BPI ANALYST REPORT POSTED ON ANOTHER SITE
CAPITAL IDEAS
Toronto
20 Toronto Street, Suite 900
Toronto ON M5C 2B8
? Phone: (416) 861-3080
? Trading: (416) 861-8257
? Fax: (416) 861-0418
Montreal
1 Place Ville Marie, Suite 1611
Montreal PQ H3B 2B6
? Phone: (514) 878-0079
? Trading: (514) 878-1018
? Fax: (514) 878-1866
www.groomecapital.com
Big Picture Technologies, Inc. (BPI-ASE)
Closing Price: $1.20
Initial Recommendation Price: Under Revision
Current Recommendation: Speculative Buy
12-18 Month Target Price: N/A
Shares Outstanding (basic, MM): 14.0
Shares Outstanding (fully diluted, MM) 24.3
Market Cap. (MM): $16.8
Tuesday, November 16, 1999
NICHE WEB-SOLUTIONS PROVIDER
E-Commerce
Big Picture is a developer of award-winning Internet software and content, specializing in business-to-business online communication. The comnpany's software products offer an all-in-one solution to businesses wishing to set up an e-commerce web site. Big Picture?s new product - eMerchant Pro derives revenue from two sources: 1) retail sales of the software and 2) ongoing hosting revenues, after a 3 month trial period (hosting capability built-in to the software). Recent event: On November 11, 1999 Big Picture completed a Memorandum of Understanding to acquire Morgan Media Inc. and Slasan Associates Inc. for a combination of cash and shares. Morgan Media Inc. (Morgan) is a supplier of web-based tools and products for the education and corporate markets. Morgan collaborated with Big Picture in the development of Big Picture's flag ship eMerchant Pro product, which utilizes Morgan's web engine technology. Slasan Associates Inc. (Salasan) is a Western consulting practice specializing in the development and implementation of large scale projects. A reseller of Morgan Media product, Salasan has international project management experience in 25 countries. The combination of the technical, marketing and consulting expertise of the three firms (Big Picture, Salasan and Morgan Media) should result in a full service corporate group that can effectively
meet the increasingly complex demands of the the rapidly expanding web-based commerce and education markets.
Michael Anthony, CEO, will be holding a conference call on November 16, 1999 at 4:00 pm to discuss
these acquisitions - tel. (888) 740-4844. The company?s flagship products, which will drive this growth, consist of the following:
Product 1. The Company pioneered its first unique product line of Internet development software - SmartSite - a quality control/assurance software for web site management - it received 5-star reviews in industry publications, such as Byte, PC World, etc. Introduced in January 1999, sales for SmartSite nearly doubled during each of the past three quarters.
Product 2. The Company?s second product - eMERCHANT Pro - which will officially be launched this month, provides a complete web solution for small-medium sized business users, marketed primarily through traditional software channel (retail). The software allows customers to E-commerce enable web sites in about an hour, including design, hosting, secure credit card capabilities, shopping cart capabilities, etc. Free hosting is offered to customers for 3 months, after which customer may renew the sevice (web hosting will be provided through the Morgan Media acquisition). The eMerchant product enjoys substantial net margins, and the ongoing web hosting revenues provide for even higher margins. eMerchant is currently being featured on Dell?s Gigabuys site, and is one of only a few in this category.
Product 3. Big Picture?s third product, Blur 3 - to be launched in February 2000 - will be targeted at larger users of the realtime attendant capabilities, featured in the eMerchant product. The software will allow customers connecting to an e-commerce enabled web site to communicate, in realtime, with tele-marketers from the company. This will make the purchase experience much more compelling for both the retailer, as well as the customer, who, typically abandons the process due to lack of realtime support.
New products by next year:
The Company expects to introduce new products as a result of the recent and anticipated acquisitions.
The ?off-the-shelf? advantage. According to the Company, 70% of all shrink-wrapped software flows through the very concentrated traditional retail distribution channel, as opposed to Internet-based. IDC, a computer consultancy, estimates that 60% of small to medium sized businesses are still not using the Internet for purchases - they continue to buy from the traditional retail channel. This is the target market for BPI, as this market is currently under-serviced by e-commerce solutions providers.
We believe that Big Picture is on track for achieving $2 million in revenues for F1999 and $8 million for F2000. Recent acquisitions should provide break even earnings by Q1 2000 and be accretive thereafter. Any new acquisitions would cause us to revise our estimates. Currently, profits are reinvested into the Company, through marketing.
Latest Financials ($ thousands)
F 1998 F 1997 9 mo. F99 9 mo. F98
Revenues 442.3 101.8 964.9 372.0Gross margin 55.4% 21.7% 86.7% 65.8%
Net earnings (767.5) (583.2) (348.2) (384.0)
Shares outstanding (millions - basic) 12.7 - 14.0 12.4
Shares outstanding (millions - fully diluted) 14.2 - 24.3 14.0
Bottom Line: Considering the following:
- Exponential growth in small-medium sized businesses seeking to establish a web presence;
- Scarcity of quality all-in-one e-commerce solutions available as competition;
- Big Picture?s existing distribution network of traditional merchants;
- Recent acquisitions that complete the Company?s offering and provides for additional revenue streams; and
- Strong management with industry depth, we believe that Big Picture Technologies is currently undervalued. The prospects for e-commerce allow for many companies to prosper, and niche players, such as Big Picture, stand to carve out a leading position in one, or more of these areas.
An investment in BPI may be particularly suited for investors with above-average risk tolerance, who are seeking a potential for capital appreciation and who have diversified investment portfolios.
CHRIS BONNET, MBA / CLARENCE REBEIRO, MBA research@groome.ca 514-878-0558 |
