Solving Mampilly’s “New Bitcoin” Teaser Pitch

What's being hinted at for a "Potential 2,325% Windfall" by Extreme Fortunes?

By Travis Johnson, Stock Gumshoe, September 6, 2017

I’ve gotten quite a few questions about this spiel, which was for a recommendation that Mampilly was supposed to release yesterday (and presumably did) to his Extreme Fortunes subscribers, so I’m taking a look… despite the fact that I’m a little sick of writing about bitcoin.

Extreme Fortunes is the “high end” newsletter Mampilly writes for Banyan Hill, it’ll cost you about $3,000 (and I believe it’s one of those “no refunds” letters, which can make misleading sales pitches more painful for folks who get sucked in without thinking). This is what got our readers’ attention from Mampilly’s ad:

“On September 5 (at Exactly 10 a.m.), I’m Going to Share an Investment That Could Set You up for a Potential 2,325% Windfall as the Situation Evolves….

“The New ‘Bitcoin’ Nobody Is Watching.”

Investors have gone gaga for initial coin offerings (ICOs) as they try to match the crazy returns that initial bitcoin buyers enjoyed over the past few years, so lots of folks have been guessing that perhaps Mampilly is himself recommending some new “coin” … but it sounds like this one is a little different. More from the ad:

“New ‘digital currencies’ — from Ethereum to Ripple to Litecoin — are popping up every day hoping to be the next ‘bitcoin.’ (There are now over 1,000 digital currencies.)

“In the last week alone, some of these currencies have jumped 1,981% … 2,282% … and even as high as 10,617%.

“The thing is … this is a gambler’s market.

“Nearly every one of these coins is rising on pure speculation.

“I wouldn’t put $1 in them.

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“However, there is one coin I’ve been watching since 2010, and it just became a screaming ‘buy.’

“An Opportunity I Expect to Skyrocket No Less Than 2,325% in the Next Year”

Leaving aside the fact that this is an absurd contradiction — that you don’t like a “gambler’s market” but are looking for 2,325% gains in one year — what is it he’s actually talking about?

Here are our clues:

“… what I’m talking about isn’t a cryptocurrency — but it does involve a kind of currency you could redeem in everyday life.

“They have been quietly locking in contracts with some of the world’s largest companies … working so they will accept this “coin” in exchange for goods.”

And he says that it is already being used for hotels, flights, meals, and is somehow “virtually recession-proof” …

“77% of companies using this coin said it helped drive business during the last economic downturn and plan to increase their use of it in the years to come.”

So what is it he’s pitching? This is clearly all about rewards points, which narrows it down considerably, and the fact that we waited to write about this after his recommendation came out means we can pretty well confirm the answer, because his recommendation caused a significant pop in the shares yesterday. This is almost certainly the little Canadian company Points International (PCOM in NY, PTS in Toronto).

This one isn’t new to us here on the good ship Gumshoe, it’s been teased in the past… and quite similarly, frankly, as the Wall Street Daily folks pitched it as as their hot new “forget bitcoin!” stock in 2014 and 2015.

Back in the Spring of 2015 when I last looked at PCOM, when it was just over $10 and on the way to briefly popping up to $14, mostly because of WSD’s attention, I thought it might be appealing at $6 or so but didn’t look so hot at $10… it has fluctuated from about $6 to $10 over the last two years, and yesterday popped up about 16% to get to near $10 again.

My comment at the time for the Irregulars was….

“It’s a decent service firm that manages or helps with transactions in loyalty/rewards programs for a number of large travel and retail customers. I don’t see any scalability to their growth, so it’s tough to pay a stiff premium.”

So what’s the story now? Does the stock, at about the same price it was two years ago, look any more or less appealing?

Here’s the company’s description of itself, just to give you a flyover:

“We’re a technology company working in the loyalty e-commerce industry. Our solutions enhance the management and monetization of loyalty currencies for more than 50 of the world’s largest loyalty brands, from frequent flyer miles and hotel points to retailer and credit card rewards. Supported by our unparalleled loyalty industry experience and technological expertise, we bring state-of-the-art loyalty commerce platforms and products to individuals and businesses in today’s loyalty marketplace.”

In practice, much of what they offer is the underlying software for points programs, and some financial and transferability services — letting members of some points or miles programs buy points to get over the threshold for some sort of award, or trade points with other customers.

On the financial side, the company has been relatively steady over these past two years — they’ve generally gotten less profitable, but they haven’t been burning through cash (they still have about $50 million in cash, a lot for a $150 million market cap company), and they haven’t issued more shares or taken on debt.

