MAPINFO: Any Thoughts Message Board

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Technology Stocks : MAPINFO: Any Thoughts

MAPS 0.825

-1.1%

3:59 PM EST

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To: Charlie Smith who wrote (208)	2/13/2000 3:11:00 PM
From: Alan A. Hicks	Read Replies (2) of 225

MAPS should qualify for the Russell 2000 Index this year. Each year the Russell 2000 index has to be reconstituted based on changes on the market capitalizations of the companies in the index. Changes take effect each May 31. MAPS current market cap is about $350 million. The smallest company in the index was around $185 million last year. This year the cutoff point should be higher but MAPS should qualify easily. Index funds tied to the Russell 2000 will have to buy MAPS shares to mirror the index. What has been happening the last few years has been that brokerage houses have been publishing lists of companies likely to be added or deleted from the index based on their market caps. Investors are buying or selling these shares ahead of the actual changes in the index. The Wall Street Journal has written articles about this the last couple of years. One study reported on showed that in the six weeks prior to the changes taking effect those companies being added rose 11% while those being deleted fell 9% on average. It will be one more positive impact on MAPS supply/demand equation for their shares over the next few months. MAPS will have officially graduated from a micro cap to a small cap company. The next milestone to reach will be a $500 million market cap. Most money managers will not buy companies under $500 million in market cap because they are just too small and liquidity is too thin. There is a saying among money mangers that when a company goes up it becomes "high enough to buy." It may seem illogical but it helps explains why larger caps have been getting very high valuations while small caps have remained undervalued. For example, Oracle has an 18 times revenue valuation while MAPS is still about 4 times revenues. Getting above $500 million market cap could attract a new round of institutional investors if MAPS keeps their growth rate up they way they have. I have had my own initial target of 5 times revenues for MAPS shares. But if MAPS can keep their growth rate going AND get their operating margins trending towards 20%, I do not think it would be unreasonable to see MAPS at half of Oracle's valuation which would be 9 times revenues. It would not be such a stretch since MAPS has been growing twice as fast as Oracle the last couple of years. And with the pipeline of orders they have in the telecom market and their relationship with Oracle, it looks like it they can keep it up for quite awhile. MAPS has also been investing heavily in new products and expanding their sales force to keep the growth going. The only brokerage houses to follow MAPS currently are Brean Murray, First Albany and Smith Moore. They have all published excellent reports and are quite bullish on MAPS. I think it is about time some analysts from some large brokerage houses get on board. From my perspective all the pieces are there to make MAPS a no brainer. At 9 times revenues of $130 million in calendar 2001 could put MAPS at about $110 per share by the end of next year. If we just get to five times revenues that is still $65 per share.

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