"Sunpacific Capital and Investors Edge are compensated and do have interest
in HRCT".
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Investors Edge Institutional Equity Research John R. Switzer
www.investorsedge.net
July 14, 1998
HARTCOURT COMPANIES, INC. OTC.BB BB: HRCT)
--- Financial Statistics---
Price: $1 3/8 $Book Value/Share : $2.18 Investment Opinion:
Strg Buy
Price Range (52-weeks): $5/8 - $3 3/8 LT Debt: $0.65 Market Cap
(millions): 20m
Shares Outstanding 17.44 million Float 14.0mm 3-yr EPS(E) Growth
100%+
Average Daily Volume 50,000 Div. Yield (P'fd) 9%
Revenue Ops P/E Q'sEPS
Year Millions Margins EPS Ratio Q1 Q2 Q3 Q4
12/97A $20.8 N/A ($0.04) N/A N/A N/A N/A N/A
12/98E $26 7.0% $0.08 13X $0.00 $0.02
$0.03 $0.03
12/99E $45 9.7% $0.21 5X $0.04 $0.05
$0.06 $0.06
12/00E $62 11.8% $0.35 3X N/A N/A
N/A N/A
Comparable Company Statistics
Symbos Price P/EX Grow% MktCap
KO $86 55X 10% $54.0Bil
RN $24 65X 20% $7.8Bil
MOT $55 32X 10% $33.0Bil
SEG $23 5/8 N/A 25% $5.7Bil
Body of Report
· The Hartcourt Companies, Inc., is a rapidly expanding Holding Company
based in Los Angeles, California. The Company has completed 2 major
acquisitions in the past 9-months and is in the process of closing 3 more
acquisitions expected to close in Q3/98. In addition, the Company is in
negotiations with another 3 acquisition targets, one which will close in
Q3/98, the other two in Q4/98. All acquisitions will be merged into its
current operating divisions. The Company is focused on acquiring
companies that are within the scope of its core markets, High Technology
Manufacturing (ECS, Inc.), Environmental Control & Filtration Systems (Pego
Systems, Inc.), and Aircraft Leasing (EmKay - to be closed in Q3/98).
· Hartcourt has evolved from a struggling concern with revenues of $74,000
in 1994 to a flourishing growth company with revenues of over $20 million in
1997 (Actual results). In addition, acquisitions planned for the remainder
of 1998 (3 to be completed by end of Q3 1998, and 2 additional by end of
Q4/98), will add an estimated additional $75 million in revenue. Letters of
intent have been signed for the three planned acquisitions.
· Hartcourt's wholly owned subsidiaries primary clients include: AT&T
(NYSE: T), Coca-Cola (NYSE: KO), Proctor & Gamble (NYSE: PG), Motorola
(NYSE: MOT), Intel (NASDAQ: INTC), 3-Com (NASDAQ: COMS), General
Instrument (NYSE: GIC), Raytheon (NYSE: RTN), Arco (NYSE: ARC), Mobil
(NYSE: MOB), and many others.
· Pego Systems, a leading manufacturer and developer of Environmental
Control & Filtration Systems was acquired by Hartcourt in October, 1997.
Pego's 1997 revenue was $6.6 million with net after tax earnings of about
$10%. Hartcourt acquired Pacific Pneumatic (closing Q3/98, 1997 revs of
approximately $2 million) and merged it into Pego. In addition, the Company
is considering an acquisition of a large Envirnmental Equipment & Systems
company. This companies 1997 revenue was approximately $20 million with $4
million in net earnings. This acquisition should add at least $4.00 in
value to Hartcourt common stock when the transaction closes by the end of
Q4/98.
· ECS, a leading High Technology Contract Manufacturer, was acquired in
October, 1997. The Company specializes in the manufacturing and assembly of
printed circuit boards, telephone wire and cabling, and coil winding and
plastic injection. ECS had sales of approximately $14 million in 1997.
