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Non-Tech : Radica Games (RADA)

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To: jan_mike who wrote (1634)	1/5/1998 9:52:00 PM
From: jerald morse	Read Replies (3) of 7111

Gary, Wayne, - I agree that product selling out is better than almost anything else but I still don't think all that much product made it to the stores for much of Q1 giving us earnings less than .50cents/sh. I'll stick with my numbers posted before. There are too many reports of "sold out", even now, for me to believe they just missed the last toy and the store was in the process of restocking. In any event Q1 should take us to trailing earnings of $1.50 share - cheap is cheap. After reading much of the latest SEC filing I feel more and more that the low PE has to do with business location and past history than future appraisal. The Chinese location and business arrangement probably results in difficulty in accessing true book value, for one thing. If worse comes to worse what's a property in China worth to the average american investor? Radica is building the new factory additions for about $15.00/sq.ft. Like, I can't build a tool shed in my backyard for that price! The average american house costs $40 -$50./sq.ft. The arrangements with the local government for workers and taxes and property lease - forget it - that's going to be discounted in the PE the market ultimately gives the stock; even more so now that there are problems in Asia which makes everyone MORE aware of the risks. Past company history really doesn't show consistent earnings growth going back to the IPO and once the market gets burned by a stock it takes a long time to forgive and forget. All is factored into the PE. In addition "da street" MISSED the real run up from $2.00 and can't stand it, soooo silent treatment. For now. The toy shows, successful products, and exploding earnings will win the day, in the end. BTW that was a great move in getting the Chinese government to raid and shutdown the factory making the fakes David! Obviously Radica has good relations with the Chinese and some day all the above may be seen with a very positive spin and the days of trading at 10X earnings will be over. Good luck to all in '98.

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