TZL - TZ Limited

[Pommiegranite]

G'day Pommiegranite, do you have any comments on TZL's fall from grace over the past week. ie from a closing of $5.95 on 2/11 to $4.71 on 9/11, a 21% drop?

Is it just reflective of a bad week for the overall market, or more price manipulation, and perhaps it's an opportunity to top-up again?

I would be very interested in your assessment on this plus your full brief on his company, seeing as you have obviously done a substantial bit of work backgrounding TZL.

Definite manipulation. Have a look at Friday's trades. They were all very low value eg 21 shares or 43 shares. The manipulation is done by a computer. Of this I am sure. I believe this is done for 1 of 2 (or both) reasons:

1. Credit Suisse keeping the SP low enough so that upon delisting minimal $ will be offered to current shareholders to part with shares.

2. To accumulate shares from panicked shareholders.

 

[Pommiegranite]

A little delayed, but here is my take on TZL, and why it is a long term hold which I daren’t sell out off.

It is probably best to view their website as to the various products which they are pushing. Also read the News/Media reports in order to understand how TZ have developed. I bought in for one product alone: Intevia


Product

Intevia is a fastening device which seeks to revolutionize the nuts, bolts and other fastenings thorough the addition of intelligence. Intevia is in fact a fastening device which is made of a SMA (Smart Metal Alloys) which is made of Nickel and Titanium (to give it strength). When heated the SMA shrinks through the attachment of a chip on the alloy controlled by an operating system. The operating is controlled remotely.

The main benefits of Intevia are:

• Lightweight (much lighter than cast iron nuts and bolts)
• Time saving - Can be controlled remotely, thereby saving time from having to use wrenches on each and every fastening.
• Security: Access can be controlled, monitored and logged
• Space saving (such as no need to leave space for car mechanics to work a wrench)
• Servicing of machinery can be controlled by the manufacturer (making millions of $ for each car manufacturer as you would have to get your car service from them
• Patented (15 years) - So no competition for that period

There are others which escape my mind at the moment.


Market Structure

Shares: 43,393,692
Options: 4,265,500
DLR Oasis have $14million remaining of a bond which they are converting.

Total Market Cap @ $4.71 : $240,416,794
Cash (After recent capital raising): $18million approx.
Cash (should all options be excercised) : $11million


Management

Directors with proven track records in IPOs, Cap raisings and M&A. The president is former Microsoft Australia/NZ CEO.


History

It would probably be best to view their website for the full history. However, this is my take on things:

Dickory Ruddock invented Intevia. It was patented by TZ for who Mr Ruddock is a director. Intevia was then licensed to Textron Fastening Systems in exchange for royalties. Textron Fastening systems had financial problems, due to the increase in the cost of steel, and were sold to Acument. TZ then reacquired Intevia from Acument in exchange for $24million(?) and a 10% equity stake in TZ. TZ retained Acument’s CEO (David Feber) and many staff, and operations.

TZ last year relocated to Chicago in preparation for relisting on NASDAQ. It is this move as well as the re- acquisition of Intevia which has led to a financial loss in 2006. This is what has depressed the share price, as the market on the whole hasn’t drilled down on this loss to understand the reasons behind it. This is what give investors today the opportunity to invest as ground level.

Nasdaq listing

It has always been in TZ’s plans to relist on Nasdaq. In Decemebr 2006, Credit Suisse New York were appointed as advisors with respect to restructuring and public offering for NASDAQ listing. Note: the underwriting is a 2 year contract. This re-enforces my expectations that TZ’s Q2 2008 NASDAQ listing target is a genuine goal.

The delisting from ASX and relisting in NASDAQ is expected to take 4-6months. This is why many investors are expecting news soon. Also with TZ having, over the past few months, announced various deals with future customers, delivery will be expected by those customers, sooner rather than later.

To complete a NASDAQ listing, TZ will need to fulfil certain criteria. One of these is to have a market capitalization of $500 (I believe). This is why it is expected that TZ may acquire another company which will increase TZ’s market cap. A manufacturing company, to produce the Intevia Fastners, would make perfect sense

Customers

This is where TZ really is beginning to produce the goods. They have an early adopter program. This pretty much means they approach companies, explain Intevia to them, and the potential customer then agrees that they would like to use Intevia. Intevia needs to be tailored to each use, this is why contracts would come once the bespoke Intevia fastener is produced.