Hartcourt is also closing 2 additional acquisitions in Q3/98, ELAN and FM
Technologies (combined revenue of almost $4 million), merging them into ECS.
In addition, the Company is considering acquiring a large high-tech
manufacturer located in the Silicon Valley. This companies 1997 revenue was
over $18 million, with earnings of over $1 million. This acquisition should
add another $1.50 in value to Hartcourt common stock by the end of Q3/98.
· Based upon Hartcourt's high growth profile, successful acquisition and
consolidation campaign to-date, acquisitions in-hand for the remainder of
1998, high quality products, stable customer base, and the technology
element of its core business units, we believe Hartcourt is more fairly
valued at between 20X -to-25X 1999E earnings or between $4.20 and $5.25
(this does not include acquisitions that have not closed ie. EmKay, and two
Q4/98 acquisitions*). Compared to other high-growth technology companies,
Hartcourt is significantly undervalued. We recommend purchase of Hartcourt
as a STRONG BUY.
The Company
The Hartcourt Companies, Inc., headquartered in Los Angeles, was formed in
1994 to act as a platform for acquiring high growth, privately held
businesses in industries that are fragmented and prime targets for
consolidation. Hartcourt's growth strategy is two fold. First, the Company
is focused on acquiring companies in highly fragmented and specialized
industries. Second, once a business is acquired, Hartcourt assists in the
expansion and growth of the acquired subsidiary by providing management
support, capital infusion for vertical acquisitions, and strategic
alliances. Beginning in the summer of 1997, the Company changed its
direction, divesting its interests in Asia and selected three core
industries to begin its vertical acquisition & consolidation campaign.
Hartcourt currently operates wholly owned subsidiaries in the following
markets: ECS Division - High-Technology Contract Manufacturing; Pego
Division - Environmental & Filtration Control Equipment & Systems; and MK
Aviation, S.A. - Aircraft & Aviation Equipment Leasing.
Hartcourt Rapid Growth Through Acquisition Strategy: Hartcourt aggressively
continues to seek acquisitions in its core markets. Management's concept of
combining several small companies in the same industry into one competitive
and more efficient and synergetic company is proving to be a successful
strategy. Using this strategy, the Company has evolved from a struggling
concern with revenues of $74,000 in 1994 to a flourishing growth company
with revenues of over $20 million in 1997. During this time the capital
base has expanded from $2 million to $37.8 million as of 12-31-97.
Hartcourt has acquired 3 companies in 1998, all in its core markets, and has
3-new core market acquisitions planned for the remainder of 1998 which, if
executed, will increase revenues by an additional $70 million in 1998,
bringing total expected 1998 revenues to almost $100 million.
Hartcourt's "Vertical Expansion and Acquisition" campaign incorporates
classic management strategies used by some of the most successful Merger &
Acquisition firms on Wall Street, including Kolberg, Kravis, and Roberts
(KKR) which is credited with starting the merger mania in the late 1980's
with their RJR (NYSE: RN) deal. KKR financed most of its deals with
private pension fund money, allowing public valuation to remain low, until
the Company was ready to "spin-off" operating divisions of RJR. Hartcourt
plans to use public equity (ie. Common stock & convertible debentures) to
finance most of its acquisitions prior to evaluating "spinning-off"
divisions into the public market (always retaining a majority interest in
the holding). The Company will immediately increase shareholder value many
times that of the late 1980's deals, due to the public valuation of its
stock which will be based upon the valuation of its wholly owned operating
subsidiaries. In addition, once an operating division is partially sold
into the public market via an IPO (initial public offering), shareholder
value will increase once again.
1994 - 1997: The Company purchased manufacturing operations in China in
1994 and in 1996 expanded its Asian interest with the acquisition of a
Chinese real estate development. In addition, the Company entered into a
Sales Agreement in 1996 to purchase 68 Alaskan mineral lease gold lode
claims. In the summer of 1997, due to the uncertainties in Asia and
problems with geological surveys for the Alaskan venture, management
decided to change direction. As of summer 1998, Hartcourt had divested all
interests in China, and will void its Sales Agreement for the Alaskan gold
lode claims. For the next few years the Company plans to focus its
acquisition strategy only on companies that are synergetic with its three
core operating divisions, ECS, Pego, and EmKay.
