From RagingBull.com:
-------Company-------
PFSWeb (PFSW)
There is a lot of misunderstanding about this company. For several BAD reasons people are discounting the potential of this stock, but once you're done reading, I think you'll agree we've found another RETK-like opportunity. I've been licking my chops over this one all week long, just waiting for exactly this scenario. An opening lower than it deserves in the midst of a lot of other IPOs allowing us to get in for a nice ride up as people realize the potential of this company.
-------Business-------
We are an international provider of transaction management services for both traditional commerce and electronic commerce, or e-commerce, companies. We provide a comprehensive suite of services, including order management, customer care services, billing services, information management and distribution services. We offer our services as an integrated solution, which enables our clients to outsource their complete transaction management infrastructure requirements to a single source.
We are currently a subsidiary of Daisytek International Corporation, one of the world's largest wholesale distributors of non-paper consumable computer supplies and professional video and audio tape products.
After the completion of this offering, Daisytek will own approximately 82.2% of the outstanding shares of our common stock, or approximately 80.1% if the underwriters exercise their over-allotment option in full. Daisytek has announced that it plans to effect the complete separation of PFSweb from Daisytek sometime in mid-2000 (and within one year of the closing of this offering) through a pro rata distribution to its common stockholders of all of the shares of our common stock which Daisytek then holds (which is also known as a "spin-off"). There are, however, various conditions to the completion of the spin-off, and we cannot assure you as to whether or when it will occur.
-------Customers-------
We currently provide transaction management services to over 30 clients that operate in a range of markets, including apparel, computer products, printers, sporting goods and consumer electronics, among others. Our clients include various divisions of IBM, Hewlett-Packard, Thomson Consumer Electronics, Nokia, Tektronix, Global Sports Interactive, American Eagle Outfitters and ISA International plc.
-------Competitors-------
ASDS. While PFSW doesn't name competitors in it's prospectus, they are in the same business as ASDS, so here's the competitors that ASDS listed, which would also be competitors of PFSW:
"call centers (such as West TeleServices Corporation; Matrixx Marketing, Inc.; and APAC TeleServices, Inc.); system integrators (such as EDS; Perot Systems Corporation and Andersen Consulting); software providers (such as Smith Gardner and Associates, Inc.; CommercialWare, Inc.; Ariba, Inc.; Commerce One, Inc.; and IBM); traditional fulfillment companies (such as GENCO Distribution System and ODC Integrated Logistics); outsourcing divisions of direct marketing companies (such as Keystone Fulfillment, Inc. and Fingerhut Companies, Inc.); order processing companies (such as OrderTrust) and electronic commerce service providers (such as ComAlliance; Digital River, Inc.; Pandesic LLC and INTERSHOP Communications, Inc.)."
Underwriters: Hambrecht & Quist, Dain Rauscher, Jefferies & Co
Shares offered in IPO: 3,100,000 (over-allotment=465,000)
Outstanding Shares: 17,405,000
Stock Price (as of 12/02): 44 1/4
Market Cap: $770.17 (mil)
Compare to Market Caps of: (as of 12/02)
CYBS $1,397.42 (mil)
PFSW $ _770.17 (mil)
ASDS $ _390.50 (mil)
PFSW Financials (in thousands)-------*
Year,Revenues,Net Income (Loss),Diluted EPS
1999 $31,510 $2,943 $0.17**
as of
6/99 $ 9,250 $ _271 $0.02***
*Supplemental Pro Forma data (see comments)
**Year ended 3/31
***3 Months ended 6/99.
ASDS Financials (in thousands)-------
Year,Revenues,Net Income (Loss),Diluted EPS
1996 $6,826 $ 1,396 _$ 0.13 *
1997 $7,456 $ _(847) $ 0.01 *
1998 $8,020 $(2,606) $(0.01)*
as of
6/99 $4,679 $(2,293) $(0.24)*
*The ASDS income statement is a mess. You have to see it. Take the above info as a rough estimate only.
CYBS Financials (in thousands)-------
Year,Revenues,Net Income (Loss),Diluted EPS
1996 $ _144 $ (1,143) -------
1997 $ _968 $ (4,338) -------
1998 $3,384 $(10,085) $(2.05)
as of
9/99 $7,883 $(17,763) $(0.98)
-------Nakuru's Comments-------
PFSW is a much better company than ASDS is. If we just thought PSFW was worth twice what ASDS is worth, then the stock price should be at $50. Wow. (I actually think PFSW is 3-5x the company ASDS is, which gives a range of $75-$125.) Another thing is that ASDS is a recent IPO and hasn't had time to settle into a valuation yet. It may go much higher and if so, then PFSW will certainly deserve to be even higher.
They are also a much better company than CYBS is. They had more revenue in the first quarter of this year than CYBS has had in three (3)! In that same time PFSW is making a profit, while CYBS is swimming in losses! To be valued at twice CYBS would put PFSW at $158. The thing is that PFSW should be valued at least 3x CYBS and one could argue for more, which would put PFSW well into the 200s. What's really going on though is that CYBS is almost priced for perfection already, for that day when its income statement looks like PFSW's does right now. So, realistically, I think we should see PFSW as a little more than a 2 billion dollar company or at about $115-$130.
Note this important fact: It's the small number of outstanding shares on PFSW that allows it to command a lofty stock price. Even with a monstrous stock price, PFSW still can have a reasonable market cap.
Important: People are concerned because IBM makes up a large part of PFSW's revenue. The stuff some people are saying would make you think having IBM as a customer was a BAD thing. I think it's the best damn thing I've heard! Now it's true that if they were to lose IBM, that would be bad, but there is no evidence that will happen. Also, we could be concerned if we believed they didn't have the ability to sign additional customers. Problem is, we have evidence to the contrary: "PFSweb added 10 new clients in recent months, including Hewlett-Packard, Thomson Consumer Electronics, Nokia, Global Sports Interactive, the distributor for SportsAuthority.com, AthletesFoot.com and others, and ISA International plc." If they keep adding clients like HP and Nokia, I won't be worried. It's true IBM will continue to be a big percentage of revenue for a while, but again, the only worry will be if they LOST IBM, not that they HAVE them!
People are also concerned because of this statement:
"As of October 1, 1999, we have restructured our arrangements with IBM, one of our key clients, so that the transaction management services we provide for IBM will no longer include purchasing and reselling IBM product inventory, but instead will be reflected as service fees. In addition, upon completion of this offering, we will enter into a transaction management services agreement with Daisytek and begin recording service fee revenue under this agreement. Our historical financial statements, therefore, may not provide a meaningful basis for analyzing our business in the future."
But what people seem to miss is what they then go on to say:
"To assist in evaluating our ongoing business, we have provided the following pro forma and supplemental pro forma financial information. ... The column labeled "supplemental pro forma" shows how the pro forma financial data would reflect what our results would have been:
- under our prior IBM agreements if we had received service fees instead of purchasing IBM products and reselling them;
- if we had performed transaction management services and recorded service fee revenue for our business with Daisytek under our new agreement; and
- if we had acquired certain assets and liabilities from Daisytek as part of our separation from Daisytek."
And the income statement I gave above is this very same Supplementary Pro Forma statement that takes all these changes into account. (The one that doesn't would boggle your mind. It makes these other companies look like jokes because the reselling PFS did makes their revenues enormous.) The point is, these numbers already account for the changes that might worry us.
So, we stand to make more money on this thing than anything that has come along in a while. I'm in at an average of 38 1/2. This is my new favorite stock.
(You could have received this alert earlier at the link below.)
nakuru
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