Sarasota, FL 3/31/2008 8:24:25 PM
Inca Designs (IDGI: OTCPK) Swimming against the tides?
Pennycents Magazine covers Inca Design
Pennycents Magazine, the market’s most valuable research tool covering micro-cap, penny stocks and otcbb equities, issued the following daily column by Priya Nigam.
As the US slowdown gives way to recessionary trends, it has become more and more important to identify companies that are taking significant initiatives to stay ahead.
While the global swimwear market is around $13 billion, women's and children’s swimwear accounts for more than four-fifths of the overall swimwear market. Inca Designs Inc (IDGI: OTCPK) is engaged in the designing, manufacturing, sourcing, marketing and sale of high-end swimwear and resort wear for the wholesale and retail markets. The company sells its products under the brand names INCA, INCA Girl, INCA Bag, and INCA Junior via around 50 major US retailers and almost 30 international retailers. Inca Designs has recently announced the launch of its online store (www.incagirl.com), a big step forward in distributing its apparel collections. The company hopes for this initiative to give it increased exposure and boost its sales. This move comes only days after Inca Designs announced the inauguration of a new flagship store in Manhattan, New York City. The company’s apparel are available at leading fashion retailers, such as Barneys New York, Scoop, Intermix, Neiman Marcus, Nordstrom, Bergdorf Goodman and Henri Bendel.
The entity was incorporated in 1998 under the name Accident Prevention Plus Inc. In December 2004, the company changed its name to Transportation Safety Technology. In April last year, the name was changed to Inca Designs Inc, which then undertook a reverse merger acquisition of S2 New York Design Corp. (In a reverse merger, a private company merges with a publicly-listed company with no assets or liabilities. The latter is also known as a “shell” company. This allows a private company to get publicly listed without an IPO, thereby avoiding complex procedures and saving time).
Inca Designs generated revenues of $96,287 in the nine months ended September 30, 2007, down from $676,212 in the year-ago period. The company cited “internal restructuring” and the “repositioning of outside and freelance consultants” involved in marketing its products and utilizing its assets to open retail stores as the reasons for the decline. Inca Designs’ operating loss widened to $801,186, from $328,009 in the first nine months of 2006. The company had no cash on hand as of September 30, 2007.
Earlier this month, analyst Lisa Springer of Beacon Equity Research initiated coverage of Inca Designs with a Speculative Buy rating and a price target of $1.85. Springer said in her note to clients that the company “has already booked over $500,000 of new sales in early 2008,” adding, “Inca could be generating earnings before interest and taxes (EBIT) exceeding $1.4 million on revenues of $3.0 million over the next 12 months.” “With these results achieved, we expect the company to generate $5.1 million in revenues and $2.7 million in earnings before interest and taxes in 2009. Longer-term, we believe the combination of new apparel offerings and the establishment of company-owned retail stores will enable Inca Designs to deliver 50% average annual growth over the next three to five years,” Beacon Equity Research said.
Inca Designs addresses a huge market opportunity. While its products have a “designer wear” appeal, they are made available at fairly reasonable prices. This enables the company to target a larger population, which may be fashion conscious, yet looking for something affordable. Its global exposure is a positive in the slowdown scenario. Moreover, Inca Designs has been undertaking initiatives to strengthen its presence and its brand name and it has got significant media coverage recently.
The writer does not own shares in the above stocks.
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