DTGI - Digerati Technologies Inc. (DTGI) - Elbowing Into An Attractive Niche

Initiating coverage with Outperform rating. We believe that there is more to this story than a simple roll-up strategy of attractive, small to medium sized, cloud based telecommunication companies. There are dynamic, organic growth opportunities given favorable industry trends, its focus on high growth markets and its local support that differentiates itself from larger, national industry players. Attractive growth markets/High recurring revenue. Current operations are in high growth markets of Texas and Florida. In addition, the business has very low churn rates of roughly 0.3% to 1%, which is less than industry averages of 1% to 2%. Finally, 95% of the company's revenue is under long term contracts of 1 to 5 years, with the average of 3 years. Seasoned management team with favorable track record of creating shareholder value. Collectively, the management team has 125 years experience in the telecommunications industry, with a track record of creating nearly $2 billion in shareholder value. Disciplined acquisition strategy. The strategy includes finding companies that have $2 million to $10 million in revenue, are operating cash flow positive, and are located in attractive, growth markets. We believe that the company will be successful in obtaining capital that will continue to spur its acquisition growth initiatives to gain scale and achieve operating efficiencies. Attractive stock valuation, $0.23 price target. Near current levels, the DTGI shares trade at 2.8 times EV to 2022 revenues and 28.6 times EV to 2022 EBITDA, below that of its peer group, which average 3.4 times and 31.8 times, respectively. We believe that the multiple should expand as it executes on its acquisition growth strategy and up-lists to a national US exchange. Our price target is $0.23 which is based on a target revenue multiple of 3.6 times, more in line with its peers. Read More >>