Subject:
*BAY $TREET BYTE$* May 7
Date:
Wed, 7 May 1997 11:55:51 -0300
From:
bidbayst@nbnet.nb.ca (bidbayst)
To:
bidbayst@nbnet.nb.ca
Wednesday May 7 *BYTE$*: GORAN CAPITAL; NET NANNY SOFTWARE
***********************
GORAN CAPITAL (GNC, TSE: $34.50; GNCNF: NASDAQ: US$ 24.25)
*****************************************************************
BBS Feature November at Cdn$26.50
Following a stellar year in 1996, Goran released record first quarter
results Monday that were above analysts estimates. Fully diluted earnings
per share at March 31/97 translate into approximately $1.10 Canadian. My
per share estimate for the full current year is Cdn. $4.00; a new
acquisition is a distinct possibility and would increase this estimate.
Goran is largely ignored by Canadian analysts but continued growth in
revenues and earnings cannot be ignored forever. At yesterday's close,
Goran was less expensive on NASDAQ. On the TSE I am seeing strength in
other insurance issues like Fairfax Financial and EL Financial which have
been making multi-dollar moves recently. My conservative estimate for
Goran's stock in 1997 remains between $40 - $45. Goran presents its
highlights very well in the news release, parts of which I have included below:
"TORONTO--(BUSINESS WIRE)--May 5, 1997--Goran Capital Inc. (NASDAQ:GNCNF.)
Goran Capital Inc. (TSE:GNC)(NASDAQ:NM - news) a leading insurer of crops and
nonstandard automobiles today announces its results for the first quarter
ended March 31, 1997. All currency is stated in U.S. dollars.
Goran is pleased to report record growth in its key product lines, crop and
nonstandard
automobile insurance, over the same quarter for 1996. Gross written premiums
for the three
months ending March 31, 1997, increased 214 percent to $130,304,239 from
$41,421,617 for
the same period in 1996.
For the quarter just ended, net earnings increased to $4,606,894 as compared
to $2,203,526, to
the same period of 1996 an increase of 109 percent.
Earnings per share increased to $0.83 for the first quarter of 1997 from
$0.43 for 1996. These
earnings per share are ahead of analysts' estimates.
The acquisition of the nonstandard automobile insurance company, Superior
Insurance Company on May 1, 1996, provided additional income as compared to
prior years, but other factors such as increased business from our other
companies, the introduction of new products and the re-engineering of our
nonstandard auto operations contributed greatly. Since the acquisition of
Superior, we have managed to reduce the expense and combined ratios to bring
them in line with the other major providers of nonstandard auto insurance.
The Company is now positioned to compete as a low-cost provider of
nonstandard automobile insurance.
The changes in our non standard auto operations in the last twelve months
have been significant. At the same time, a great deal of expense and energy
has been deployed in developing new automation systems to move our
nonstandard operations to the forefront of today's technological
environment. The fruits of these labours will not be seen until 1998.
``Growth in our crop division is partly due to the consolidation underway
for crop insurance including the elimination of the government dual delivery
system. The transfer from the federal crop insurance program to the private
sector is moving expeditiously and thus contributing to a small share of our
growth. While this factor is not insignificant, it is not responsible for
the entirety of the substantial increase in market share that IGF has
gained. Management's ability to move with the times and take advantage of
emerging opportunities in this fast growing and dynamic sector of the
commercial insurance business has been responsible for our growth,'' stated
company CEO, Alan G. Symons.
Over the last month and a half, we have been asked by our shareholders and
analysts, how does
our crop insurance look with the flooding; and with the rapid growth in the
nonstandard automobile operations, are our reserves and pricing sound? The
floods of the Ohio Valley had no impact on our companies. The Red River
floods and the great amount of snow in the northern states had people
concerned about planting delays. We expect minimal losses from this area and
recent good weather has reduced this risk further. Recent publications and a
review with our regional offices indicate a normal crop year for our major
growing regions. Reserving for our nonstandard automobile operations is
reviewed twice a year by one of the nation's largest independent actuarial
firms, and annually we have the independent actuaries work reviewed by the
actuaries and accountants at our independent auditing firm. We also have our
in-house actuary review reserves and pricing, including a full product team
that sets our pricing in tandem with our actuary.
In addition to the above subsidiaries results, Goran's surplus lines
operation in Fort Lauderdale and its reinsurance company in Barbados are
meeting expectations. Granite Insurance Company, a Canadian federal
insurance company, continues to run off its business profitably with minimal
outstanding claims left.