So far Intevia have signed up BAE Systems, Boeing, Airbus, an anonymous Tier 1 car supplier, Navistar (school bus seatbelts), Porter (shipping containers), Karmann (convertible roofs for Audi, VW, GM etc) & many others which I really can’t be bothered to type about! There are also many more to come as so far we have only heard about 7 of the 27 early adopters.

Note: Some of these have actually provided purchase orders.

Revenue

Now this is where things really are staggering. As each Intevia fastener sells for around $150-$250, and the cost is minimal (production in Asia, and each unit requires only a small amount of nickel/titanium). John Falconer (Company Secretary) has confirmed to me that margins will be about 55%. To be honest, I expect higher.

There are far too many deals to go into detail on. However, let’s take one of the smaller deals in detail: Navistar

Navistar builds 38,000 school buses in the US each year. Intevia will tell the driver if kids aren’t wearing seatbelts and will unbuckle automatically in the event of a crash.
It is becoming a legal requirement in more and more US states to have seatbelts installed. Each bus would require 112 seatbelts.

Revenue = 38,000 x 112 x $200 = $851million.
Net profits would be about = $330million per year

On a typical NASDAQ p/e of 40, that deal in itself would be worth $241 to TZ's shareprice (60x current)

Okay, this is the best case scenario for 1 deal alone. However, this is for 1 country alone, and just highlights what we are dealing with here.

I have attached a spreadsheet which I fill as deals come in to give my profits. Please note that the revenue figures really are extremely coservative to stop me getting too excited.

Just fill in you holding in the orange cells.

Any questions, lets discuss!

 

[YELNATS]

Thanks Pommiegranite, reads as an exciting story. Will be interesting to observe TZL's sp performance over the next few weeks.

 

[Pommiegranite]

Thanks Pommiegranite, reads as an exciting story. Will be interesting to observe TZL's sp performance over the next few weeks.

No worries.

You will note from this morning's announcement that DKR Oasis are convervting another $1,000,000 of their bond ($13million remaining).

I have noted that whenever they do this, we see approxiamtely 50k of their 330k shares put up for sale. They always sell in 5k lots!

This is just some profit taking, as they retain the bulk of the shares. This also keeps the share price depressed. So I don't see any need to rush into buy just now. However, with the AGM looming in 3 weeks, I will make sure sure that I am holding as much TZL as possible.

Also, the recent placements were at $4.50. I see this as a floor to the SP providing no negativity on the fundamentals.

 

[blzae7777]

There was an earlier question that went unanswered and it is the only reason I have been holding off this stock...
I don't properly understand the implications of the Nasdaq listing on an aussie shareholder. Will we simply be given the value of our ASX holding we they relist, and then pay US tax when we sell?
Or is it more complicated?
Also, would we need to line up a US based broker to do our trade when we choose to sell?
Thanks for any help.

 

[Pommiegranite]

There was an earlier question that went unanswered and it is the only reason I have been holding off this stock...
I don't properly understand the implications of the Nasdaq listing on an aussie shareholder. Will we simply be given the value of our ASX holding we they relist, and then pay US tax when we sell?
Or is it more complicated?
Also, would we need to line up a US based broker to do our trade when we choose to sell?
Thanks for any help.

What will happen is that Credit Suisse will make and offer for your shares. You can accept or decline. If you decline, your shares will be transferred to NASDAQ a few months later, and you will have to open a brokerage account from here (there are a few). This is what I will be doing.

As for tax, (I'm assuming you are an Australian resident), you will only pay tax to the ATO upon the sale of your stock (no US tax). Transfer of stock from ASX to NASDAQ doesn't constitute a disposal of assets, so if you are and investor, you can still take advantage of the reduce CGT allowance for holding for longer than 1 year

 

[blzae7777]

Thanks for that, I assume a ComSec international account will do the job...

I definitely don't plan to sell to Credit Suisse either, think I'll put this one away for a while see where it goes.

 

[grace]

I rang Commsec and they advised not to open an international account until you are ready to sell (6 weeks before that anyway). The reason they gave me is that if you have zero transactions in 12 months, you will be charged a minimum fee of US$65 (from memory). So they said just open before you wish to sell (especially seeing this will be my only o/s holding). If anyone thinks Commsec is advising me wrongly, please advise. I am new to the o/s bit!

