Canadian Business Magazine
December 31, 1999
Small-Cap Superstars
Yes, there is a way to pick the winners among growth stocks - our Entrepreneur of the Year Index outperformed the TSE, the Dow and NASDAQ
By Keith Kalawsky
".. One company to keep a close eye on is SLMsoft.com (TSE: ESPa), according to Ralph Garcea, an analyst with Scotia Capital Inc. in Toronto. ?The next 12 months will be pretty exciting, says Ralph Garcea. Since the Asian crisis in October 1997, Toronto-based SLM has shifted its focus away from selling online banking services, ATM networks and other financial systems to international financial institutions. Instead, it has established a foothold in North America, handling the backroom financial operations of 400 community banks and credit unions in the US. The beauty of that is 60% of its revenue comes from the US and it's a recurring revenue stream, Garcea says. You're handling all of this cheque processing and teller transactions.
SLM is also hedging its future on Internet banking products and the management of clients' online banking systems. The banks know they have to move online to maintain customer retention and loyalty, but some of them don't have the infrastructure of IT personnel to do that. Garcea says. SLM can fill that void. Smaller community banks are fearful of huge competitors such as Citigroup, which is striving for one billion customers by 2012. SLM will help these smaller banks and credit unions improve their online presence. SLM is playing perfectly into that role, Garcea says. At the end of November, SLM traded at $5.85. But Garcea has a one-year target of $11 and says SLM stock could reach $15 in two years. A surge in SLM's sales is expected in 2000 after large financial companies resume spending on new technology once Y2K fears are a thing of the past. I've received proof that SLM is gaining penetration, Garcea says, and there's plenty of room to scale up my estimates. But get SLM while it's still cheap. While its competitors trade at 15 times forward revenue, SLM shares change hands at less than one time its forward revenue.."
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I wonder what is it about Canadian Analysts that make them so timid in setting the price target. Mr. Garcea had a target of C$ 17 in Feb. 1998 for this stock when it was not in a particularly strong position as it is now.. These new targets are a bit ridiculous when you consider that the stock is at $ 9 already.. They were set when the stock was around 6 so may be he has already revised them as the magazine information is dated due to lead time frame for publication. He did say that there is plenty of room to scale up his estimates.... |