There hasn’t been any big change to their income statement — they have increased annual revenue by a little over 20% since 2015, so they do have some top-line growth, but there’s been no evidence of scalability or increased profitability as they grow — they are primarily a service business, handling things that don’t really belong to them, so their cost of revenue is very high at 85-90% (much of the revenue comes from selling points, which they have to buy from the companies at low or no markup), so that leaves a gross profit of somewhere in the 10-15% range, and their total operating expenses (overhead, selling costs, R&D) have almost always used up close to 90% of that… so they end up with a real profit margin of just about 1%.

That’s acceptable for a company that is growing fast or has the potential to increase those margins, but it’s a little surprising for a software and service company that’s growing revenue at not much more than 10% a year — so that puts a lot of weight on future growth and on the assumption that this tiny company can grow into something much larger.

The one reason you’d be willing to pay that much for a company that can’t improve their margins as they grow revenues, which seems so far to be the case with PCOM, is that you believe they’re establishing a dominant business that will continue to grow, and that they will get some earnings power at some higher revenue point in the future either because the business will finally become scalable or because they’ll be able to cut back on their “investment” once they’ve grown larger. That’s not necessarily absurd, such is the hope with lots of growth companies, including some genuinely fantastically performing stocks like Shopify (SHOP) and Amazon (AMZN), where investors arguably don’t even want to see profits yet because they want the push for growth and market share to continue.

I don’t know why Paul Mampilly has been “waiting” for seven years for this stock to become appealing, or why he finds it appealing now — there were few clues in the ad and not much in the way of “why” commentary to describe the reasons he thinks it’s going up by 2,325% over the next year. Maybe he’s recommending something more aggressive, like options on the stock, though options trading volume and open interest don’t indicate that there’s a big newsletter push behind any of those relatively illiquid contracts… but it sounds like he’s actually promoting the stock to rise that much.

Which strikes me as absurd, frankly, but let’s look and see what analysts think. They’re probably wrong, too, but they’ve at least looked at the financials more closely than I have.

The three analysts who cover Points International expct that revenue will go from $321 million last year to $343 million this year, and $363 million next year. So that’s 5-7% revenue growth — a slowdown from the average revenue growth of the past two years, but still growth. They company earned 23 cents in adjusted EPS last year, and estimates are for 28 cents this year and 43 cents next year… so that’s where analysts really see the growth, particularly next year when they’re projecting 50% earnings growth, which means they must be expecting margins to improve.

So presumably it’s that expectation of substantial earnings growth that got Mampilly interested, since there’s nothing in the historical financials to indicate great gains. Where is that growth coming from?

Well, they indicate in their latest investor presentation that their core business is still “selling points” for the programs for whom they manage “currency retailing solutions” — which includes lots of huge programs and major brands, like Delta and Hilton and British Airways and Hyatt. So much of their gross profit, they say roughly 80% of it, comes from the markup, whatever it might be, that they receive from facilitating the sale of points from companies to their customers.

The sample they show in their investor presentation is $315 million in revenue, $35 million in gross profit, and $20 million in Adjusted EBITDA from this “selling miles” business, and that they historically get organic revenue growth of about 10% per partner in this core business… then that $20 million or so in cash flow per year funds their “investments in new products.”

They have started to try to build their points retailing into online travel agencies as a service, whereby they effectively use hotel commissions to buy points and reward people for booking hotel rooms, and they clearly anticipate growing this business and having it be cash flow positive next year — they’ve apparently got an alliance with Expedia and have already launched programs like this with Lufthansa, La Quinta, Air France and a few others to prove the concept, with the potential, they say, to generate $40 million in gross profit in their “identified pipeline.” So that’s one source of growth potential — and if that $40 million is coming sometime soon (a big “if,” they don’t mention timing), then it could be big because that’s effectively doubling their gross profit (gross profit was $44.5 million over the past four quarters, from $332 million in revenue).

And the second growth pipeline they see is similar in size, they call it “platform partnerships” and it basically means they want to become the “integration standard” for the global loyalty points industry and provide the marketplace where people can use points earned in one program to earn rewards from another (or otherwise trade or sell points to other customers). This has been their goal for a long time, and they say it’s approaching cash breakeven now and also has that $40 million potential in the “gross profit” column.

So that’s a total hoped-for $160 million in gross profit (the $40 million base, plus another $40 million of growth potential they see in the core “points selling” business, plus $40 million from their integration with online travel agents to offer points as purchase incentives, plus $40 million from the “network” of points exchange). They’ve been talking about rationalizing their costs as well, so it’s hard to guess at what kind of operating expenses these other segments might bring to the table… but if we assume that their SG&A and other operating expenses are about 75% of gross profit when these future revenue streams come rolling through, that would mean that the potential is there for the operating income to go from about $10-11 million to something like $40 million.