 

[Pommiegranite]

Unfortunately I wasn't able to attend the AGM, but here is a post which I lifted from a long term holder who did attend. Thanks Hardmano.

All in all the company look set to deliver fantastic short & long term share price growth.

"Hi all

It was an upbeat AGM with somewhere over 80 in attendance (compared to around 15 last year!). Questions were probing but good humoured and I came away with a very positive "vibe". Here's my notes that add to what was in the presentations, as well as answers to some questions:

Production capacity: TZ has already contracted 5 CMOs that are now familiar with their products and able to ramp up production on demand .. 3 in the Americas (1 US, 2 Mexico) and 2 in Asia (Malaysia and China). And they are in discussions with at least one very large global manufacturer and distributor with whom a JV of some sort is likely.

Customers: They have more than they can cope with so are focusing on increasing their engineering and customer support staffing and capability. There are 90 customers that have made an application commitment (see presentation) in addition to the 12 early adopters. They want to service their existing and these new customers and convert them to volume orders.

Revenue Model: No update but management stated that the current numbers in the model are “absolute baseline”, and said that 90% of what was in the revenue model was the 12 early adopters only, so there is plenty of upside with the additional 90 customers that have identified applications. TZ is now getting the customers to do some initial engineering and then come back with customisation suggestions to meet their requirements.

Acquisitions: As the presentation says they are now so confident of their revenue stream and CMO capacity that there is no need for acquisitions to get manufacturing capability. There may be other smaller acquisitions.

Funding: As the presentation says they have secured additional funding to enable the growth strategy ahead of NASDAQ and we will be hearing about that in coming weeks. Could be debt (most likely) or placements (the recent placement was to a US institution).

NASDAQ: The process takes around 21 weeks = 5 months. This process will commence once they get large firm orders from 2 or 3 early adopters. One is expected soon (December) and the others by early 2008 (Jan/Feb). This means that the float will now be some time between late June (earliest) and probably September.

CS/Underwriting/standing in the market: I didn’t get a detailed answer to this one other than they said CS will act as underwriters do to secure the float and to ensure an “after market” post-float.

Delist/relist: It is not absolutely decided but their intention (and presumably Credit Suisse’s) is to keep TZ trading on the ASX to within a week or two of the NASDASQ listing … so there won’t be a big gap when TZ is delisted and waiting to list .. that’s good news!

Valuation and NASDAQ: The valuation will be based on received orders plus the expected backlog of orders over the following two years. TZ could list now (it meets the criteria) but they want to maximize the float price by getting in some big orders.

Current share price, placement at $4.50 and future expectations: I asked the question how is TZ going to go from a recent issue at $4.50 (and current market cap of ~ A$200m) to the expected much higher valuation on NASDAQ within 6-9 months (I think they and we are expecting in the vicinity of US$1b+or-)?: Management expects that once the 2-3 big orders come in and are announced and then the NASDAQ timetable starts .. the share price will rise. In other words they don’t expect all the rise to occur in the NASDAQ book-build and after the float (i.e. $4 here one day then weeks later re-emerging on NASDAQ at say US$15+). So we can look forward to a decent rise thru the first 3-5 months of 2008 by the sound of it.

Analyst coverage: Chris Kelliher agreed that they need US coverage and he is sure they will get it particularly once some of the big name customers sign up for volume orders and NASDAQ timetable is apparent. DF thought we might see some coverage by CS out near-term.

In conclusion it was a good meeting, and although the 2nd quarter 2008 target date for NASADAQ looks once again like it might blow out a little, the upside is that TZ is going it alone and is very confident of doing so successfully as are Credit Suisse. So there will be less dilution to fund acquisitions than there might have otherwise been.

I’m happy now to sit back and enjoy the ride!

Cheers

H"

 

[grace]

Thanks for the news from the AGM. Hope managements' expectations of the sp being $15 by NASDAQ listing are met by the market! Must be some good announcements coming in the next few months then. I bought this at $2.40 and piled up because I follow "The Speculator" in The Bulletin magazine (David Haselhurst) for my speccies. TZL has been the only one that he had to make a disclosure for in relation to his family owning shares in it. That was good enough for me to load up. I'm glad he hasn't dissapointed! I'm beginning to think that it deserves a promotion out of the spec bucket!

