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According to my industry sources, DNICK is testing the market for putting its blank coin subsidiary, Saxonia Eurocoin, up for sale. The combined value of the company’s various assets should amount to 2-4 times the current share price. A gradual liquidation or restructuring of the company should lead to a crystallization of the much higher intrinsic value. Such plans were what I had set out in my original DNICK report in August 2008, but they were subsequently held up by the sudden economic crisis. DNICK successfully mastered the temporary weakness of the global economy, and 2011 should offer a much more opportune timing for the sale of subsidiaries. Readers could be well advised to dig out the old report.

The company’s earnings outlook (and share price) has recently been suffering under an FBI and Senate investigation – one where Billing Services Group isn’t legally implicated at all, but which has nonetheless damaged the prospects for 2011. The US has recently seen several high profile cases of fraud involving the sale of certain digital goods through telephone landlines (so-called “enhanced services”, e.g. wake-up calls and voicebox services). Companies such as BSG are the gateway between such service providers and landline customers, leaving them at the risk of unwittingly handling payments for a fraudulent operation. The US telecom companies, through which such enhanced services are ultimately sold, have currently put a temporary stop on allowing new business in this area until an audit has determined how to best prevent telecom customers from being defrauded in such a way. With no new business in this area coming forward (and the existing customers gradually eroding because of the inevitable client churn), one of the core divisions of BSG is currently experiencing quickly falling revenues and cashflow. BSG itself is not accused of any wrongdoing, but the company is caught up in the PR fall-out of the investigation.

The company’s ambition is to establish a fully electronic marketplace where vendors and distributors of financial services can get together and carry out transactions in an environment that is conducive to facilitating transactions and that helps decrease transaction costs. The rapid growth of this platform is something that the market has not yet woken up to. 

The company’s management say they “are excited about the positive receptivity” of large US corporations to whom they recently pitched BILL2PHONE. This includes discussions with a potential corporate client that has 40m retail customers.Dedicated sales team for BILL2PHONE is now in place and the company is approaching virtually all well-known potential customers in the US online market, in a targeted campaign.

At its current depressed market cap of GBP100m, the company isn’t worth much more than the value of its stake in palm oil producer, Numar. The entire banking division, with its market-leading position in Belize, is thrown-in almost for free. Shares of BCB are now either incredibly undervalued or there are major negative surprises afoot.

This investment story has always been, and continues to be, backed by strong fundamentals. What BSG had so far lacked, was exposure to the public eye. Finally, however, it seems like the wider public is about to take notice. 2010 should be the year when BSG goes from being one of the telecom industry’s best kept secrets to reaping fame as the online payment industry’s next rising star.

Originally, BSG functioned as a clearing-house between these smaller telecoms companies; handling the billing for phone calls where a customer made a call from one telecom company’s region into another telecom company’s region. The business model evolved further and the company is now a market leader for complex billing solutions for landline telecom companies in the US. BSG controls 90% of this niche market.

DNICK continues to be a cashcow, with 2009 cashflow estimated to come in on the same level as during the previous year (and an even better outlook for 2010).