Dirks Issues Strong Buy on Ziasun Technologies
NEW YORK, June 14 /PRNewswire/ -- The following is being issued today by Dirks & Company, Inc., a member of the
National Association of Securities Dealers, CRD number 42185:
Ziasun Technologies (OTC Bulletin Board: ZSUN - news) today received a Strong Buy recommendation, as Dirks &
Company (NASD CRD: 42185) initiated research coverage on this profitable San Diego-based Internet holding company. The
report was prepared by Wall Street analyst Raymond L. Dirks.
The report indicated that in 1999, Ziasun's first full year of operations, revenues were $27.4 million, EBITDA was $10.4
million, and earnings per share $0.23. Revenues and EBITDA are each expected to more than double in 2000, to $60 million
and $23 million, achievements that Dirks says ``are consistent with the company's first quarter earnings results, which is a point
in and of itself -- an Internet holding company that is profitable''.
Dirks cited recent management restructuring as a positive development. Allen Hardman, who has been chief operating officer
since the company's 1998 inception, was promoted to CEO last month, while former CEO Scott Elder is now focused on the
Online Investors Advantage Business Unit. With this change, all business unit managers will report directly to Mr. Hardman.
Dirks expects flat EPS this year, reflecting ``above-average non-cash amortization of goodwill, which is why we look at
EBITDA to gauge the company's core operating results.'' Beyond that, however, Dirks forecasts a doubling of EPS in each of
the following two years, $0.65 in 2001 and $1.55 in 2002.
Ziasun is an Internet holding company whose business units provide solutions for e-learning, e-commerce and specialized online
support services in North America and in Asia and other international markets. The company's Internet portfolio includes
Online Investors Advantage (http://www.i-advantage.com), Momentum Asia (http://www.momentumasia.com), ServiceLive
(http://www.servicelive.com), Momentum Internet (http://www.momentuminternet.com) Swiftrade (http://www.swiftrade.com),
AsiaEnet (http://www.asiaenet.com), Tigertooth (http://www.tigertooth.com) Mfinance (http://www.mfinance.com), and a 19%
equity-stake in Asia4Sale (http://www.asia4sale.com).
Any statements released by Ziasun Technologies Inc. that are forward-looking are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Editors and investors are cautioned that forward-looking statements
invoke risks and uncertainties that may affect the company's business prospects and performance. These include economic,
competitive, governmental, technological and other factors discussed in the statements.
Ziasun Technologies
(Symbol on OTC Bulletin Board ZSUN)
Recent Price: $ 6.0625 Market Capitalization: $194 million
52-Week High: 15.75 Shares Outstg: 32 million
52-Week Low: 5.50 Insiders Own: 47% (13 million)
June 13, 2000
EBITDA Mkt Cap to
Year Revenues Amt Mgn EPS P/E Revenues
(mm) (mm)
1999 (a) $27.2 $10.4 38% $0.23 33 X 9 X
2000 (e) 60.0 23.0 38% 0.25 32 X 4 X
2001 (e) 120.0 46.0 38% 0.65 12 X 2 X
2002 (e) 250.0 109.0 38% 1.55 5 X 1 X
Summary and Investment Conclusion
-- Ziasun recently reported first quarter operating results. Revenues of
$14.5 million were 16 times greater than the year earlier period, Gross
Operating Profit of $7.0 million represented a 48% margin and EBITDA of
$4.3 million ($0.13 in EBITDA per share). Fully diluted EPS of $0.08
compares with negligible year ago EPS.
-- The Company has now applied for listing its stock on the American Stock
Exchange;
-- Reflecting divisional earnings momentum begun in last year's fourth
quarter and the organic growth Ziasun achieved within each of its three
Business Units, we expect first quarter Revenues to be indicative of
results for the entire year, producing annual Revenues of $60 million,
EBITDA of $23 million, and EPS of $0.25.
-- Beyond, Revenues, EBITDA and EPS are all projected to approximately
double over year earlier comparisons sequentially over the next ten
quarters;
-- Definitive expansion of the Ziasun Business Model (including its
e-Incubator Program) into European markets this year augurs well to
bolster anticipated quarterly operating results;
-- Based upon Ziasun's above average growth in both Revenues and Earnings,
and maintenance of a Debt-free balance sheet -- three timelessly positive
barometers with which to gauge commercial value -- we believe Ziasun can
command a $1 Billion market capitalization within 6-9 months, implying a
target stock price of $30/share;
-- By the middle of next year, when the market begins anticipating
operating results for 2002, a 12-18 month target price of $60/share
represents a multiple of less than 40 times that year's earnings.