Operating Divisions - Hartcourt Wholly Owned Subsidiaries
Pego Systems, Inc., Acquired October, 1997
Pego systems, incorporated in 1970, has been operating for over 27 years and
is the largest distributor and manufacturer of Environmental and Filtration
Control Equipment & Systems in the Southwestern U.S. Pego is the exclusive
distributor in California, Arizona, Nevada, and the Pacific Northwest for
one of the world's largest commercial blower and pump manufacturers,
Gardener Dickinson (NYSE: BDX). The Company's revenues are derived from
three areas of operations: Manufacturing and distribution of environmental
and filtration control equipment; custom designed air and gas processing
systems, and equipment service for existing clients. Pego's systems are
used in many industries including pharmaceuticals, high technology
manufacturing, food conveyance, petrochemical refineries, municipal
wastewater treatment, and many more. Several Fortune 500 companies are
existing Pego clients including Proctor & Gamble (NYSE: , Coca-Cola, Arco,
Bechtel as well as the U.S. Air Force and several municipalities. Pego's
operations are based in Long Beach, California, with facilities in Rancho
Cucamonga, California, and Northern California. Pego's top executive and
operations management, Mike Caruana and Rich Griener, have agreed to
continue to manage Pego in conjunction with Hartcourt's executive
management. Pego generated $6.6 million in revenue in 1997 with a net
after-tax profit of over $400,000 (6.6%). With recent acquisitions and
restructuring at Pego, Hartcourt expects to nearly double these margins
within 12-months.
Acquisitions 1998
Early in the second quarter of 1998, Hartcourt acquired Pacific Pneumatic
(Rancho Cucamonga, CA), a small competitor of Pego's and merged it into the
Company. Pacific Pneumatic had sales of nearly $2 million in 1997 and will
add substantially to both revenue and earnings for Hartcourt in 1998. Pego
Systems management believes that the acquisition will add approximately $3
million in revenue in 1998, while the synergies of the merger will increase
operating margins to almost 12% initially, further increasing to as much as
15% in the next 2-years. Pego Systems was acquired as a purchase (cash),
and the last $250,000 payment (on Preferred convertible to cash stock) will
be made in Q3/98.
Hartcourt/Pego is near signing a letter of intent with a large Environmental
Control Systems and Equipment Equipment Manufacturer, a privately owned
competitor of Pego Systems, and will likely complete the acquisition by the
end of Q4/98. This large acquisition target had sales of $20 million in
1997 and produced a net profit of approximately $4 million. This
acquisition is extremely synergetic for Pego, adding sales to existing
clients through the expansion of its core product line. The acquisition
target provides systems used in clean room manufacturing and plating
equipment for high-technology industrial applications including hard disk
drive and CD-ROM manufacturers. The deal will be a stock swap merger, with
Hartcourt providing additional working capital to fund the rapidly expanding
merged companies.
Products and Markets / Pego's product lines include:
1. Petrochemical Clean-Up Equipment: For use by refineries and plastics
manufacturers. These industrial applications utilize Pego's steam turbine,
blower, and PIG launcher systems. The Company's clients include Arco,
Mobil, Bechtel, and OEMs that sell to Dow Chemicals.
2. Industrial Waste Filtration Systems: Used primarily by municipalities
for sewage and land fill applications. Pego has several large and medium
municipalities which use its gas compression systems which pressurize waste
water lines, vacuuming dangerous gases then filtering them, and pumping them
into engines to be burned as fuel. Pego's systems are also used by Waste
Management (NYSE: WMX), at some of its facilities in Asia.
