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United Communications Partners Inc (OTCMKTS:UCPA) Running Up The Charts

United Communications Partners Inc (OTCMKTS:UCPA) Running Up The Charts
Written by
Jarrod Wesson
Published on
May 30, 2017
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United Communications Partners Inc. (UCPA) has recently run up the charts and been of the month's biggest winners in penny stock land. The company is a communication agency network operating in Sweden, Denmark, Finland, USA, Norway, and Germany. The most important reasons to justify the recent uptrend are revenue growth, UCPA's clients, the share structure, and the limited dilution risk, but most importantly the recent Q1 2017 earnings release. In this article, we will assess them all, but first have a look at the share price explosion around the end of May.SourceBusinessUCP uses three subsidiaries, namely Tre Kronor Media & Reklam Stockholm AB, Abrego Spain SL, and Tre Kronor Holding AB. According to the company's website, these subsidiaries operate under the following brands, or own a significant controlling interest:-Tre Kronor Media: it was founded in 2007, and works in very different formats, "from television and display to direct response and online media". It has received several prices according to the web; "best Media Agency 2010, 2011, 2013, 2015 and 2017".- Howcom: it is the result of a partnership signed in September 2011 with "two experienced Swedish media professionals with almost 20 years of experience in the industry". The most remarkable factor of this subsidiarity is one of its clients, Gina Tricot AB, which is a well-known retailer in Nordics, and Northern Germany.- InSight Communication: it was established in 2009, and works with Reitangruppen, another important retailer in Norway.- Native Clicks: it is a business operating in Spain that helps its clients increase sales and build brand equity by writing articles and news that are placed on the large sites.What did the market see in UCPA?Revenue growth and Q1 2017 earnings releaseThis is, by far, one of the most interesting aspects of the business. Have a look at the way it grows: 2010201120122013201420152016Annual Revenue ($ million)8.615.518.320.448.139.150.6SourceIt is more than 69% yearly CAGR. If the company is growing at this pace, the valuation of the shares should be quite substantial. On the top of it, EBITDA turned positive in 2016 after a long period of costs cutting. It was $175,000. Hence, in our opinion, bankers were able to make a more suitable calculation to obtain the fair value of the shares using the EV/EBITDA ratio. Consequently, the share price was pushed up.Let's review the last Q1 2017 earnings release, maybe we can obtain more information about that jump. On May 25, 2017, the numbers for the first quarter of this year were released. The market seemed to expect a great report as the share price and the volume increased right before the news came out. Have a look:SourceBut why? To understand this market move, we need to read another press release that was put out on February 22, 2017. It was a Shareholder's Newsletter that noted in many ways that the next Q1 2017 was going to be a great quarter. We selected the following:

"As it looks Q1 will be a good quarter since most our clients are active and the market in Denmark is booming and most medias are sold out. " Source"For Q1/17, we are expecting a result of NOK 2,5 million. This will of course depend on our customers' ability to fulfill their plans. In sum, we are very optimistic." Source

The most important figures released in that report were the following.

  • Due to an increase in the number of clients served, net revenues were 8% higher that that of the same quarter of last year.
  • Gross profit for the group increased 6% as compared to Q1 2016.
  • Profit before taxes and minority interests of $293,000 as compared to a profit of $142,000 in Q1 2016.

What is our take? This is a company that does not put out a lot of news. It is a rare communication strategy that we appreciate. Instead, it focuses on daily operations, and only notes the result of the work done quarter by quarter, and sometimes sends a shareholder letter explaining the company's progress. Hence, we encourage shareholders to read the letters as the operating results are talked about more in these letters.-United Communications Partners - Shareholder's Newsletter: 1Q 2017-United Communications Partners - 3Q 2016 Newsletter-UCP Shareholder's Newsletter: 2Q 2016-UCP Monthly Shareholders Newsletter January/February 2016Share structure and the limited dilution risk According to the last annual report, the share capital of UCPA consisted of 2,000,000,000 shares of common stock authorized, and 100,000,000 shares of preferred stock. Note that it does not include dilutive securities. Thus, the dilution risk does not exist, which is also a rare and good fact in penny stock world. The last convertible securities were converted in 2012:

"In the period from January 3 – January 17, 2012, the Company converted outstanding loan of $22,000 into 91,582,492 shares of common stock." Source

Additionally, according to OTCmarkets.com, there are 1,617,887,264 shares outstanding and the transfer agent is VStock Transfer LLC.ConclusionThere is a lot to like in UCPA. The company released its Q1 2017 earnings and, as expected, revenues keep increasing. The Shareholder Newsletter was a very good indicator as to how the quarter was going to play out for UCPA. Thus, we encourage investors to read the next shareholder letter closely. Additionally, we checked the type of securities issued and found no convertible securities, thus we have no dilution risk here. To sum up, this is a stock to check closely as the company is growing at a very fast pace and we expect the stock to continue its run higher. We will be updating our subscribers as soon as we know more. For the latest updates on UCPA, sign up below!Disclosure: We have no position in UCPA and have not been compensated for this article.

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