History, Nature of Business & Outlook
Ziasun Technologies is an Internet Holding Company comprised of three operating segments (Business Units):
e-Learning
e-Commerce (including international online financial services)
e-Incubator
The e-Learning Business Unit primarily reflects the Operating Results of Online Investors Advantage (OIA)
(http://www.i-advantage.com ). OIA has been designated the leading online investment education firm, independently rated
``Highly Recommended'' by The Security Blanket(TM), an online education industry observer. Highlights in 1999 for this
Business Unit include
Over 8,200 ``students'' trained in 220 investment education workshops OIA
held in North America, Australia and New Zealand
This is expected to double in 2000 to 16,000 with half of the students
in the USA
OIA will expand the Australia and New Zealand operations launched in
1999, and launch new operating entities in Canada, UK and Continental
Europe in 2000
The e-Commerce Business Unit is comprised of (i) a free online portal delivering real-time comprehensive financial news, stock
quotes and other data on the US, Asian and European stock markets (Momentum Finance: mfinance.com); (ii)
online stock trading for overseas investors (Swiftrade: swiftrade.com); graphic design, printing, database
management and Asia-wide fulfillment services (Momentum Asia: momentumasia.com).
Momentum Finance was ranked amongst the world's top 100 financial websites in 1999. Its advertising-sponsorship
arrangements include Barclay's International Funds Asia and the Far East Economic Review. Additionally, Momentum Finance
is a contracted provider of content to AFX-Asia, a joint venture between The Financial Times of London and Agence France
Presse. Approximately 30,000 people newly join the ranks of online-investors everyday.
Swiftrade was the first online stock trading platform to target overseas investors and remains the ONLY online stock trading
firm to seamlessly accommodate online investors' preferences in three of the world's largest equity markets: USA, UK and
Hong Kong (online stock trading accommodations are expected to include Continental Europe, Australia and Canada by
2001). Momentum Asia, based in The Philippines, provides a focused cross-selling amalgamation of printing, graphics design
and fulfillment services capitalizing upon its low-cost-of-delivering such services. Clients for such low-cost customer services
include Fedex, Enron, Ritchie Brothers, Subic Power and is expected to ramp-up smartly this year reflecting intensified
cross-selling to America's Fortune 500 companies.
The e-Incubator Business Unit represents a holding-tank for start-up businesses that are not yet self-sufficient, yet whose
business model offers high prospects for an above-average investment rate of return. Asia4Sale, for example, had been a
wholly-owned subsidiary-member of this Holding Company Incubator, launched in 1999 at a total investment of $221,000. Its
business comprises a three-part e-commerce portal catering to home shopping (B2C), industrial auctions (B2C and B2B), and
business-to-business bartering (B2B). A majority-interest in Asia4Sale was sold for $5 million in the fourth quarter of 1999,
approximately equal to one-times its first year's anticipated revenues. Ziasun retains a 19%-equity interest in Asia4Sale, after
declaring a stock dividend to its March 29th shareholders of record.
Other Incubator members of this Business Unit are:
-- Search Dragon (http://www.searchdragon.com) -- a business directory and
search engine for Asia (excluding Japan);
-- AsiaEnet (http://www.asianet.com) -- markets the e-commerce portal
Tiger Tooth (http://www.tigertooth.com); provides Region-relevant content
and Internet access with focus upon the four Asian Tiger "New Economies";
-- ServiceLive (http://www.servicelive.com) provides 24 x 7 real-time
email and telecommunications services to high-traffic websites.
Ziasun's Top Management
Allen Hardman was recently promoted to Chief Executive Officer of Ziasun, and is based in the Corporate Head Office. Prior
to this promotion, Mr. Hardman had been Ziasun's President and Chief Operating Officer since 1998, and a member of the
Board as well. This management restructuring is consistent with Ziasun's maturing as an Internet Holding Company ...
consolidating the many (and growing) corporate responsibilities at the holding company level (staff) while delegating into the
field P&L accountability to ZSUN's business units (line). Prior to becoming Ziasun's Chief Operating Officer, Mr. Hardman
had been Director of Business Development for a consulting engineering company. Prior to that, he was Marketing Manager
for several packaging systems companies. Mr. Hardman's Bachelor's degree comes from Cal State University.