3. Pharmaceutical, Food, Chemical, and Plastics Conveyance Systems: Move
material through piping systems and clean products such as pills, canned
foods, and other products with an "Air-Knife System". The Company provides
these systems to Proctor & Gamble, Coca-Cola and many other large national
companies.
4. High-Technology Air Knife System, which is, used by circuit board and
other high-tech products manufacturers.
5. Cement Manufacturing and Pumping Equipment: Gas compression systems,
which clean the conveyance systems for product delivery.
Market Positioning
Hartcourt, through its subsidiary Pego Systems, has executed a vertical
industry consolidation strategy, which will expand its product lines,
selling more products to its existing customer base as well as expand its
territory. The Company is in the process of expanding its sales force by
almost 50% over the next 12 -to- 18 months, opening sales offices in 4 major
cities. The market for industrial environmental and filtration control
equipment is between $400 and $500 million annually, growing at an annual
rate of over 5%. With its planned acquisition of the large Pego
competitor, Pego Systems will be able to capture nearly 10% of the market
almost immediately. The Company's goal is to increase its world-wide share
of the market to 15%, or $60 million in sales annually over the next 3 -to-
5 years, an annual revenue growth rate of approximately 45%, while operating
margins are expected to increase to 15% due to the synergies of its recent
merger and the planned large acquisition combination synergies.
Electronic Components and Systems, Inc. / Pruzin Tech. (Acquired Oct. 1997)
ECS, based in Tucson, Arizona, is a leading High-Technology Contract
Manufacturer. The Company specializes in the manufacturing and assembly of
printed circuit boards, telephone cable wires, coil winding and plastic
injection. ECS is also the largest manufacturer of cable reception and
channel switching boxes due to its contract with General Instrument (NYSE:
GIC). Some of the Company's largest clients include Motorola (NYSE: MOT),
Intel (NASDAQ: INTC) and AT&T (NYSE: T). ECS operates facilities in Tucson,
Chandler, and Nogales Arizona, as well as a large facility in the
Maquiladora free trade zone in Sonora, Mexico. The Company employs
approximately 50 people in the U.S., and 750 in Mexico. ECS has grown from
a small Company in 1988 with only $300,000 in revenue to a rapidly growing,
leading technology firm with over $14 million in sales in 1997.
The Company pioneered the technology of ball-grid array connection for
integrated circuits, a leading manufacturing technology, which dramatically
improves the efficiency of printed circuit boards. Micron Technologies
(NASDAQ: MU) is working very closely with the Company for the application of
this technology on its existing and future products. All of the Company's
principals will remain with ECS, including Jim Pruzin as President, and Don
Gentry as Vice President of Operations.
Acquisitions 1998
In the second quarter of 1998, Hartcourt/ECS acquired two contract circuit
board manufacturers, ELAN and SM Technologies, merging them into ECS. Both
companies had sales of $1.8 million in 1997, for a total of $3.6 million,
with net after-tax profit of approximately 3%. Hartcourt management
believes that each of these two acquisitions should be producing
approximately $10 million in sales annually with a net after tax profit of
over 5%. Currently, both ELAN and SM are providing "Labor Only / Assembly"
contract services for their clients. Under ECS management, both companies
will integrate full circuit board manufacturing capabilities with all of
ECS's technology to its existing "Labor Only / Assembly" contracts. This
will increase revenue to almost $10 million per company immediately, while
Net Profit margins will increase to approximately 5% for all of ECS due to
the synergies of the acquisitions. All acquisitions were done mostly with
HRCT common stock ($500,000 cash paid to ECS in addition to common and
non-liquidating convertible preferred Hartcourt stock).