Goran stockholders' equity increased to $51,963,700 at March 31, 1997 as
compared to
$14,940,270 for the same period in 1996. Goran's subsidiary, SIG Inc.
completed an initial public offering November 5, 1996 that allowed the
company to retire debt and increase capital in its operating subsidiaries
that have fueled the continued growth in its primary business sectors. Total
capital deployed in our insurance subsidiaries for the writing of business
is in excess of $127,000,000 today.
GORAN CAPITAL INC. (NASDAQ:GNCNF) of Indianapolis and Toronto, is primarily
engaged in the nonstandard automobile insurance, reinsurance, crop insurance
and surplus lines underwriting. Goran maintains active insurance licenses in
35 U.S. states, Barbados, and all Canadian provinces.
It derives more than 95 percent of gross revenue from the United States."
NET NANNY SOFTWARE (NNS,VSE:$0.78)
*****************************************
BBS Feature February /97 at $0.36
There appears to be a promotional push on for Net Nanny Software both on the
Internet and elsewhere. The stock hit the $0.90 cent range briefly after
the BBS recommendation in February and drifted lower with other speculative
issues when the Bre-X scandal began.
Net Nanny continues to make progress and to be recommended for use in
several media publications. Revenues are increasing slowly, and the
corporate version could soon begin to be marketed. Like all software
products, particularly those targeting Internet users, Net Nanny faces
tremendous competition. Stock strength which is based on promotion
eventually subsides (very often forming a new, higher base) and as always
with highly speculative issues, investors are wise to protect gains early.
MAJOR DRILLING (MDI,TSE: $15.75)
************************************
BBS Feature June/95 at $6.00
Another great growth story largely ignored by the Toronto analysts, Major
Drilling is strengthening after its announcement last Friday of a major
acquisition. This acquisition "provides Major Drilling with access to
opportunities in western Canada, while at the same time complimenting Major
Drilling's international expansion strategy". MDI announced it has entered
into an agreement to purchase 100% of the mineral exploration drilling
business of J.T. Thomas Diamond Drilling (1980) Ltd., J.T. Thomas Diamond
Drilling Ltd., J.T. Thomas Canadian Drilling
Ltd., J.T. Thomas de Mexico S.A. de C.V. and J.T. Thomas Perforaciones
Canadienses Limitada. "These companies (all of which are here referred to
as J.T. Thomas or the Company), currently conduct mineral exploration
drilling in British Columbia, the Yukon, the Northwest Territories, Mexico
and Costa Rica. The purchase is effective May 1, 1997 and will be concluded
on or before May 21, 1997 through a combined purchase by Major Drilling of
shares and assets."
This new acquisition will add to MDI's impressive revenue/earnings
performance of the past several years (going back before Major was publicly
listed in the spring of 1995, shortly before being featured in BBS). J.T.
Thomas has been growing also and looks like a good fit for MDI's highly
aggressive management. "Revenues from drilling operations for J.T. Thomas
for the fiscal years ended April 30, 1995 and 1996, as well as for the ten
month period ended February 28, 1997 were $13.3M, $15.9M and $22.2M
respectively. Earnings from drilling operations before taxes and owner
bonuses for these years were $2.9M, $4.0M and $8.7M respectively. Earnings
for 1997 will be subject to normal year and accounting adjustments. This
information is based on the unaudited financial statements of the Company
for these periods. The purchase price for the transaction is $13,500,000
dollars, subject to adjustments, consisting of a combination of
approximately $11,500,000 in cash and $2,000,000 in common shares in Major
Drilling at a price of $13.50 per share. The cash portion will be funded
from Major Drilling's currently existing working capital."
As with many of MDI's acquisition, J.T. brings additional non-tangible
assets including "an excellent reputation for quality in the industry".
MDI, which has grown both by expanding its own resources and through
strategic acquisitions always tries to retain key personnel ;"the Company
(J.T.) will continue to operate as an individual entity under the direct
management of Mr. John Baker, who has been with the company for
approximately seventeen years."
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Bidding On Bay Street (BBS), Copyright 1997, is published by Van Wyck
Publications. Information contained in the Newsletter is obtained from the
companies featured and other sources believed to be reliable, but accuracy
and reliability cannot be guaranteed. The opinions expressed are strictly
those of the writer and should not be considered a solicitation to purchase
or sell individual securities mentioned herein. BBS is written from an
individual investor's viewpoint; the editor and/or individuals contibuting
information to the newsletter may own shares in companies followed therein.
Investors are urged to obtain further information regarding specific companies
and obtain financial advice where necessary to insure investment decisions fit
individual needs and resources. Van Wyck Publications will not accept any
form of compensation, directly or indirectly, from companies for advertising,
public relations or any other services. We do insist on cooperation from
companies in obtaining information and respect for the Individual Investor's
right to information. |
