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Strategies & Market Trends : AMIGOS INVITATIONAL YEEHAW PORTFOLIO

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To: Sergio H who wrote (823)	8/1/1999 1:06:00 PM
From: Cary C	Read Replies (1) of 1316

Thanks for the info on USTR Sergio. I hadn't really looked at the background of the people who were heading up the internet part of the business. She has quite an impressive list working closely with her. As far as the revenue possibilities from the e-commerce division that was created, the people I have talked to say it could generate 2 to 3 billion dollars in revenue to United Stationers in the next three years. That would basically be doubling their current revenues. My first reaction to this was that it was an unrealistic figure. Upon further review... New companies are going to be able to compete for the home market. Not necessarily companies like the one I work for who carry a lot of over head while catering to the 20 to 200 person office. They will be able to operated on much lower margins. It will spill over into our market also. When you consider that Office Depot did approximately 10 billion, Staples 8 billion and Office Max 4.5 billion last year, the 2 to 3 billion in three years doesn't seem unrealistic. Lower margins aren't going to effect United since they will be the ones selling the product to their existing and new dealers. They could in fact see margins increase from lower pricing and rebates from manufacturers from increase volume. Obviously there are a lot of what if's such as how will the super stores respond to this if it becomes a threat or even if they think it might be a threat. All of them along with the big "boys" in the industry are spending a lot of money in the E-Commerce arena. Even though they are the same I believe E-Commerce and the home business market will give them some similarities to the super stores. Food for thought possibilities.. Office Depot current PE 27 shares/ float 374m / 280m Offcie Max current PE 24 113m / 80m Staples current PE 65 464m / 390m United current PE 12 34m / 26m The above gives United about 3 more stock splits (purely hypothetical no facts to justify) In 95 and 96 United traded at a PE range as high as 35 and most recently in 98 as high as 23. Currently at 12, United could at least double to a PE of 24 if they start showing the anticipated revenue growth. A PE of 24 would give them a current stock price of $50.64 and year end next year of $60.96. I guess time will tell. One thing is clear to me, at this level, USTR is a very comfortable investment for me. Cary

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