Hartcourt is near signing a letter of intent with a large Silicon Valley/San
Jose based high-technology contract manufacturer with sales of approximately
$18 million and an after-tax profit margin of about 4%. This acquisition is
a key strategic move by Hartcourt to enter the Silicon Valley area as a
powerful high-technology contract manufacturer. Combining this acquisitions
technology and its customer base with ECS will allow the Company to expand
vertically in its core markets, as well as grow sales into new areas
currently supplied by the large Silicon Valley manufacturer. Contract
manufacturing is a very "click-ish" industry, where contacts with buyers and
other manufacturers is the only way to obtain new business. The Silicon
Valley acquisition gives Hartcourt's subsidiary, ECS an automatic intro into
the vast high-tech manufacturing market of the Silicon Valley. This
acquisition will also open the door for Hartcourt to further its acquisition
campaign in the Silicon Valley, consolidating the many small, fragmented,
privately owned high-tech manufacturers in Northern California's high-tech
breeding ground.
Products and Markets
Printed Circuit Boards: One of the largest segments of ECS's sales (over
50%) is the assembly of printed circuit boards. The Company produces a
variety of boards, both complex and simple, built on its automated Surface
Mount and manual Through Hole equipment, allowing for custom applications
and hybrid combination requirements. Most high volume manual requirement
boards are produced in the Mexico facility, while the Arizona facilities
produce most of the high volume automated surface mount boards. The Tucson
facility also does a large amount of research and development for its
customers, with prototype runs and small production lots. ECS also offers
Circuit Board Testing for its customers.
Telephone Cord: ECS has the capacity to produce a wide variety of telephone
cords and at one time was AT&T's sole supplier for all of North America for
AT&T Telephone Cord products. ECS is still a large supplier to AT&T (NYSE:
T)through its contract with Cable Systems International (CSI), the successor
company to AT&T's phone cord supplier division. ECS produces phone cord for
business phone systems as well as consumer phone cord. The Company ships
cord directly to its customers from its 25,000 square foot warehouse in
Nogales, Arizona via a direct link to its sales office in Phoenix, Arizona.
Cable Harnesses: These cables are a complex version of simple telephone
cord. Complex cable harnesses are used by commercial enterprises and
military customers for use in high-tech electronic devices and allow
multiple devices to communicate with each other. These cable systems use a
variety of cables including coaxial, semi-rigid, and standard hook-up wire.
ECS harness customers include Raytheon (NYSE: RTN (a&b)), Motorola (NYSE:
MOT), 3-COM (NASDAQ: COMS), General Instruments (NYSE: GIC).
Market Positioning
Hartcourt, through its subsidiary ECS, Inc., has executed a vertical
industry consolidation strategy, which will expand its product lines,
selling more products to its existing customer base as well as expanding its
territory. The Company is in the process of pursuing additional
acquisitions in the high-tech manufacturing industry, in other regions of
the U.S., which will dramatically improve the Company's ability to expand
its customer base and product line. Due to the regional nature of the
circuit board manufacturing business, the Silicon Valley acquisition in San
Jose is a key element of the Company's growth through acquisition strategy.
In circuit board and other high-tech contract manufacturing industry
segments reliability is the most valuable commodity for the client, not
always price even though ECS and the Silicon Valley manufacturer are both
highly price competitive. By allowing ECS to attain a foothold with a well
known client-base in the Silicon Valley, the acquisition will open the door
for many more acquisitions in the densest high-tech manufacturing region in
the U.S.
The market for high-technology contract manufacturing is a multi-billion
dollar industry, growing at the high annual rate of over 10% due to the
proliferation of integrated circuit components and equipment used in
commercial and consumer applications. With Hartcourt's planned Silicon
Valley acquisition, ECS will be able to capture an increasingly large
portion of the Western U.S. high-tech contract manufacturing almost
immediately. The Company's goal is to increase its presence in all
high-tech centers, including Seattle, Boston, and many others, over the next
3 -to- 5 years. With the Silicon Valley acquisition, ECS should be able to
grow its revenue at an annual rate of approximately 15% excluding any new
acquisitions, while increasing after-tax margins to above 5%, one of highest
in the industry. Margins are increasing due to the consolidation of
administrative, sales and marketing, and research and development at the
Company.
