S A ADVISORY April - May 1999


S.A. Advisory
2274 Arbor Lane #3
Salt Lake City, Utah 84117

Teltran International
(OTC Bulletin Board TLTG)

We first recommended TLTG to our phone service subscribers and then e-mailers during mid February @ $1.40. At present TLTG is one of our only “Internet Plays”. The company has rapidly entered the internet arena with the introduction of a “Class A portal”, very similar, but actually better than Yahoo. One of the stand-out features is the “FREE REALTIME QUOTES” at NO charge. Everything on Yahoo you can get on http://www.teltran.com - EVERYTHING! Please take some time and review the site! The company’s main focus and actually main revenue source will be derived from the “SUPER HOT” area of the internet today; that is, VoIP (voice over internet protocol).

Products & Services

Internet Related Services
   Internet Telphony - Teltran VoIP Service
   Web Portal - Teltran.com
   Web Hosting & Web Page Publishing
Telecommunications Services
   International Long Distance Resale
   Domestic Long Distance Resale
   Prepaid Calling Cards
Enhanced Fax Service
   Fax Broadcast
   Fax on Demand
   Fax Retrieval & Bulletin Board
Global Messaging
   Voice Mail, Fax Mail, E-Mail
   Auto-Notification, Personal Messaging, Multi-Media Broadcast
   Text-To-Speech, Video, Telex

When we first recommended TLTG, management estimated that for 1999 revenue would equal $30 million and net income/share would be at least .30/share. This in itself is quite dramatic since most internet related issues never really talk about earnings. Within a press release dated April 5, 1999, they had announced that they had already signed their third contract signed with major US telecom carriers and provide international termination of voice, fax and data transmissions using Teltran VoIP Service. According to President and CEO Byron Lerner, “After all installations are completed, we fully expect to be transmitting approximately 5 million minutes per month from the three contacts we have signed. The $12 million in annual revenues that we will realize from the contacts will give Teltran a base from which to grow as new countries are added to the TVS network. It appears as though we are on target to meet or even exceed my earlier projections of revenue in excess of $30 million annually and earnings of $.30 per share.”

In addition, Teltran’s President and CEO said, “With the Teltran VoIP Service agreements we have recently announced and the continuing improvement and expansion of our web portal, we remain excited about Teltran’s short and long term prospects for growth.”

Note: Graph A only deals with domestic calls. TLTG’s main focus is international calling - much more profitable. Growth should actually be greater than domestic because cost is so much higher in the first place. (Note: Domestically you can call via telephone for 10¢/minute nationwide - obviously, not much profit - domestic internet calling very low margins).

Teltran VoIP Service is a voice over internet protocol service using the Australian-developed system “OZEmail Interline” for making telephone calls across IP networks from touch-tone phones. With TVS, customers place calls directly to a local access point or point of presence. The call is then routed over IP networks, such as the internet, to create a wide area voice network. TLTG and OZEmail Interline have teamed up to provide telecom customers worldwide with the finest VoIP service in the world. TLTG is one of fifteen affiliates worldwide marketing the VoIP network of OZEmail Interline.

According to Mr. Lerner, “Once customers experience the call clarity and see the potential cost savings we feel our success rate will be very high in quickly transmitting millions of minutes per month through our VoIP network.”

It is obvious to us that internet telephony is going to be huge and the next explosive wave within the world of cyberspace. IDT Corp. (IDTC) owns Net2Phone as a wholly owned unit. We have learned that within weeks IDTC will most likely spin off Net2Phone and commence an IPO. Last quarter total Net2Phone usage minute grew to 53 million up from 34.5 million. Once this is completed, a standard valuation will develop for internet telephony service providers. This interesting twist will allow investors a more clear picture in order to value TLTG more realistically.

