On September 5, 2003, MTXX paid a fee of $7000 to attend EdgeWater's fall 2003 micro cap conference for Investment Professionals
Issuer Purchase Disclosure
As of 09-19-03, Edgewater Research Partners LLC has received 0 annual "all services" subscriptions ($199 each) from MTXX employees and/or Directors. In addition, MTXX purchased 10 individual "MTXX Initial Coverage" research reports at $30 each. On September 5, 2003, MTXX paid a fee of $7000 to attend EdgeWater's fall 2003 micro cap conference for Investment Professionals.
========================================
MATRIXX INITIATIVES, INC. (MTXX) - RESEARCH OVERVIEW
Coverage Initiated: 05-06-03
Current Rating: BUY
Current 12-18 month Price Target: $11.75
(new price target established 08-12-03)
(target increased to $11.75 on 09-19-03)
Matrixx Initiatives, Inc. develops, sources and markets the Zicam® brand of cough, cold and allergy products which have unique formulation and delivery characteristics. These characteristics include several novel delivery methods such as a gel based nasal spray that does not drip, nasal swabs, chewable and meltaway tablets and an oral mist. Each of these delivery mediums contain a zinc based formula that scientific studies indicate can reduce the duration of the common cold by up to 75% when used within a day or two of initial infection. The company has also extended the brand by introducing a derivative nasal congestion product as well as an allergy product, while also developing a sinus moisturizer. In all, the company is currently marketing 7 products, with the three oral ingestion products being introduced later this year.
The company currently markets at least some of their products in over 50,000 locations including the country's largest chain drugstores, supermarkets, mass merchandisers, club stores and convenience stores. Sales have been increasing steadily since the product launch in 1999, jumping from just under $12 million in 2001 to $23.5 million in 2002. We anticipate that the company will be able to achieve CAGR's in excess of 25% over the next three years. In 2002, we look for the company to steadily increase earnings going forward as it continues to leverage the brand in terms of generating greater market penetration with existing products as well as additional growth through the introduction of new ones. Our earnings estimates are for $.22 for the current fiscal year (2003), and $.44 in fiscal 2004, while our cash flow estimates are double those amounts due primarily to non-cash charges and the existence of substantial deferred tax assets aggregating about $10 million. We believe our price target is commensurate with these cash flow assumptions in the context of discounts rates that we consider to be reasonable with respect to the risks and uncertainties associated with micro cap stocks.
The company currently has over $12 million in cash and a little over $5 million in total (current) debt, which will be paid off by year-end. We believe the company's current capital structure is sufficient to allow them to execute the existing business plan, which calls for revenue growth commensurate with that which we have mentioned above and modeled below.
The company needs to focus on building its brand around the unique product characteristics it has developed. In our view, that will require a number of management aptitudes and relationships, which we believe current management possesses. The company has indicated that it plans to substantially increase its research and development efforts in an attempt to keep its product pipeline full. We will look to that pipeline to provide additional growth opportunities. While the company has largely avoided the issue, we also think that markets outside of the U.S. will represent potential growth opportunities under the proper circumstances.
We expect the continued traction in the Zicam® brand to bring some much needed breadth to the company and its stock in the coming quarters. Additionally, the consumer healthcare products industry in which the company operates is highly conducive to the acquisition and consolidation of brands. While we are not counting on that avenue as a necessary exit strategy, we believe it is a potential scenario.
$30.00
Purchase MTXX Initial Coverage Research Report
Purchase MTXX June 30, 2003 Earnings Update
$15.00
$15.00
Purchase MTXX research Update for 09-19-03
EDGEWATER RESEARCH PARTNERS LLC
DISCLAIMER STATEMENT
The information contained in this report has been written by David Lavigne of EdgeWater Research Partners LLC ("Edgewater") and has been derived from sources considered reliable, but cannot be guaranteed by us. Edgewater and Lavigne are not aware of any material conflict of interest known at the time of the publication of this report. Financial projections and estimates herein represent our independent analysis based upon information in conjunction with the Company's publicly available financial statements. Edgewater and Lavigne may maintain positions in the securities referenced, which may change at any time without notice. Edgewater does not receive fees, warrants or any other compensation from issuers in connection with its research. It does however, encourage issuers and it representatives to subscribe to Edgewater's research, and from time to time, issuers and or their representatives may also purchase individual copies of Edgewater's research products. Edgewater and Lavigne may own options, rights or warrants to purchase any of the securities of the Company. This report is for informational purposes only and is not to be construed as specific investment advice or recommendations, nor as an offer to sell or a solicitation of an offer to buy any securities. The securities referenced are speculative in nature and may not be suitable for your specific investment objective. For specific investment advice or recommendations, please consult with your investment representative.
Issuer Purchase Disclosure
As of 09-19-03, Edgewater Research Partners LLC has received 0 annual "all services" subscriptions ($199 each) from MTXX employees and/or Directors. In addition, MTXX purchased 10 individual "MTXX Initial Coverage" research reports at $30 each. On September 5, 2003, MTXX paid a fee of $7000 to attend EdgeWater's fall 2003 micro cap conference for Investment Professionals. |