 

[strayda11]

Am also heavily overweight- avg about $3 now after some recent purchases- but things continue to look very exciting... =)

By far my favourite stock...

 

[sheepdip]

I topped up my holding today at $4.70 and again the order got filled in tiny lots of between 20-80 shares at a time. At the time the ask was $4.80 but there was a constant trickle of these tiny lots from off-screen at the bid price to fill my order. Not sure whats going on but it seems to have been all day long with the ask generally 10c above the bid but the price being constantly knocked down by this non-stop trickle from off-screen.

 

[Pommiegranite]

I topped up my holding today at $4.70 and again the order got filled in tiny lots of between 20-80 shares at a time. At the time the ask was $4.80 but there was a constant trickle of these tiny lots from off-screen at the bid price to fill my order. Not sure whats going on but it seems to have been all day long with the ask generally 10c above the bid but the price being constantly knocked down by this non-stop trickle from off-screen.

Automated share price manipulation to facilitate accumulation. It has been going on for a long long time.

You may have also noticed that during morning preopen many sell orders appear and disappear simultaneously around 4.10pm-4.20 pm.

Its all irrelevent to investors, as with the upcoiming major orders alluded to in the AGM, the capping will be swallowed up.

 

[grace]

Definite manipulation. Have a look at Friday's trades. They were all very low value eg 21 shares or 43 shares. The manipulation is done by a computer. Of this I am sure. I believe this is done for 1 of 2 (or both) reasons:

1. Credit Suisse keeping the SP low enough so that upon delisting minimal $ will be offered to current shareholders to part with shares.

2. To accumulate shares from panicked shareholders.

In relation to this computerized manipulation.....will we ever see this come to an end? Is credit suisse doing this? How do they do it? Don't know much about it, but I do see it happening.......

 

[Pommiegranite]

In relation to this computerized manipulation.....will we ever see this come to an end? Is credit suisse doing this? How do they do it? Don't know much about it, but I do see it happening.......

Hey Grace,

I'm not sure who's doing it, but the reasons are clear:

For small timers it's easy to buy a few shares. However, for a larger buyer, there is relatively very little for sale, that if they bought all that was available:

1) it wouldn't be enough &
2) the price paid would be ever increasing, so would be bought at a premium

As for your question when will this end, who knows.

What I do know is that there was manipulation going on at $2.50 until the Boeing order was announced. Now the manipulation goes on at $4-6.

So when we get the 3 expected PO's over the next 6 weeks, the manipulation will happen at ever increased SP levels.

Bottom line: Ignore the SP until you are ready to sell. For me that will be well over $100.

 

[grace]

Don't know how to post ASX announcements, but there is a good one today.

Larson purchase order through for using TZL's security latch system for their storm doors Summer 08. Larson is the largest manufacturer of storm doors in the USA.

Should be a couple more purchase orders this month coming.

Nice rise in SP today too.

 

[Pommiegranite]

Don't know how to post ASX announcements, but there is a good one today.

Larson purchase order through for using TZL's security latch system for their storm doors Summer 08. Larson is the largest manufacturer of storm doors in the USA.

Should be a couple more purchase orders this month coming.

Nice rise in SP today too.

That's right grace: 1 down, 2 to go. The 3 orders will boost the forecast revenue to inturn trigger the process of the move onto NASDAQ.

And these are only 3 of 90+ customers who wish to be early adopters

 

[grace]

This share seems to be holding nicely today (considering it will list on the nasdaq Q208). Is there some good news coming any day (2 orders to go this month). Anyone know anything?

 

[sheepdip]

I think you said it right there Grace - 2 orders to go this month (could be any day now) and from there we should be flying.

I've been selling pretty much everything recently and funnelling it all into TZL. At the rate I'm going my portfolio is soon going to be 50% TZL, 50% cash.

Holding VERY strong at or near $5 while the market dives off a cliff.

 

[grace]

I think you said it right there Grace - 2 orders to go this month (could be any day now) and from there we should be flying.

I've been selling pretty much everything recently and funnelling it all into TZL. At the rate I'm going my portfolio is soon going to be 50% TZL, 50% cash.

Holding VERY strong at or near $5 while the market dives off a cliff.

Only down 1.67% for the year. Wish I had 50% of my portfolio in it too! Holding up very nicely during this this fearful market.