NATS: This was recommended this morning by a newsletter I get. They expect 30 day appreciation in stock price but all their picks are usually ok for a longer holding time. The float is: 700,000 or maybe a bit higher.
Olympic Cascade Financial Corporation: NATS
Olympic Cascade Financial Corporation (Olympic) is a financial services
organization that operates through its two wholly owned subsidiaries,
National Securities Corporation (National), and WestAmerica Investment
Group (WestAmerica). National conducts a national securities brokerage
business through its main office in Seattle, Washington and in 38 other
offices located in 18 states. WestAmerica is registered as a broker-dealer
with the SEC and licensed in 36 states and the District of Columbia.
Olympic provides financing options for emerging, small and middle
capitalization companies through research, financial advisory services and
sales and investment banking services for both public offerings and
private placements, and also provides retail brokerage and trade clearance
operations. The public float is reported on many services, including Yahoo
to be 700,000 shares. We have heard rumblings that this number might be a
bit higher, but have been unable to verify this. Even if the float is
slightly larger than 700,000 shares, the key point is that the float is
extremely low. And guess what? That's right, an online brokerage is coming.
Online brokerage expected this quarter:
On December 13, 1999, National Securities Corporation, a wholly owned
subsidiary of Olympic Cascade Financial Corporation (Nasdaq: NATS and CHX:
OLY) announced that it selected Digex, Incorporated , a leading provider
of managed Web and application hosting solutions, to host its new online
trading and investing Web site scheduled to launch in the first quarter of
2000. The online site, named NSCdirect.com, will offer online trading and
investment services in addition to National Securities' current suite of
full service brokerage, cash and asset management, research and investment
banking services.
``Working with Digex allows us to easily scale our online services to meet
the increased demands of an online trading business without the additional
staffing effort and expense of doing it ourselves,' said Steven A.
Rothstein, Chairman of the Board of Olympic Cascade. But there is much
more to Olympic Cascade than simply developing an online trading site.
Surging Revenues and Profitability:
Olympic Cascade Financial Corporation reported that for the company's
first fiscal quarter ended December 31, 1999, the company had net income
of $405,000, or income of $0.23 per share, on revenues of $14.5 million.
This compared to a net loss of ($261,000), or a loss of ($0.18) per share,
on revenues of $8.2 million for the first fiscal quarter ended December
31, 1998. Diluted shares outstanding were 1,778,455 and 1,463,007 for the
2000 and 1999 fiscal quarters, respectively. Steven A. Rothstein,
Chairman, President and Chief Executive Officer of the company stated
that, "We are very pleased with the level of profits realized in the
current quarter, which exceeded our total net income for all of fiscal
year 1999. Revenues for the quarter were up 77% from the prior year's
first quarter, while total expense increased only 67%. A continuation of
this trend will obviously translate into very positive results for fiscal
year 2000." This remarkable performance has so far gone largely unnoticed
by Wall Street, and has left NATS greatly undervalued.
Still Markedly Undervalued:
Once NATS releases their trading site, they will be grouped among other
online brokers, and the current valuation for NATS is currently incredibly
cheap compared to their peers. As an example, let us compare NATS to
Siebert Financial (SIEB) and AB Watley,(ABWG) two similarly sized online
brokers:
NATS: For the three months ended 12/31/99, revenues rose 77% to $14.5
million. Net income totalled $405 thousand vs. a loss of $261 thousand.
The stock trades at a market cap of only 14.5 million, and a PE of 15.1.
Keep in mind that these revenue/earnings surges are before their online
site has even been launched and it is reasonable to expect their revenue
to continue to climb once the site is up and running.
ABWG: For the three months ended 12/31/99, revenues totaled $8.5 million,
up from $3.2 million. Net loss totaled $1.1 million, up from $229
thousand. The stock trades at a market cap of 132.7 million, and does not
have a PE because they are not profitible.
SIEB: For the 3 months ended 12/31/1999, revenues were 10.5 million; after
tax earnings were 1.5 million. The stock trades at a market cap of 264.6
million, and enjoys a PE of 58.44.
So. NATS has greater revenue than ABWG and is profitable, whereas ABWG is
not. YET ABWG TRADES AT A MARKET CAP ALMOST 10X GREATER THAN NATS. For
NATS to match ABWG's market cap, its shares would have to jump to roughly
64.5 dollars per share. Now Siebert does have slightly greater revenues
than NATS and is more profitable. Their numbers help give us a ballpark as
to what is reasonable. Logic dictates that NATS does not deserve the
market cap of a Siebert Financial (corresponding to a NATS share price of
129 dollars/share), BUT, there is no reason why NATS does not deserve the
same or greater valuation than AB Watley group, or 64.5 dollars per share,
roughly 8.5 times the current stock price.
The Stock has yet to spike:
As you can see in the chart below, NATS has yet to have a major price
spike, and appears to be stuck in a trading range between 6.5 and 8.5,
which we think is the calm before the storm:
The final key point is that the online brokerage site has been promised in
the first quarter of this year, or before March 31, 2000. That leaves only
25 more trading days at most before the site opens.
Final Analysis:
Online brokers have been in the dumps for a while, but many analysts,
including CNBC, are predicting a major rebound in this sector very
shortly. In fact, just this week, Robertson Stephens Senior eFinance
Analyst Scott Appleby issued a positive report on the eBrokerage industry,
predicting a strong March quarter due to recent record trading volumes. He
stated, "NASDAQ volume the March quarter is tracking as the strongest
ever, with an average weekly volume of 8.0 billion, a 26.9 percent
increase from last quarter. Nine of the top ten NASDAQ all time trading
days have occurred during this quarter and volumes continue to be
strong.' We expect this trend to continue to benefit Olympic Cascade's
bottom line.
We believe Olympic Cascade to be an excellent holding irrespective of
their online trading site given their continually improving financials.
However, given that the stock has a low float, is incredibly undervalued
when compared with peers, and has an online site ready to debut within 30
days, we feel that NATS is ripe for impressive price gains over the next
30 days. It is our hope that investors who have the foresight to buy
shares before interest swells as the opening of the site approaches will
be well rewarded.
Company Information:
875 North Michigan Avenue, Suite 1560
Chicago, IL 60611
Phone: (312) 751-8833
Fax: (312) 343-6146
Employees as of 9/99: 100
Company Officers:
Steven Rothstein, 49
Chairman of Directors, CEO Pres, as well as Chairman of the Board
Craig Gould, 30
Vice Chairman of Technology
Robert Daskal, 58
Sr. VP, CFO, Treasurer and Sec.
Michael Bresner, 55
Pres of National
Gary Rosenberg, 59
Director
Market Capitalization $14.5M
Shares Outstanding 1.91M
Float 700.0K (As reported by Yahoo)
Company Website:
nationalsecurities.com
Online Broker Site to be launched in March:
nscdirect.com
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