LandStar, Inc. Shares to Move Higher on New Partnerships, Acquisitions, and Customer Orders.
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ARCMAIL IS TREMENDOUS BOON TO LDSR
The 411 on ArcMail for Data443
LandStar signed a two-year exclusive sales and marketing partnership agreement with ArcMail, a leading provider of enterprise information and email archiving solutions for businesses of all sizes across a wide range of vertical markets. This agreement is anticipated to add $2 million in revenue over the next twelve months for the Company’s Data443 subsidiary and fosters major cross-selling opportunities to its large existing customer base. The product line will be offered immediately to the Data443’s international reseller and VAR channels. Management noted that the ArcMail technology offers customers easy, swift deployment and immediate cost savings. Given that ROI is a key determining factor in SaaS product acquisition and utilization, ArcMail is a great new arrow in the Company’s quiver.
Founded in 2005, ArcMail is a pioneer and leader in the enterprise information and email archiving market. ArcMail offers customers a broad array of cost-effective, easy-to-use archiving solutions with comprehensive and tailorable features that ensure secure, compliant email, file, and other electronic data retention, storage, and retrieval. ArcMail solutions support all eDiscovery requests for electronically stored information for all regulated industries – Data Privacy, Healthcare, Financial Services, Legal Services, Government and Education. Key ArcMail product features include full-text indexing; granular retention rules; secure and customizable access and permissions; basic and advanced Boolean search; litigation and legal holds; and extensive import and export capabilities that accelerate and simplify eDiscovery requests and compliance audits.
The ArcMail transaction is the latest in a series of transactions made by Data443 as it continues its path to scale the business, grow its customer base, and bring meaningful, high-margin revenues to the Company. In late 2018, Data443 closed ARALOC acquisition, and announced a letter of intent to acquire N8 Identity, a leader in agile, cloud-based identity governance solutions. We believe this and other transactions will have a very positive impact on the Company’s financials, beginning in 2Q19. Clearly the future N8 integration with ARALOC, an industry-leading secure digital content distribution and communications platform that protects an organization’s confidential content and intellectual property assets from leakage, combined with ClassiDocs & ArcMail provide Data443 with a powerful offering suite.
Meanwhile, Data443 has announced a series of customer renewals for its flagship offerings and we believe the seemingly endless security breach announcements by major corporations like Facebook (NASDAQ – FB – NR) heighten the need for and should drive sales of the Company’s GDPR compliance tools. The California Consumer Privacy Act of 2018 also should serve as a critical sales and deployment catalyst not just for companies domiciled in California but around the country (https://www.law.com/njlawjournal/2018/12/01/the-california-consumer-privacy-act-what-you-need-to-know/?slreturn=20190111162737). Finally, investors can look to a possible up-listing to the OTCQB later this year, as LDSR records outsized sales and profit growth. Plus, we anticipate a change in the Company’s ticker to more appropriately reflect the Company’s business.
As noted above, we reiterate our $0.027 target price for LDSR, which represents a roughly 10x jump from current levels. In our view, the stock has been mistakenly oversold since the Form 10 filing in an environment in which its peers are raising top-line estimates and enjoying higher valuations. We envision the same for LDSR. The table below illustrates that the current price/revenue valuation for the peer group for 2019 is 8.2x. By applying the same metric to LDSR’s projected 2020E sales, we derive our 12-month target price. It should be noted that since our initiation of coverage report, peer group members’ revenue and valuation have risen between 10-15% on average, respectively.
With the current valuation metric in mind, a rule of thumb for next year’s valuation is that $2M in projected revenue for LDSR in 2020 is worth $16M in valuation today. Consider this:
In our view, investors should use the recent ArcMail news and the pending close of other acquisitions as catalysts for a jump in value and share price for a company that appears to be hitting on all cylinders and represents limited downside risk.
Senior Analyst: Robert Goldman
Rob Goldman founded Goldman Small Cap Research in 2009 and has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. In addition to his work leading GSCR, Rob serves as the Director of Research for Marble Arch Research, Inc. During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund.
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