GEAC.....Canadian best kept secret Message Board

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Gold/Mining/Energy : GEAC.....Canadian best kept secret

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To: Serge Collins who wrote (845)	8/2/1999 6:33:00 PM
From: PlayTheKing	Read Replies (1) of 1571

Serge, Excellent questions. In addition to what Mike has already added, I have the following comments: <<Ignore the revenues, there are many companies out there trading at .02, .03, .04 x sales. Big revenues don't make it a good deal.>> I don't agree. Revenues are what drives a company. If the revenues are not growing at a decent rate there are no profits. GAC has always been known for its ability to turn companies around who show potential to grow. Revenues and cash flow are much more important than EPS because of management's ability to "massage" the EPS. Take a look at GAC's 1999 fiscal year end: Net loss...but $9 M in the bank!! I would take cash anyday. <<How much Goodwill does Geac have to assume if they buy them out at the announced price? How much affect will that have on profitability?>> Goodwill is an accounting number that is meaningless once it is on the books. I traditionally like companies that are more conservative who write-off the goodwill over a shorter period of time (e.g. no more than 10 years). After the first year of acquisition goodwill is a sunk cost. <<What shape is JBA's balance sheet in? How much debt/liabilities is Geac taking on?>> Zero debt. <<Will this acquisition mean writedowns in future quarters?>> Most definitely. GAC will want to clean up the books and take as much of a write-off as the auditor's will let them. Integration costs and reserves will have to be estimated for such things as redundancies, premises (i.e. relocations and other contingencies such as taxes, wrongful dismal suits, etc. Most companies want to start fresh and are likely to be overly conservative in their reserve estimates. That way, if things come in under, they will report a smaller loss. <<Why does this company insist on growing through acquisitions when investors are looking more and more for companies that grow internally?>> In their telephone conference 2 weeks ago GAC stated that they are expecting to maintain their 20% ROI before taxes. That, in my opinion, is their stamp that they are growing at a good rate. They're in the business of turning companies around and it was for that reason that the share price reached such levels in 1996/97. Their ability to turn the Dun & Bradstreet into a profitable segment was greeted favourably by the street. Growing through acquisitions is their forte. The street expects that. The lack of acquisitions over the past 2 years has contributed greatly to the decrease in the share price. The tides are turning... JMHO PlayTheKing

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