September 6, 2000
Volume III, Issue 74
Email : info@otcjournal.com
URL : otcjournal.com
To OTC Journal Members:
There is breaking news today on Envoy Communications (NASDAQ: ECGI). This is the second news release this week. As we mentioned in our weekend edition, companies sensitive to enhancing shareholder value generally hold off on announcing significant fundamental developments until after August in order to maximize the response of the audience.
Envoy Communications (NASDAQ: ECGI)- Another Strategic Acquisition
In the second news release of this week, Envoy announced today that it entered into an agreement to purchase The International Design Group, a world renown retail planning and design firm. IDG will function under Envoy's wholly owned subsidiary Watt Group, which is now the largest retail design firm in the world. The Watt Group has applied its strategies in over 35 countries and over 2 dozen industries world wide. Clients include such high profile names as Kraft, Bell Canada, Borden Foods, GE, Maple Leaf Foods, Shell Oil, Bank of Montreal, CIBC, Home Depot, and Wal-mart.
Earlier this week Envoy also announced a new contract with Neuberger Berman, a Wall Street Investment Advisory company. This contract is estimated to be valued at about $10 million in annual advertising revenues.
There have been two relatively significant press releases in the first week of September alone. Management at Envoy has spent the last two years building this company into an earnings powerhouse. The next step in the process is to develop a Wall Street following for the stock. We believe that this will be a major focus of senior management at the company for the remainder of this year.
The last two acquisitions of IDG and Ghilchrist both take Envoy out of the realm of being perceived as simply a digital an advertising agency. Envoy has become one stop shopping for digital advertising, branding, and complete Internet Technologies Solutions and design work. Furthermore, in the June quarter the company came in with $44.5 million in revenues, up 20% from the same quarter last year. EBITDA earnings were $.15 per share. Annualized, this means the company is now earning $.60 per share. The stock is now trading at 8x annualized earnings. S&P stocks are trading at 30 times next year's earnings.
In theory, based on a S&P multiple, Envoy should be trading at $18 CDN (about $11 US).
In our opinion this stock is a potential double if Wall Street ever finds out about this company. The way they are growing, someone is going to come for this stock sooner or later, and we hope you are along for the ride when it happens. Look for management to make a major effort to cultivate Wall Street interest for the remainder of this year.
For value investors this stock is ridiculously cheap.
Here is the complete text of the news release for your review:
Wednesday September 6, 6:01 am Eastern Time
Press Release
SOURCE: Envoy Communications Group Inc.
Envoy builds "best of breed" with another strategic acquisition
Purchase of The International Design Group makes Envoy a North American branding powerhouse
TORONTO, Sept. 6 /PRNewswire/ - Geoff Genovese, President and CEO of Envoy Communications Group (NASDAQ: ECGI/TSE: ECG) today announced the company has entered into an agreement to purchase The International Design Group (IDG), a world renowned retail planning and design firm. The cash and stock purchase is expected to close in October of 2000 and represents the second time in the last quarter that Envoy has purchased a business that complements their brand strategy and design expertise, the first being Gilchrist Bros. Ltd. of the UK. These acquisitions, along with the recent purchase of Sage Information Consultants Inc., one of North America's leading technology solution providers, are part of Envoy's aggressive, global growth strategy. The purchase of IDG drives Envoy's gross margin forecast for the period ending December 31st 2000 to approximately $90 million.
As with Gilchrist, IDG will operate as a division of The Watt Group and will complement Watt's internationally recognized creative services with almost 30 years of shopping centre and retail design experience. The organization has undertaken projects in countries around the world, including Argentina, Canada, Chile, Germany, Israel, Poland, Turkey, UAE, UK and the US. IDG's international credits include the design of the Metro Centre in the UK, for ten years the largest shopping centre in Europe; the Alto Los Condos in Chile, the largest shopping centre in South America and Duty Free outlets from Istanbul to Jakarta. In Canada, IDG's design successes include the LCBO, the world's largest retailer of wines and spirits, the Air Canada Centre's Sports Centre and Paramount Theatre's flagship Festival Hall and Silver City multi- plexes. IDG is ranked in the top 50 design firms in the world according to World Architecture Magazine and won the 1999 Retail Council of Canada's Design Award of the year for their work on Quebec's La Maison Simon.
``As part of our global growth strategy, this acquisition moves us closer to our goal of being the best of breed in each of our three core disciplines: technology, branding and marketing,'' said Genovese. ``With IDG joining the other members of the Envoy branding group - The Watt Group, Gilchrist Bros. and FUSIONcreative - we are well on our way to creating the world's premier, full service, brand strategy and design company,'' he added.
``Like the Gilchrist and Sage acquisitions earlier this summer, the purchase of IDG is a great strategic move that will bring our 12-month rolling gross margin to approximately $90 million for the period ending December 31st 2000 and will increase our EBITDA per share run-rate to 80 cents,'' said Joe Leeder, Envoy's CFO.
``We're pleased to join Watt and the Envoy Group of Companies,'' said Ron MacLachlan, Managing Director of IDG. ``The skill, experience and creativity we can now offer clients is unprecedented and will position us as one of the world's major design forces.''
``IDG has great brand equity in markets around the world and is a perfect fit for Watt,'' said Geoff Belchetz, President and CEO of The Watt Group. ``The combination of our respective talents and international experience will enhance our ability to offer clients integrated branding solutions that achieve bottom line success.''
The Watt Group (www.wattgroup.com) is the largest strategic retail design group in the world. For the past thirty years Watt has applied its strategies to drive client profitability in more than two dozen industries, spanning 35 countries. The Watt Group has developed some of the worlds most recognized brands, including: Loblaws' President's Choice; Wal-Mart's Sam's American Choice and Great Value brands; the Safeway Select brand and PETsMART's corporate brands. Watt has also created landmark retail concepts like The Home Depot and provided consulting services for leading brand companies like Kraft, Bell Canada, Borden Foods, GE, Maple Leaf Foods, Shell Oil, Bank of Montreal and CIBC.
A new breed company, Envoy (www.envoy.to) is an integrated e-Marketer, digitally driven and committed to building global brands both off and on-line. Envoy owns leading advertising and e-Marketing agencies, Communique, Devlin Applied Design, FUSIONcreative, Gilchrist Bros. Ltd. (UK), Hampel/Stefanides of New York, Sage Information Consultants and The Watt Group. Envoy's impressive roster of clients include adidas-Salomon Canada, Aer Lingus, Alliance Atlantis, BASF, Benjamin Moore, Bermuda Telephone, Bridgestone/ Firestone, CAMCO, Canadian Football League, Canada Life, CCOHS, CIBC, Castrol, CDNOW, Fairmont Hotels (USA), FedEx, Fisherman's Friend, Health Canada, Hewlett Packard, Honda, Hummingbird, IMAX Corporation, Juno Online Services, LCBO, National Discount Brokers, MAC Cosmetics, Oxford Properties Group Inc., Panasonic, PETsMART, PhoneFree, Pizza Hut Canada, Prudential (USA), Safeway, SPAR Aerospace, Sprint Canada, SportsRocket.com, State Farm (USA), Steelcase, Taylor Made, TD Waterhouse (USA), Wal-Mart and Woofur.com.
SOURCE: Envoy Communications Group Inc. |
