Telestone Ripe for Growth

Editor's note: The following article was written by Maj Soueidan, the founder of The Markets Edge Hedge Fund and GeoInvesting. Soueidan's "GeoTeam" of researchers and analysts uses fundamental criteria to analyze micro- and small-cap stocks.

Telestone Technologies(TSTC Quote) provides 2G and 3G wireless communication access coverage solutions to telecom companies such as China Mobile(CHL Quote), China Telecom(CHA Quote) and China Unicom(CHU Quote) through its branch offices in China across 26 provinces.

A number of factors should support this company's growth. Before we discuss them, however, let's look at what Telestone does. The company:

Develops wireless, IP, CATV access network unification solutions technologies (WFDSTM) that are proprietary for carriers or building owners for their local information access network.

Designs and manufactures telecommunication equipment used in its access network systems or sold directly to other telecom vendors.

Implements its access solutions by installing the network systems at client sites through its nationwide branch offices.

Following are important bullish factors for the company and its stock:

The Chinese government will spend $70 billion over the next three years on 3G initiatives. This creates both visibility and acceleration in TSTC's business.

TSTC has aggressive goals over the next two and a half years to increase its domestic market share from 5% to 33%, indicating that it intends to capture a good deal of government-allotted spending with its new WFDSTM technology.

International business accounts for less than 5% of TSTC revenue. TSTC plans to expand its operations in the U.S. and other developed markets with its WFDSTM technologies, while serving those that are underdeveloped and behind the technology curve with its mature 2G technology to extend the life cycle of its 2G products.