So that’s the growth hope. I haven’t seen any full analyst reports on this one yet, so I’m not sure how fast those forecasters are modeling in this growth — right now, the relatively tepid growth expectations from analysts seem to indicate that they’re not expecting this 300% growth in gross profit and operating income to come all that rapidly. Or perhaps they’re skeptical of it happening at all, I don’t know.

And it’s time to pass it back to you, dear readers — for me, I still see the potential in Points International, but don’t find it particularly appealing at this price unless you read through their filings and begin to really believe the growth trajectory in the business is going to steepen. That huge increase number for next year’s earnings is compelling, that means you’re only paying 23X forward earnings (or more like 15X earnings if you back out PCOM’s large cash balance)… but it’s also a number that makes me a little uncomfortable, since they seem to be forecasting that the EBITDA margin for the next $40 million in revenue will be 12% while the EBITDA margin for the first $320 million is 3%. It’s possible, for sure, if they manage to grow these other segments and those turn out to be profitable, or if they can cut costs substantially (which is hard when you’re trying to grow two new business segments), but the key would likely still be the margin they can earn by reselling points from airlines or hotels (mostly airlines), which will still be the vast majority of revenue.

If I were to invest in Points today, my first step would be reading through their last few years of conference call transcripts to see if I can build any confidence in management’s forecasts or optimism (or, alternatively, to see if they perennially overpromise), and I’d probably also want to browse around in some of their products to see if they look appealing to me as a potential customer. And, of course, I would get that notion of a 2,325% one-year windfall out of my head before I did even a modicum of research or opened up the website for my brokerage account… that’s just silly.

So that’s where I come down on Points… it’s still a compelling idea, creating a global standard for loyalty points and a network where those points can be transacted, and we don’t seem to be moving beyond the customer adoration of points and rewards, but I think we’re still at a point where the big airlines hold most of the sway and can pressure Points on margins if they wish, which means they’re somewhat hostage to their customers when it comes to the source of 90%+ of their revenue, and the growth projects are still really just trying to get some traction and have a pretty unknown growth trajectory at this point. There aren’t any big competitors out there, with the exception of “platform” points (like Hotels.com reward nights, etc.), the real competition is from the airlines and large hotel chains themselves — do they outsource and partner with Points International, or do they do it in house? They’ve both gained and lost customers over the years as opinions have changed on that, it seems.

I expect Mampilly is probably more excited about the growth prospects than I am, and he has probably researched it more thoroughly… but in the end, of course, it’s your money, so it’s what you think that matters. Have any points thoughts? Shout them out with a comment below.

P.S. We’re always looking for more feedback about the newsletters you subscribe to — if you’ve ever tried out Mampilly’s Extreme Fortunes, please click here to let your fellow readers know what you thought.

Disclosure: I don’t own any of the stocks mentioned above, but do own small positions in some cryptocurrencies, including bitcoin, ethereum and litecoin. I won’t trade in any of the investments covered here for at least three days, per Stock Gumshoe’s trading rules, but do have an automated recurring “buy” of bitcoin and ethereum that continues on a weekly basis.


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38 Comments
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jbecket
3 years ago

Thank you as always, saving me a lot of money as I get sucked into the siren calls which in general seem to be more and more promising % returns that require are so long they’re hard to decipher.

👍 94
Rick Shaddock
3 years ago

Mampilly is trying to piggy back off the public awareness of Bitcoin’s rise to tout their chosen stock.

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frank_n_steyn
frank_n_steyn
3 years ago

That is correct, it is PCOM. It was trading around $8.30 or so, and immediately shot to over $10.60 after Mampilly wrote about it. Most likely because it is thinly traded.

Mike Mattson
Mike Mattson
3 years ago

Lol. Navcoin designed by the Bitcoin core development team is the proof of stake coin and true value crypto play at $1.75

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Peter
Peter
3 years ago
Reply to  Mike Mattson

Could n’t even find a ticker symbol for this .

advantedges
advantedges
2 years ago
Reply to  Peter

PCOM. Read the report here.

👍 112
SageNot
SageNot
3 years ago

Don’t yah just love a company with a negative $90.+ PE Ratio? And Paul charges $3k/yr. for this gambling outhouse? I tried his $79. letter, still waiting for a 10 bagger, or a 5 bagger, (would you believe a double?)