MK Aviation, S.A., Aircraft Leasing
Hartcourt is scheduled to sign an agreement on July 7, 1998, to acquire MK,
formerly the world's 5th largest Aircraft Leasing Company. MK currently
leases primarily aircraft engines, but has in the past owned and leased many
large commercial jet aircraft. Hartcourt's CEO, Alan Phan, was an employee
of MK from 1981 until the early 1990s, serving as an executive officer of
the corporation. MK's revenue in 1997 was $33 million, with a net after-tax
profit of $1.6 million. Currently, the Company is on-track to produce
revenue of approximately $40 million in 1998. MK Aviation has net assets of
approximately $10 million, mostly in the form of commercial jet aircraft
engines which are leased to major airlines around the world.
The aircraft leasing industry is relatively new, beginning in the late 60's
and early 70's. Companies such as Guinness Peat Aviation (GPA), and GE
Capital (formerly Polaris) developed the industry to a $12 -to- $15 billion
dollar industry. MK Aviation had leasing revenue of over $600 million in
the mid-1980's. Aircraft leasing companies purchase mostly used aircraft
and components (engines) that are 10 -to- 15 years old having achieved a
stable depreciable value, and lease them to major airlines across the globe.
The asset is moveable so if the market is bad in Asia, the planes can be
moved to Europe or the U.S. and leased there. In addition, maintenance is
government mandated and regulated, so the asset generally has a very long
life, with low depreciation due to the age of the original asset. During
the period from 1985 to 1990, an aircraft glut dramatically reshaped the
industry, and MK scaled back its operations. The current owner of MK
semi-retired during this period, allowing sales to decrease to current
levels by the early 1990's, where they have remained. Hartcourt management
believes that MK can produce as much as $400 million in revenue annually
within the next 2 years (by year-end 1999 or mid-year 2000), with an after
tax profit of between 1.5% -to- 3%. MK is being purchased for $10 million,
mostly stock.
Valuation
Financial overview: Hartcourt has evolved from a struggling holding company
with interests in Asia and only $74,000 in revenue in 1994 to a solid growth
company with actual 1997 proforma (including all 1997 acquisitions from
January 1, 1997) revenue of $20.8 million, and projected 1998 revenue of
approximately $30 million (excluding the MK and other planned acquisitions),
net profit of about $2 million, and 1998E projected EPS of about $0.07. The
Company has changed its focus and redirected its growth through vertical
acquisition and consolidation strategy to focus on undervalued companies in
high-growth and high technology industries. The Company successfully
acquired Pego Systems, Inc., and ECS, Inc., in 1997, and has already
acquired 3 companies to merge into Pego and ECS so far in 1998. These three
acquisitions alone add almost $10 million to in revenue to the Company for
1998E. In addition, through 3-more synergetic acquisitions planned to be
complete by September, 1998, (letters of intent already signed), Hartcourt
will add at least another $60 million in revenue this year. Through its
synergetic acquisitions and subsequent mergers, Hartcourt has been able to
improve operating margins at each one of its subsidiaries, increasing from
5.7% at Pego in 1997 to over 10% in 1998E, and increasing from 3.7% at ECS
to over 5% in 1998E.
Hartcourt's balance sheet is strong with approximately $38 million in net
assets as of 12-31-97. The Company has a current book value of $1.51, and
has virtually no debt (debt to equity ratio of 1.7%). The Company also has
approximately $8 million in working capital, and a stable source of cash to
fund operations. In addition, the Company's operating subsidiaries are all
cash-flow positive.
NMS Listing: Hartcourt is in the process of filing all necessary documents
to begin trading on the NASDAQ NMS system. This will bring the Company off
the Bulletin Board. This is a major step for small companies such as
Hartcourt to make. It allows them greater access to capital and broad
exposure to Institutional Investors and Fund Managers, which are generally
restricted from purchasing bulleting board companies. We expect the Company
to begin trading on the NMS by early August, 1998.
