Bobbi / Newfoundland
And a good morning to you Bobbi. Yup, big things happening offshore Newfoundland. Your comment about Newfoundland/oil services reminded me of an article I posted not to long ago. This doesn't fall within the catogory of true oil services, but I thought it interesting enough to merit posting, may be interesting to you also.
Stratos A Rising Star, Says Analyst 12/3/97
Analysts like it, but the stock market has not been kind to St. John's-based Stratos Global Corp.
The satellite communications firm's stock price continued to slide this week, closing at $1.70 Tuesday on the Toronto Stock Exchange, down from a high of $4.70 in April.
But in a recent corporate analysis prepared by Deacon Capital Corp.'s John Grandy, Stratos Global should be worth about $5, even when its non-core assets are discounted as having little value.
"It's a company which should get a little more respect," said Grandy, who admitted he doesn't usually comment publicly on individual stocks, but would make an exception for Stratos.
Grandy authored an October report that noted steady improvement in the company's satellite business and recommended its customers buy.
"The reason we like it is they are the only Canadian public company that offers mobile satellite phone service," Grandy said in an interview Tuesday. "They've been very successful at it and we believe they are going to be more successful."
An earlier analysis by another Toronto brokerage firm estimated the stock was worth $6. The market, however, has said otherwise.
Stratos stock was a hot commodity at the beginning of the year when three investment funds invested a total of $10 million in two special warrant issues. The three million warrants, issued at an average of $3, were converted to regular shares when the company completed its acquisition of the U.S. wireless communications firm IDB Mobile, from WorldCom Inc.
Although Stratos Global may be undervalued, there is little or no chance of a takeover, said Stratos CEO Derrick Rowe.
"It's a very difficult company for someone to do a hostile takeover because of the concentration of the company," Rowe said in an interview this week. "(The shares) are in fairly big blocks."
The market appears to understand only one thing, Rowe said: profits.
Stratos has recorded losses of $1.05 million and $1.65 million in the last two quarters, though it reported a small operating profit in the last quarter.
But Rowe said this is where the fledgling company expected to be, given it has only been trading in its current structure for a year.
"The message we put out was that, really until fiscal 1997-98 starts, these restructuring costs will continue to have an impact," he said.
Deacon Capital recommended Stratos sell its non-core assets, such as its five million shares of Conpak Seafoods - which reported healthy earnings in its fourth quarter results issued last Friday - and its small interest in American BOA, a small auto parts manufacturer.
"From my perspective, it's easier for me and other investors to understand the business if they concentrate on (satellite communications)," Grandy said.
Stratos Global's satellite communications arm is Stratos Wireless Inc.
Rowe said that while reckless dumping of assets is not in the company's best interest, it will probably sell non-core assets - and show additional earnings when it does.
"The long-term intention is to become purely a wireless company," he said.
In his report, Grandy said non-core assets, particularly the SCC Environmental Group, had disappointing results. All non-core assets were assigned a total estimated value of just 66 cents a share. The total enterprise value of Stratos was estimated at $5.10.
"It's a very fast-growing industry," Grandy said, adding much of the future growth would come in the international shipping industry.
Stratos Wireless already has 100 per cent of the East Coast offshore oil and gas industry, Rowe said, with contracts for Hibernia, Amoco and PanCanadian in Nova Scotia. |