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michael lacy
michael lacy
2 years ago
Reply to  SageNot

Yeah, I fell for Pail Mamsilly’s “profits Unlimited” and have received nothing but a headache. As I am a paraplegic trying to invest my small amount of money that is currently sitting in a credit union savings account as to make enough money to pay my medical bills. As everyone knows, the healthcare industry is an out of control legal bunch of thieves who if they had their way would take my home and everything I own. It’s all I can do to stay afloat. Like Mr. Mansilly they care about nothing but taking my money, Neither know that the crooked entities do not practice “Do unto others as you would have others do to you. It’s like Bob Dylan said, They have no faith to lose and they know it”. Even the pawn must hold a grudge.

Feeling ashamed I got sucked into the “Profits Unlimited” scam
Michael Lacy

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Rich Hoffman
2 years ago
Reply to  michael lacy

Michael, I’m sorry to hear about your bad experience with Profits Unlimited. I sympathize with the other subscribers who also have
not made any gains from following Mampilly’s recommendations.
I have a realized gain of over $500 since subscribing a four weeks ago. I usually don’t hold onto my shares for more than a few weeks,
if I can make a quick profit. I do have close to $100 losses on some of the picks from the PU newsletter. I’ve been lucky so far with the inexpensive newsletter, but the other two which cost me a total of over $5,000 are not worth the price that’s charged. I made a profit
of $750 on the stocks recommended in True Momentum & Extreme
Fortunes (because the Market has been doing so good). I don’t think
I’ll be that fortunate the next coming month’s, so I’ve decided to see if I can cancel the pricey newsletters. I’m 84 years old, and walk with
a cane, otherwise I’d be falling whenever my arthritic knees give way.
I don’t have the energy to do all the extra research that many of the astute investors say is necessary to get the best out of Mampilly’s newsletters, or anyone else’s for that matter. I read quite a few posts where investors only picked some of the stocks recommended. I
invested in most of them if the price was close to the mid-price that Mampilly shows in his buy zone chart for each stock. I hope you have a better year than you’ve had thus far. Take care.

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David Collier
David Collier
2 years ago
Reply to  Rich Hoffman

