Research Report (3 of 4)
2nd RESEARCH REPORT DATED NOV. 19, 1997
from:
Morgan Keegan
Date: November 19, 1997 Rating: 2'S
Earnings::
1996A (.40)
1997E (.45) to (50)
1997 1996
Q1A (.12) vs. (.01)
Q2A(.15) vs. (.04)
Q3A(.11) vs. (.12)
Q4E(05-.10) vs. (.23) Rpt. Date: 2/98
Citibank Agreement
Affinity Technology Group, a Columbia-based provider of credit
decision technology today announced an agreement with Citbank, a
subsidiary of Citicorp). The agreement provides for the use of
Affinity's e-xpertLender systems in Citbank's indirect auto lending
business.
- The x-pertLender system is a decisioning system that
processes loan applications for the bank based on the bank's
criteria and accepts or rejects that application. The system
is beneficial to banks because in automates and speeds the
credit approval process.
- The indirect auto lending business is very competitive.
Generally the loan application is faxed from the auto dealer
to a number of lenders. More often than not, the lender that
responds first gets the loan.
- from a bank's point of view, the difference in making or not
making a loan is a matter of minutes, not hours. According
to Affinity, an estimated 60% of CCI's indirect applications
can be processed using the x-pertLender system, with
approximately half of those being approved. The response time
should be around 10 minutes.
- In addition to the future revenue component, we believe the
Citibank contract provides additional validation for
Affinity's products.
As was the case with the Dime contract mentioned in our previous
notes, revenue from this contract is in two forms: installation,
which will take place and recognized on a percentage of completion
basis over the next several quarters, and ongoing revenue, which
is recognized once the system is installed and applications
processed. In our conversations with Dime the company's experience
with the application volume is quite good.
In addition to the revenue component, we believe the Citibank
contract provides additional validation for Affinity's products.
Investment in these shares is of a speculative nature, with a
revenue ramp-up and additional contracts essential, in our opinion,
to achieve profitability. Less speculative investors may wish to
consider Carolina First (CAFC @ 20 9/16) - Sergio, today CAFC is
21 7/8. rated 2-V, as an alternative method of participating in
this company. That company owns roughly 18% of Affinity, primarily
via warrants.
Above information developed by John B. Moore, Christopher T. Kelley
at Morgan Keegan in Memphis. |
