WAVO: Management visits FBR; WaveTop on the way
09:44am EST 11-Feb-98 Friedman, Billings, Ramsey &Co (Robert Martin 703-312-96
Friedman, Billings, Ramsey & Co.
1001 Nineteenth Street North
Arlington, VA 22209
Continuing Coverage
WavePhore - WAVO ($9 ®) Speculative BUY
Management visits FBR; WaveTop on the way
Rob Martin (703) 312-9631 rmartin@fbr.com
Dan MacKeigan (703) 312-9666 dmackeigan@fbr.com
February 11, 1998
* WavePhore Management presents to FBR
* WaveTop remains on track, expected to roll out the first week of April
* Networks extends its relationship with S&P to include European data
distribution
* We reiterate our Speculative BUY rating and price target of $15
52-Week Range: $13 - $5 5/8
Shares Outstanding (MM): 17.3 Mil.
Float (MM): 10.0 Mil.
Avg Daily Volume: 247,002
Market Capitalization (MM): $164.5 Mil.
Enterprise Value (MM): $155.5 Mil.
Institutional Holdings: 12.2%
Insider Holdings: 26.0%
3 - 5 year CAGR: 50%+
Cash (12/97): $11.6 Mil.
Shareholders' Equity (12/97): $45.6 Mil.
Long-Term Debt (12/97): $2.6 Mil.
Book Value Per Share (12/97): $2.63
Yr - Yr
FY (Dec ) Revenue Growth
1996(A) $19.0 Mil. n/m
1997(E) $22.6 Mil. 18.8%
1998(E) $32.8 Mil. 45.3%
1999(E) $63.8 Mil. 94.4%
2000(E) $100.2 Mil. 57.0%
Quarterly EPS 97(A) 98(E) 99(E) 00(E)*
Q1 (Mar.) ($0.23) ($0.32) ($0.15) -
Q2 ($0.62) ($0.31) ($0.05) -
Q3 ($0.21) ($0.24) $0.07 -
Q4 ($0.24) ($0.18) $0.21 -
Full Year EPS ($1.30) ($1.04) $0.09 $1.59
P/E n/m n/m 109.8 6.0
* FY00 EPS fully taxed (not including NOLs) would be $0.95 per share
Management presents to FBR. Continued focus on each of the three business, with
emphasis on WaveTop.
Management continues to commit significant resources to WaveTop, with
expectations of an April launch. WaveTop has moved to its second beta
generation, currently being distributed to users outside the company, including
industry analysts and media contacts. The company remains confident of the
consumer launch in the first week of April.
Networks extends its relationship with S&P Comstock to include European data
distribution. Networks signed a three year agreement to provide satellite
uplink, hardware, installation and network services. Such a contract bodes well
for Networks recent European initiative, setting the tone for future contracts
in Europe.
Recommendation: We reiterate our Speculative BUY recommendation for risk
tolerant investors with a 12-18 month price target of $15 per share, based on a
combination of a 5-year discounted cash flow analysis and an independent
valuation of each business unit.
Risks: Launch of both the WaveTop service in the first week of April and the
launch of Windows 98, expected in 3Q, are instrumental in meeting our estimates
going forward. Any delay will create a lag on revenue that will ripple through.
The company also faces liquidity issues with just over $11 million in cash on
the balance sheet and an expected burn rate of nearly $5 million a quarter.
Without additional financing the company could run up against a liquidity crisis
by 3Q98.
Friedman, Billings, Ramsey & Company, Inc. is a market maker in WavePhore.
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