CANNACORD Starts coverage....
Bridges.com Inc. (BIT : ASE : $2.60) Jeff Rath, CFA (604) 643-7323
Recommendation: SPECULATIVE BUY
12-month target: $5.40
52-week price range: $6.40-0.41
Shares O/S: basic 9.0M, fully diluted 10.7M
Working capital $2.19M
Current ratio 6.5:1
Long-term debt: Nil
Weekly trading volume: 141,105
Market capitalization: $35M
* Fiscal 1999 net income growth understated:
1. Accounting change moved approximately 20% of fiscal 1999
re-subscription revenues into fiscal 2000.
2. Fiscal 1999 net income is now fully taxed.
* Bridges.com (Bridges) is an online content provider specializing in
the publication of career and career related information. Presently,
Bridges sells its content via the Internet directly to middle schools
and high schools throughout North America. Management intends to
eventually expand its markets to include elementary schools,
universities, libraries, as well as the at-home market.
* Bridges's proprietary career content (branded Career Explorer-"CX"),
together with its focussed sales practices, continue to generate
impressive results. The company's subscription base is now 4,266
representing 12% of the 36,000 middle and high schools in North
American. We expect Bridges' market share to reach 10,000 schools
representing over 5,000,000 students by fiscal 2001) or 28% of the
marketshare.
* We believe the education system throughout North America has under
performed and is very cost inefficient. We also believe that this
marketplace now represents a very large opportunity for innovative
technology companies like Bridges, which provide current, cost
effective solutions.
* The more immediate opportunity for Bridges represents improving the
education-to-workforce" transition for students and their educational
institutions. A more informed student is expected to be able to make
improved decisions regarding post secondary educational choices and
eventually in career directions. Improving this transition should
result in a more focussed student body, improving the overall
effectiveness of the educational investment over the longer term.
We like this investment as a general play against the entire
educational technology sector.
* Our 12-month price target of C$5.40 represents 20 times forecasted
fiscal 2001 EPS and only 5.25 times forecasted 2001 sales. While
valuing Internet stocks against EPS is not currently the industry
norm, we believe this method offers good downside protection improving
the overall risk reward of this investment. With EPS projected to
grow from $0.09/share to $0.27/share over the next 24 months, a strong
fundamental earnings argument supports investors at this level. |
