As I mentioned in a previous post, STGI's basic business is to pro-
vide fail-safe backup for corporate databases, and to recover the
data in the event of a disaster. They also provide software mainten-
ance, data integration, networking services, etc. After a recent IPO
of 1,500,000 shares at $7.00 a share, there are now 4,769,069
shares outstanding (no idea about the float). They planned to use
the proceeds of the IPO to hire additional marketing and technical
personnel for their millenium thrust, to establish regional and inter-
national testing centers, and to repay $800K of indebtedness.
Year Ended 31 Dec Nine Months Ended 30 Sep
1994 1995 1995 1996
Revenue 4,616,000 8,927,000 6,692,000 7,007,000
EPS(loss) (.01) .00 .03 (.25)
As of 30 Sep 96: cash = 5,797,000; assets = 20,251,000; liabilities =
9,553,000.
From their 14 May 97 announcement of 1st qtr earnings -- 3 months
ended 31 Mar 97:
1996 1997
Revenue 2,344,117 2,701,848
Net Income (9,513) 18,490
Cost of Services 618,442 786,138
The 27% increase in cost of services was explained as "added
technical staff for millenium work". Their market cap at $15.00 a
share is $71.5M. If one multiplies their 1st qtr sales by 4 to get a
rough estimate of this year's annual revenues (i.e., $2.7M x 4 =
$10.8M), their price-to-sales is a sort of pricey, but not too bad 6.6.
They have recently announced contracts with the Tennessee Dept
of Employee Security to convert and test 1 million lines of code (LOC)
and with Mecklenberg County (Charlotte), North Carolina for an
additional 1 million LOC. At a generous $1.00 per LOC, that's $2M
in potential new revenue over and above their core business.
However, note that they do not have a software solution for finding
and fixing errant date codes, so revenues would have to be shared
with a partner(s). Their SEC document notes that their Y2K business
plan will depend on forging relationships with vendors of automated
tools, hence the recent alliance with CSGI. The stated they will not
develop toolsets independently.
Therefore other alliances announced with body shops such as CBSL
and IMRS as well as automated finders and fixers like ALYD and
PTUS (IPO on this one soon) should propel STGI higher. They seem
to hold one of the few, critical keys to the testing kingdom.
Me? I'm going to buy on dips. This is not to be construed as invest-
ment advice. Do your own research before investing. |