If TLTG can achieve revenue growth of $30 million and earn .30/share for 1999 (note: this is from zero revenue). We believe that a PE of 30x is quite conservative. For year 2000 management is estimating .65/share. Many would value these estimated projections with a PE of 100+. We, of course, are usually very conservative and are strictly fundamental in nature. If we are to assume that a PE of 30x is suitable, then our share price would explode from the current level of $2.00 to $9.00 and $19.50, respectively. Obviously, when one takes into account the lunatics bidding up internet related issues, TLTG could go to $50. There are many unknowns. What is known in our opinion is that TLTG is a great internet speculation with huge upside potential near term and long term. We still rate TLTG with a strong buy for risk oriented accounts. Recently became fully reporting as promised - at present around 10 million shares outstanding and 2 million in the float. Finally, management is a class act. They seem to be able to deliver on all statements! We are impressed. Website: http://www.teltran.com Broker contact: Mike Chesler at 1-800-890-1629.

Corporate Number: 1-888-Teltran

We intend to monitor TLTG in our model portfolio for percentage gain performance. A great speculative core holding involved in an enormous telecommunication evolution.

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Homeland Holding Corp.

Business operates a chain of 69 supermarkets in the Oklahoma, Kansas and Texas Panhandle region (does not include recently announced acquisition of nine stores located within eastern Oklahoma currently operated by Horner Foods, Inc.). The 69 stores are broken down: 10 conventional, 46 superstores and 13 combostores.


  1. Average sales/stores - $7.6 million
  2. Revenue for year ending December 1998 - $529 million
  3. Net income/share prior to amortization .65/share.
  4. Net loss for year including amortization. (This write-off results from reorganization during 1996 - only one more quarter of charges left) - $2.19.
  5. Book value - $6.49/share
  6. EBITDA - $22.2 million or $4.52/share
  7. Cash - $7.8 million or $1.59/share
  8. NOL (net operating loss carry forward) - $7.54/share (won’t be paying taxes for a very long time).
  9. LTD - $89.9 million (nothing unusual for supermarket chains).
  10. George Soros Fund Management owns 666,700 shares (very famous investor).
  11. Fir Tree Partners - 562,195 shares.
  12. Management has been actively purchasing stock on the open market. The Chairman, who is the President of Wild Oats, recently purchased 20k during March 1999.
  13. 52-week range - $2.625 - $8.125
  14. Current market cap - $15 million
  15. Current PE value (not including amortization) - 4.6x
  16. Trading 50% of book.
  17. Trading less than 1x cash flow (EBITDA)
  18. Trading at 2x cash
  19. Price to sales - .03

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It is hard to believe that HMDL currently trades at the current level of $3/share. The upside potential is very attractive. Based upon current fundamentals, HMDL today should be trading at $9 to $10, not $3. In our opinion, someone will target them as a delicious meal, i.e., ABS, SWY or KRT. When compared to its peers, obviously smallish in nature, but still highly undervalued when comparing PE multiples. The average PE for our group of stocks listed within the chart (comparison of supermarket chains) equals 24.4x 1998 numbers. If HMDL were to trade at this multiple, our share price would equal $15.86 - a far cry from current levels of $3.00. In reality, it does not matter that HMDL is a supermarket chain. Bottom line: a stock that trades at 50% of book, a PE of 4.6, trading less than 1x cash flow (EBITDA), 2x cash, PSR of .03, trading near its 52-low, insider buy and noted investor types holding huge position in the stock - has no business being at the current level of $3.00. This is the steal of 1999.

Food for thought: Most internet stocks will never become a mature business as has HMDL, but yet are trading 10, 20 or 30x the current price of HMDL. It must be something in the water!

George Solos is one of the shrewdest investors alive today. One of his funds owns 13% of the company. One has to wonder why!?

Again, it is our opinion that most likely this situation will become a target by a much larger hungry supermarket chain looking to grow on the cheap! This situation is a great candidate for a value investor that does not value investments by “eyeballs” or “clicks.”

Broker contact: Greg Nelson at 1-800-269-9460.
Corporate Number: 405-879-6600.

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