PU portfolio is designed for you to keep the stocks for the next four years…he has added about 12 stocks per year and he is up 235% in 2017…do not sell your stocks…you should know that no stock goes up in a straight line…the best performer stock is up over this amount and i bought it at 5.15 and it is not approaching 25.00…i have held it…it paid for me to have surgery…so…I will be all in soon…i will sell whatever i can and work as hard as i can to get my money into his portfolio…i am in all three and every Friday I am up..and I have only worked one month this year to get over the murder of my mother…i am qualified to be an expert at the trial where i will put the man who murdered her in prison…i would never say something so serious on the internet if it were not true…she was murdered for her wealth…just like what almost happened to me…i survived and found one cure for one of my injuries a decade before…i hold more than one medical degree and i invented a machine that is used in medicine all over the world…i won the international science fair in at the age of 17…i entered college at age 15..but took college human physiology as a ninth grader…i had two wonderful parents…and i saved my dads life…and my sister’s life twice because of my persistence and my extreme fund of knowledge…i am not trying to be cocky…i am telling you if i am a world expert in my field and I am…that Paul Mampilly is clearly a world expert at his and if i was a regular Joe I would know that if I could get one of the best if not the best for 47.00 a year and you can get Profits unlimited for that price…and i did…and i have never sold any of the stock except the postions he closed out…and i am souring up…and he predicts in a well documented video why a dow of 50,000 is conservative…it has to do with megatrends, all of the history of the stock market and why there are certain companies that profit and those that fail…He has his own system and he vets each stock..he has not missed on a single stock the way I see it…and I own PCOM…and I am earning money…i own every one of his recommendations…so…i have two degrees that are lets say like a PHD…and I have two…I am a world expert in education such that over 400 companies and 40 countries have sent their experts to get training from me for 3 decades…and i shut it all down because of stalkers and because i went home to care for my dad…he was also almost murdered…for money…now both my parents are gone…and i have saved a relative’s life twice…set that one up in a great home…I got it for that person by negotiating it… 400,000.00 and that relative now owns it but it was worth 700,000.00 . That relative now has no mortgage…I am still getting that person help to recover what also almost happened to me and my mom and my dad and that relative…i dont mention sex or names or the relationship only to protect that person from anyone who is dangerous…it is well documented that one in 100 people are born..not made…a psychopath…so every time one hundred people pass you one of them is quite dangerous…I can assure you it is not Paul Mampilly…the man is a saint…and so wise I would say he is one of the few people on the planet that is my IQ and EQ match…I don’t fit on planet earth with hardly anyone…i have trained 1/3 of the worlds experts in one area…i cornered the world market by myself…i shut it down to go home and care for my dad and i wont reopen it for a while…i am still preparing the case to put the two men in prison…and giving my relative time to adjust to the fact that this will surely happen…so don’t you think for one moment i am here as a prankster…I am a serious person…my whole career is about helping people. My offspring have genetic superiority…but you would never know it…so humble…yet at 29 one has a BA, 2 masters, and now on a PHD…i paid for none of it…all full ride scholarships…and safe in a far away wonderland…and my other offspring are the same..it is just genetics…i had no rules as a parent…none…no bedtime, no “clean your room”…their homes are spotless because i let them live as they chose as children…i gave them only yes never no…i was creative with them…and no i did not put them in just any school…it affects life outcomes…and i worked hard to ensure that they had all the tools to match their massive mental gifts…this man is giving you the chance of a lifetime…Paul Mampilly..and i am here and he does not know my name yet…but I tell everyone to follow him…so…i am either a crazy double Phd or not…smart people can appear to be crazy…that is true..but i have been studied by many people who want to try and understand how i can do what i do with just my mind…and they all come to the same conclusion…you love what you do and you are just genetically endowed…i dont apologize for that and usually i tell people im the moron of the household…and for my home i may well be…I am just of average intelligence…my favorite phrase…i tell people sorry sorry sorry..at least three times…for those who say they truly hate me…for being good and kind and helpful i apologize…to these takers…it is pointless to react…and i am reacting here only because you are all making a terrible mistake…i am trying to help you…stay the course follow the man…he is not evil…he is good. So you either trust me or you dont…i cant and wont use my real name…i barely can feel confortable using social media because i dont like the sound of the phrase “being followed” because i was followed for a long time before i was seriously injured…i wont say how well i am doing…i wont ever say anthing about myself not now…not until we stop the crazies and that…wont happen…It does not matter to many of you that bitcoin is used for illegal purposed and it is still helping people make money…you can mine it for free…the stupid people who invest dont realize that governments want to pass laws and it has already happened in Europe to stop bitcoin transactions..because governments want to control the money…and they will pass laws and they stopped the illegal gambling a few years ago…all of it offshore in foreign lands but all money from Americans betting…they shut those companies down and their stocks plummeted…dont think they wont stop bitcoin, etherium..but if a govenment chooses like Venezuela to use for their own purposes to have their own cryptocurrency they will do it..and so will ours…because our government needs to have private transactions…some of those transactions protect us…some of you will say all people in government are corrupt…there is no situation where it is always ALL or NONE…when it comes to human behavior…anyone who wants illegal drugs just has to go to their ATM get cash and buy them…they did not need the SILKROAD which was using bitcoin to lauder money…that man is young and in prison for life…for selling drugs on the internet…illegal dangerous drugs…synthetic marijuana in Arizona puts people in comas…because it is not yet cut…by the time it reaches Indiana it is almost harmless…so none of you know anything about toxicology unless you are a toxicologist…marijuana has awful side effects with smoking like a collapsed lung in some…and in thousands with cancer it is a life saving medicine for pain…but most people are stupid and most people have some evil in them and most people like experimenting…and so they love that it is now recreational…but its primary use in medicine is for people with epilepsy…that wont respond to any other agent…look at the stock XXII and you will see it went up…does not mean it will continue….it is not a Mampilly pick…then we pick on PCOM based on a false assumption..Mampilly does not ever make any use of options in his trades…so you got that one wrong…about PCOM…it is like digital currency..that is what trading and using points like Delta frequent flyer points…and those who travel frequently love that service…so they are loyal…and loyalty brings back customers and makes new ones…so PCOM is using points in a way that might later be considered illegal…no one I know pays taxes on the benefits they get from their points…but it saves them thousands of dollars and gets them comfy and cozy flights and many other services…and they plan on a universal point that is interchangeable…and it is not tracked by any government…not yet…soooo???? that might give you a clue as to why PCOM will do well…good luck…i hope i did not disturb anyone…and i hope i helped you…it is not easy being smart…nope…it is a horrible burden…but i never worry….it is horrible for human nature is prone to jealousy, hate, bigots…and so much more…the known history of the written word proves it…there have only been 30 days on planet earth when there was no war since the first words of mankind were etched into rock…that tells me the basic nature of humans for the majority of homo sapiens is WAR! That means evil abound in mankind…and it does…but not in all…and not in Paul Mampilly..not one gram…he would deny that…he would say i made many mistakes…i would say compared to most homo sapiens you are truly a SAINT. Have a happy New Year..mine is great…:)

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