DailyTrends.com Company of the Week: Secured Digital (SDGL)
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I originally profiled this company back when it was at .04 two Novembers ago. From that time, it skyrocketed to .70 cents. You better believe a lot of followers were happy.
Now, I'm looking at Secured Digital for the second time around, and personally believe that it has quite a bit of value left for another run.
But first, some background info.
SDA has seven subsidiaries that's right, seven):
- EyStar Media Inc.("EMI") distributes home networking equipment
- Secured Digital Applications works in protecting shipping and provides Biometric solutions
- Gallant IT Holdings provides Information Tech in Southeast Asia
- Armor Multi Systems is the market leader in material handling equipment
- Perwimas Telecommunications creates wireless broadband networks
- Secured Shipping allows for safe supply chain management
- Temasya Wira excels in R&D for new biometric technology
Another interesting fact is that it's based out of Malaysia. This is a country that is known for having the world's oldest rain forests.
SDA has grown in the past two years by adding to its repertoire of companies that provide niches in the Asian countries.
I spent time this week with Patrick Lim, who is the Chairman and CEO of SDA, to find out more on how he keeps everything together!
Lahiji (DailyTrends.com): Mr. Lim, how come you own so many companies? What is the toughest thing in managing all of them simultaneously?
Mr. Lim (CEO of SDA): Each subsidiary plays an important role in realizing the Company's vision to a leader in the provision of biometrics security applications, secured shipping solution and ICT products and services. The toughest thing in managing all of these companies simultaneously is to motivate people from different backgrounds and industries to operate as a single entity towards achieving a common objective for the benefit of our shareholders.
Lahiji: What percentage of your business is being conducted here in the United States?
Mr. Lim: We do not conduct any business in the United States presently, but we are planning to commence operations in 2005.
Lahiji: In the last 12 months, which companies have you acquired? Have they been accretive to earnings?
Mr. Lim: Companies acquired during the last 12 months (12/1/03 to 11/30/04) are as follows:
- 80% equity interest in Asiaco Material Handling (East Coast).
- 67% equity interest in Asiaco Logistic
- 60% equity interest in Asiaco Engineering
- 62% equity interest in Asiaco Taiping
- 46% equity interest in Asiaco Transport, which we have sold in October 2004.
- 33% equity interest in Asiaco Engineering
- 100% interest in Gallant Service Centre
- 55% equity interest in Gallant IT Holdings, Gallant Zone, Gallant Focus and Gallant IT Distribution.
All the above companies have been accretive to earnings.
Lahiji: Why do you think the stock price has fallen so much in 2004, even after terrific earnings?
Mr. Lim: It could possibly be due to a number of factors that are beyond our control and investors' perception that SDGL is a foreign company. We are taking steps to change this perception by establishing an operation in the United States in 2005.
Lahiji: Explain what biometric technology is. How much growth have you seen in that space since 9/11?
Mr. Lim: Biometric is the science and technology of measuring and statistically analyzing biological data. Today, the only technology that can automatically identify people with any degree of certainty is biometric. Biometric uses unique physiological characteristics that are not shared by any other person, such as fingerprints and faces, to positively identify an individual.
However, as biometric is still a new technology to the mass market, times are required for us to introduce the technology to general consumers and to alleviate fears and misconception on loss of civil liberty and privacy that many people associated with biometric technology.
As for the impact of 9/11, conventional wisdom states that the post-9/11 need for security and reliable identification in public and private properties will lead to substantial increases in the number of biometric technologies and systems deployed. In Malaysia, the acceptance of biometrics has been helped by the government's initiative in issuing biometric identification cards to all citizens above 12 years old.
Lahiji: What are you planning to do in 2005?
Mr. Lim: During the past year, we have been busy building our foundation for the provision of biometric security and secured shipping solutions. 2005 will see the crystallization of our efforts through partnerships established and companies that we have acquired. We hope to introduce a patented telecommunication device in North and South America next year through our US subsidiary company.
Lahiji: Lastly, what is the biggest misconception people in the world have about Malaysia?
Mr. Lim: The biggest misconception people have about Malaysia is that it is a "third world" country. Nothing could be further from the truth. Malaysia has a thriving economy and is one of the top 20 US trading partners. Malaysia was the first Asian country to recover from the 1997 economic crisis.
Malaysia is also in the forefront of information technology with the establishment of the Multimedia Super Corridor (MSC). Conceptualized in 1996, the MSC has since grown into a thriving dynamic ICT hub, hosting more than 900 multinationals, foreign-owned and home-grown Malaysian companies focused on multimedia and communication products, solutions, services and research & development.
Malaysia is strategically located in Asia. It will serve as our bridgehead to the rest of Asia as it has good road, rail, air and sea links to the rest of Asia.
END OF INTERVIEW
There are not many companies out there in micro-cap world that have consistently given good results. SDGL is one of the few, and continues to grow in my opinion. Last month, they reported their ninth consecutive quarter of profits. Sales have also been rising pretty steadily.
With several acquisitions underneath their belts, SDA should have a very solid 2005. They are advancing in biometric technology which can become a very nice area for profit. Fears of terrorism in Southeast Asia are as pertinent and widespread as they are here in the United States. Wireless broadband is seeing explosive growth and the EyStar system is becoming very popular in people's homes.
Management also owns 59% of the outstanding shares, which alleviates my fears in them just abandoning ship and lacking in empathy. Top that with a clean balance sheet with $9.9 million in shareholders' equity, and you have a very nice investment to work with.
My price target is .35 cents in the next 12 month period. It won't take long for investors to find this Malaysian gem and cause the stock price to move higher, yet again.
Chris Lahiji will be available to take your questions until Monday, December 20. Please use the form below to submit your questions.