MSGI Marketing Services Group Inc. Message Board

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Technology Stocks : MSGI Marketing Services Group Inc.

MSGI 0.0001000

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Mar 3 4:00 PM EST

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To: stock_bull69 who started this subject	7/5/2000 7:13:52 PM
From: Austin S.	Read Replies (2) of 3418

Needham reiterates "BUY" - June 30, 2000 - REPORT: Summary * We are updating our earnings model to include the recently acquired Grizzard Communications and Coolidge Company. * The Grizzard deal was accounted for as a purchase, therefore historical numbers will not be impacted. Grizzard had calendar 1999 revenue of $80 million and EBITDA of $16.5 million. * The Coolidge Company was purchased for undisclosed consideration and had 1999 revenue of $12 million. * Revenue estimates for the June 2001 fiscal year are increasing 60% and our loss per share declines as a result of the addition of these businesses. * Grizzard's business is more seasonal than MSGI's, making our new estimates "bumpier." We expect the company to earn a profit in the seasonally strong December quarter 2000, and to become permanently earnings positive in the December 2001 quarter. * We estimate that MSGI will burn about $12 million from operations before reaching break-even. With $23 million in cash and a credit line available from Banque Paribas we believe that the company is adequately funded. * We believe that at least 75% of the cash burn is attributable to the funding of WiredEmpire, the Internet portion of the business. We believe that the direct business, which is traditional database marketing, will be profitable for fiscal 2001. * We reiterate our Buy rating on the shares. Investment Opinion We believe that the database marketing business of MSGI should sell for at least one times revenue and perhaps as much as two times revenue. MSGI currently sells for 0.6 times our fiscal 2001 revenue estimate of $227 million and 73% of our calendar 2000 revenue estimate of $195 million. WiredEmpire represents a hidden asset that we believe is not priced into the current valuation at all. Despite the recent sell-off in Internet customer relationship management companies the names that are comparable to Wired, including eGain and Kana, still sell for an average 13 times year 2000 estimated revenue and 7 times 2001 estimated revenue. These multiple (sic) indicate a valuation of Wired ranging from $90 - 150 million. Of course, to unlock that value will require a reuscitation of the IPO market for such companies, which we believe to be uncertain at best. Even without an IPO, we believe the capabilities of Wired give MSGI a competitive advantage versus other traditional marketing companies that lack the capacity to integrate offline marketing campaigns. We reiterate our Buy rating on the shares of MSGI.

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