After a much anticipated 2 year waiting period, I am pleased to report that on Wednesday, October 1, 2008, Gateway International Holdings, became a fully reporting Company once again by filing its Form 10k annual report with the Securities and Exchange Commission.
I wish to extend a word of congratulations to Tim Consalvi, CEO and Chairman of Gateway Int'l. Tim inherited a difficult sitution and has worked diligently to get the Company back in compliance with the SEC. I would also like to thank Steve Kasprisin, who in April returned to assist the Company as a contract CFO. Steve assisted the Company through the filing requirements and I am quite sure that Tim and the Board leaned heavily on Steve for his expertise in these regards.
Now the question is "When will the Company's stock begin trading again?" I have not received comment from the Company on this regard, but based on standard procedures, I would guess that right now the Company is in process of getting a broker/dealer to file a 15c2-11 with FINRA. Once this filing is cleared, the stock could begin trading.
I look forward to seeing this stock trade again. Prior to the SEC's deregistration of the Company's securities, the stock traded as high as $2.35 per share. Based on the information included in the 10k, this price might be a little high given the current economy, but I would not be surprised at all to see the stock settle around $1.50 per share when it begins trading. Last year the Company achieved almost $19.5 million in revenues. There were a lot of non-standard costs that were charged against earnings last year, including legal and filing fees. Historically, the Company has average around 12% pre-tax profit. Not assuming any growth, but simply maintaining during the upcoming 12 months, if the Company achieves 12% margins on equivalent sales, we would expect around $2.35M in profits. On a per share basis, based on reported TSO of 28,378,645, this would equate to approximately $0.083 of earnings per share. The stock has historically experienced internal growth over 25% per year based on ongoing operations. Rather than use aggressive estimates, assume a high end rate of 25% and a low end growth rate of 15%. Utilizing a PEG ratio of 1 (typical value investor model), that would indicate a stock with a fair value in the range of $1.25 to $2.07 per share (hence my middle of the road target of $1.50 per share).
I have liked this little "nuts and bolts" company for a long time. Clients in the MCMG Private Client Group own a fair amount of stock in this company and I remain increasingly optimistic that this investment will provide a very nice, time weighted return.
Disclosure: Through First Capital Investors, I provided consulting services to Gateway Int'l from 2003 thru 2007. I was one of the largest open market purchasers of the stock from 2003 thru 2005 and have purchased shares in private transactions since the deregistration. I continue to hold all of my shares. I have not worked with the Company at any time during 2008.