Scott Elder had been Chief Executive Officer of Ziasun since March 1999, however, with the recent management changes, he
has stepped down to become the CEO of the OIA subsidiary. Prior to joining Ziasun, Mr. Elder worked for The Business
Alliance Company, a business consulting service company, whose marketing and training joint venture partners included
General Mills, P&G, Rubbermaid and Zane Publishing. Mr. Elder's Bachelor's degree came from Brigham Young University,
and an MBA from University of Phoenix.
Ziasun's Balance Sheet (Amounts in Millions)
12/31/98 12/31/99 3/00
Cash & Marketable Securities $1.3 $12.2 $17.0
Accounts Receivable 0.4 1.1 1.0
Other Current Assets 0.6 0.2 0.5
Total Current Assets 2.3 13.5 18.5
Accounts Payable 0.6 2.1 2.3
Payable Re Incentive Bonus -- -- 6.0
Federal Income Taxes Payable -- 2.1 3.7
Total Current Liabilities 0.6 4.2 12.0
Net Working Capital 1.7 9.3 6.5
Fixed Assets, net 0.5 0.8 0.8
Goodwill 2.1 4.7 116.2
Other Assets, net 1.8 1.0 1.4
Total Net Assets $6.1 $15.8 124.9
Represented By:
Long Term Debt 0 0 0
Shareholders' Equity 6.1 16.0 124.1
Total Capitalization $6.1 $16.0 124.1
Ziasun Earnings Outlook
Our earnings outlook for Ziasun in 2000 is an extension of first quarter results. Revenues for the year of $60 million, 50%
Gross Profit Margins, Operating Expenses of $1 million / month. Projected Operating Income in 2000 of $18 million (see table
below) represents a 30% margin (versus 19% for 1999). Other Income (Gains on Securities or Gains due to Sale of
Subsidiaries) is forecast at $5 million this year (versus $5.4 million in 1999), resulting in EBITDA of $23 million ... more than
double 1999's EBITDA.
Given that 1999 was a foundation year in amalgamating numerous business units located on three different continents, Ziasun
accumulated $116 million in Goodwill on its balance sheet as of March 31st ... which will be written off over each of the next
ten years. Generally Accepted Accounting Practices (GAAP) require that a company may write-off its Goodwill over 10 - 40
years; therefore Ziasun is taking this write-off over the shortest time allowable. Hence, we have reflected this accounting fact in
laying out a spread sheet to analyze our expected Operating Results for Ziasun over the next 2-3 years. Based upon this
amortization schedule, Ziasun will take a non-cash charge of $11.6 million annually for the next ten years.
The magnitude of this annual write-off does not alter our positive assessment of Ziasun's longer-term earnings capability, which
we summarize here:
We continue to maintain that Ziasun has the potential to achieve a
doubling in its Revenues this year and in each of the succeeding two
years. In fact, First Quarter operating results reinforce this
expectation. Gross Profit Margins are forecast at 50%, which is also
consistent with First Quarter results, however, given the robust top line
growth, we would expect these margins to gradually increase to the 60%
level. Each One Percentage Point improvement in Gross Profit Margin adds
$500,000 to ZIASUN's Net Income (i.e. $0.02 per fully diluted share).
As illustrated in the table below, we project fully diluted EPS of $0.25
this year, then more than doubling in 2001 and 2002 to $0.65 and $1.55
respectively.
ZiaSun Technologies, Earnings Model
(Amounts in thousands, except per share items and percentages)
1999A 2000(e) 2001(e) 2002(e)
Revenues $27,220 $60,000 $120,000 $250,000
Gross Profit 9,945 30,000 60,000 125,000
(Mgn) 37% 50% 50% 50%
Operating Exp's 4,955 12,000 24,000 36,000
Operating Income 4,990 18,000 36,000 89,000
Other Income 5,442 5,000 10,000 20,000
EBITDA 10,432 23,000 46,000 109,000
Margin 38% 38% 38% 44%
Less Depr and
Amortization 684 11,500 11,500 11,500
Pretax Income 9,748 11,500 34,500 97,500
Tax Provision 3,784 3,500 12,000 35,000
Net Income 5,964 8,000 22,500 62,500
EPS (fully diluted) $0.23 $0.25 $0.65 $1.55
Average Shares
Outstanding 25,796 32,200 35,000 40,000
Implied Market Cap
at a Target Price of: $30/share $60/share
$966 mm $2,100 mm
Certain statements in this release constitute ``forward-looking statements'' within the meaning of the Private Securities Litigation
Act of 1955. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance or achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements.
SOURCE: Dirks & Company, Inc. |
