Sunday, August 12, 2012

NeuStar (NSR) – Market Leader with great prospects -

Those looking into some catalyst might want to ponder over this name for the week. After looking into the name which I originally got from Barron's this def. is worth a serious look:

Important time period – 1H2013

Potential Long -
NSR - NeuStar was created in 1996 to provide clearinghouse services to the telecommunications industry. NeuStar, Inc. provides real-time information and analytics to the Internet, communications, entertainment, advertising and marketing industries. It offers a range of services, which include registry services, managed domain name system, services, Internet Protocol, services, fixed IP geolocation services, Internet security services, and Web performance monitoring services. It operates in three segments: Carrier Services, Enterprise Services and Information Services

Notes or points to keep in mind –
NeuStar was created in 1996 to provide clearinghouse services to the telecommunications industry.

Manage number portability for both landline and mobile meaning when a customer wants to change providers and want to have the same phone number - NSR does it. NSR provides addressing and routing for every single phone call and text message in U.S. Operates under long-term contracts with all telecom firms with annual escalators of 6.5%,until 2015. NSR has been flawless under contract for the past 15 years. There are 4700 telecom. Virtual monopoly in the US so NSR is very valuable to whole network and not easily replacable. That business is 50% of NSR of revenue.

2nd business is enterprise which services the Internet infrastructure space. NSR addresses and routes about 20% of all Internet traffic globally. Emerging growth opportunities include network security services; majority enterprise revenue is subscription-based, so easy to predict. How does that work - If I make a phone call, either on a land line or a cellphone, and I'm trying to find your cellphone, the phone call essentially goes up into the cloud and through NSR databases. NSR also acquired Targus because of which NSR is able to provide real-time use in marketing, advertising, and customer support.

NSR trades at less than 10x 2013 cash earnings, and the stock could double in the next year or two. NSR has good management and made smart acquisitions. Bought back 12% of the shares in the past year.

RISK: The NSR contract with all telecommunication firms runs through the middle of 2015 but NSR is the single vendor in the space. NSR renewal process for the contract starts in 1H 2013. The risk of losing their contract is almost nil, because  the complexity they are dealing with and the investments made by those 4,700 telecom entities in connecting with NSR. Additionally NSR’s performance has been flawless.                                                                                           

1 comment:

  1. Neustar seems interesting but the stocks not for the faint of heart thats for sure.