineer.
John Fazzio, Executive Vice President
John has founded, grown and operated several businesses after graduating from Temple University’s Fox School of Business in Philadelphia, Pennsylvania in 1976. He has experience owning and operating a publishing business, regulatory compliance business, environmental transportation business and an environmental remediation business. His involvement with two of the businesses began at nominal sales volumes, and he was able to grow them respectively to over $5 million and $10 million in annual sales. John has been building two consulting businesses over the last 4 years; Winning Advantage, Inc. and Environmental Business Consulting.
In our view, TeleFix’s biggest risk is the timing of contract awards, and the resulting project deployment, rather than the number or size of the awards. It is not uncommon to have delays in awarding or implementation, especially in the public safety arena. A secondary risk would be slowdowns or delays in overall spending, or perhaps a migration of spending to other mobile initiatives which could prove technologically superior and do not play to TeleFix’s strengths. We believe that this risk is highly unlikely as such moves require the implementation of standards prior to widespread design and execution. Having a short operating history and a lack of large cash reserves are all typical concerns and consistent with firms of TLFX’s size and standing.
Having access to a minority-owned public company that can take advantage of communications services mandates is a rare opportunity investors should not pass up. TLFX is bidding on large-scale contracts with Tier 1 and NYSE-listed firms and we believe that TLFX could generate $10M over the next 12 months and $25-40M in the following year. If the timing of the contract awards and deployments hold to typical schedules, TLFX could generate a 20-25% net margin on $40M in revenue. Our near term $1.10 price target is based upon 10x FY14E (June 2014) net income of $10M. We rate these shares Speculative Buy.
Analyst: Robert Goldman
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report or note is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This report does not take into account the investment objectives, financial situation, or particular needs of any particular person. This report does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA, the U.S. Securities and Exchange Commission or with any state securities regulatory authority.
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com