August 15, 1997
CEO Sees Boost From Japan Market Entry
(Dow Jones - August 15, 1997) Optical Cable's recent break into the Japanese market will buttress sales for commercial and securities applications, Chief
Executive Kopstein said. Other markets in the Far East and South America also are fast-growing he said.
International sales accounted for about 27% of the company's $45 million total for fiscal 1996 and so far this year have comprised nearly a third of sales.
"We've been gaining ground internationally, "Kopstein said.
He sees increasing demand for the company's extra-rugged, or military-style, cable for use in guardless security systems, such as those used in prisons,
or by broadcasters, as higher quality pictures and digital transmission become standard.
Optical Cable products have been used in winter and summer Olympics and other sporting events, and national political conventions.
Shares of the company's thinly-traded stock closed Thursday at 15 - 65 times projected earnings for fiscal 1997. Kopstein, named Virginia's Entrepreneur
of the Year in 1997 for technology in a program sponsored by Ernst & Young, took the company public himself and owns 93% of the 38.6 million shares
outstanding.
The stock's high valuation is one reason Soundview Financial Group analyst Chandan Sarkar, one of two researchers who recently picked up coverage, is
recommending a short-term hold on the shares. Optical Cable's fundamentals, however, have him rating the company a long-term buy.
Anthony Tucker Inc., which began coverage Aug. 7, also issued a buy recommendation and reported a 12-month price target of 18.
The upbeat third quarter expectations is good news after Optical Cable's second quarter.
Shares hit a 52-weed low of 7 1/8 June 6 after the company reported second-quarter net income fell 5.4% to $1.3 million, or 4 cents a share, from $1.4
million in pro-forma earnings a year ago.
Net Sales in the second quarter rose a 4.5% to $10.6 million but a slowdown in the European market was blamed for a 6.6% drop in international sales.
Kopstein at the time blamed the day's volatility ( the stock eventually closed at 9, off 7/8, or 9%) on that earnings report and efforts by short sellers to drive
share prices down.
Optical Cable has a huge short interest ratio - 967,920 shares as of July 15 with a short interest ratio of 22 days, the 19th highest ratio on the NASDAQ
Stock Market. That is, it would take that many days to cover the short interest if trading continued at the average daily volume of the month. In a short sale,
the investor sells borrowed shares in hopes of replacing them later at a lower cost and pocketing the difference in price.
The stock recently was up « at 15 «, and the shares have gained more than 66% since hitting the low in June.
For his part, Kopstein still sees the shares as undervalued, saying he expects their price to hit 25 in the near term. "In the entire year since we went
public," he said, "I've not sold any of my 36 million shares." Several weeks after the company went public at $10 a share, the stock soared to $136, before
a 2-for-1 stock split.
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