Forward Valuation: Based upon Hartcourt's high growth profile, successful
acquisition and consolidation campaign to-date, acquisitions in hand for the
remainder of 1998, the high quality products it produces through its
subsidiaries, and the technology element of its core business units, we
believe the Company is more fairly valued at between 30X -to- 35X 1999E
earnings or between $4.50 and $5.25 (this does not include MK Aviation or
the include acquisitions that have not closed, the large Pego competitor and
the Silicon Valley manufacturer). When compared to other high-growth
holding and investment companies with multi-industry operating subsidiaries,
Hartcourt is significantly undervalued. High-growth holding companies such
as RJR/Nabisco (NYSE: RN, trading at 65X trailing 1997 earnings P/E), and
Coca-Cola (NYSE: KO, trading at 55X trailing 1997 earnings P/E) which have
similar business units, trade in excess of 70X their forward earnings.
MK Aviation, S.A.: The above valuation does not include the MK acquisition.
With projected revenue of $40 million in 1998, and earnings of approximately
$2 million, the MK acquisition should be valued at 2X its 1998E revenue due
to its extremely high growth profile, and will add $3.20 to Hartcourt's
common stock valuation.
Other Acquisitions: The above valuation does not include the large Pego
computer or the Silicon Valley manufacturer acquisitions. With projected
revenue of $20 million and earnings of $1million for the Silicon Valley
circuit board manufacturer and projected 1998E revenue of $20 million and
earnings of $4 million for the large Pego competitor, the acquisitions
should be valued at about 30X earnings and will add $6.00 to Hartcourt's
common stock valuation.
Total Hartcourt Valuation: With all expected 1998 acquisitions, aggressive
future acquisition strategy, rapidly expanding revenue base, and a strong
balance sheet we believe Hartcourt's common stock would be more fairly
valued at $13.70 ($4.5 current + $3.20 EmKay + $6.00 1998E ACQs), or about
3X its total expected revenue for 1998E including all acquisitions.
Hartcourt Valuation Table
Company Valuation
Base Hartcourt Companies $4.50
Added Value with MK acquisition $3.20*
Added Value with Silicon Valley Manufacturer & Pego Competitor ACQs $6.00
Total Hartcourt Valuation** $13.70
*The MK acquisition letter of intent has been signed and terms of the deal
agreed upon, Hartcourt is currently completing the due diligence portion of
the closing process which should be complete early in Q4/98.
**Valuation based upon projected 1998E results for MK, Large Silicon Valley
Acquisition, and large Pego competitor acquisition (company names will be
released upon signing of letters of intent in Q3/98), and assumes the
completion of the aforementioned acquisition candidates.
Hartcourt Companies, Inc., currently trades on the NASDAQ OTC Bulletin Board
under the symbol HRCT. The Company will begin trading on the NMS (full
NASDAQ Listing) by August, 1998. The Company is currently trading at a
significant discount to its fundamental underlying valuation as compared to
other high growth companies due to a lack of following among NASDAQ
broker-dealers.
Year Ended December, 1997 Valuation: Based solely upon actually reported
results of operations (proforma) for 1997, Hartcourt is trading at a
substantial discount to its actual value. We believe the Company would be
fairly valued at 6X 1997 proforma revenue, or $5.00 per share. And this is
historical valuation. Growth companies in today's market all trade on
forward valuations, and Hartcourt is a rapidly growing company with revenue
growing in excess of 50% per year and expected to remain at these levels for
the next several years.
***Financial Projections & Spreadsheet Available via email and email
request***
Investors Edge is not a registered investment advisor or broker-dealer.
This recommendation is not under any circumstances to be construed as an
offer to sell any securities. Investors Edge and its officers and
employees have an interest in some or all of any securities mentioned
herein, and may be compensated by the companies mentioned herein. The
information set forth herein has been derived from sources believed to be
reliable, but is not guaranteed as to accuracy and does not purport to be a
complete analysis of the securities, companies, or industries involved.
Further information on companies and/or securities mentioned is available on
request.
Sunpacific Capital and Investors Edge are compensated and do have interest
in HRCT. |
