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Who is NewMarket Technology and Why Should We Take Notice?

Who is NewMarket Technology and Why Should We Take Notice?

 NewMarket Technology (NMKT) is a system integration company that also finds, creates and introduces new technologies to the market.  They sell these new technologies to new and existing integration customers.  They have large operations in North America, China, South America and South East Asia.  When a certain technology or region “matures” they intend to give an equity dividend to their shareholders by creating a fully reporting majority owned subsidiary.  NewMarket will essentially become a conglomerate or a co-op of publicly listed micro-cap companies which creates equity income in NMKT and ultimately increases REV for NMKT. 

Management put the brakes on some major revenue producing projects in 2007 (which will be initiated and realized in 2008).  They also had a delay in their efforts to be listed on a “big board” exchange.  Their efforts to initiate the equity dividends in 2007 did not materialize.  The magnitude of what they were trying to accomplish was great indeed.  They are the only company attempting to introduce new technologies to the market in this fashion and essentially have no precedence to follow.  They have however, managed to list their Chinese operations, NewMarket China (NMCH), and have created a public shell for their Latin American (NLAI) operations.   They have not delivered on providing any equity dividends to date.  They made a few mistakes during this process and were slowed down by insufficient staffing to meet the huge work load created to pull of such undertakings.  Management decided to re-group and acquire the necessary resources during 2007 to better implement the vision they have for the company. None-the-less shareholders were not happy and hammered their stock price in 2007.

NewMarket is anticipating at least 20% organic revenue growth over their 2006 revenue of $77.6 million for the 2007 reporting period (earnings are scheduled to be released in late March).    At minimum, they should report $93 million in revenue for 2007.  In January, management indicated they anticipate at least 20% organic growth in 2008 as well.  This suggests 2008 revenue will be in the range of $110 to $115 million without acquisitions.  Here is where things go from good to great.

Management has set its sights high.  They have a goal to reach $500 million in revenue by 2010.  Although, this is not considered to official guidance it does provide a little background to their resolve.  They have already taken the company from no revenue in 2002 to nearly $100 million in profitable revenue in 2007.  There are not to many technology companies that can make such a claim.  Management is committed to obtaining a listing on a “big board” exchange and is determined to issue at least one stock dividend in 2008 and possibly a couple more should all fair well.  In early December NewMarket completed a $7 million financing transaction with an institutional investment firm to support new growth initiatives.  The company has also indicated they have a potential acquisition pipeline of $150 million in revenue.  No NewMarket stock would be used in the acquisitions.  On January 28^th   of this year the company announced it launched efforts to build a Mobile Computing Solution (MCS) offering in the third quarter of 2007. Management anticipates $20 million in sales in 2008 resulting from its new MCS offering. The increased sales from the Mobile Computing Solution were not included in the 2008 20% revenue forecast and would raise the current estimate to $130 million.  Should management make good on half the acquisitions in their “pipeline” they could potentially see revenue of around $200 million in 2008.

 2008 is setting up to be a break out year for NewMarket Technology.  If—big if—management is able to accomplish all the above then the current shareholders will receive quite the payoff.   A big board listing will allow institutional investors to buy the stock, analysts will begin to cover the stock and its share price should more closely align with its peers.

 Personally I am long NMKT and have watched things unfold for several years.  I am excited about the prospects for 2008 and beyond.  Take a closer look; it may be worth your time.  You may discover a hidden gem.

 S D Matthews