3 FMG AFFI: Highlights from Montgomery Securities 26th Annual Investment
MONTGOMERY****MONTGOMERY****MONTGOMERY****MONTGOMERY***MONTGOMERY
AFFINITY TECHNOLOGY GROUP, INC.*
October 3, 1996 NASDAQ: AFFI
COMPUTER SERVICES--BANK TECHNOLOGY Rating: BUY
Richard K. Weingarten (415) 627-3150; rweingarten@montgomery.com
Michael L. Thomas (415) 627-2131; mthomas@montgomery.com
Price (as of close 10/2): $9 FY Ends 12/31 1995 1996E 1997P
52-Week Range: $24-6
Shares Outstanding: 35.5 MM Q1 ($0.01)A
1996E Revenues: $9 MM Q2 (0.04)A
Market Cap./Revenues: N/M Q3 (0.18)
Avg. Daily Vol. (3 mos.): 290,732 Q4 (0.17)
Dividend/Yield: None Fiscal Year ($0.07) ($0.40) $0.00
6/96 LT Debt/Total Capital: 0% P/E N/M N/M N/M
ROAE L4Q: N/M Prev. Est. ($0.21) $0.45
6/96 Book Value/Share: $1.69
Secular EPS Growth: 35%
Market Capitalization: $320 MM
* Montgomery Securities currently maintains a market in this security.
Montgomery Securities was lead manager of an initial public offering for
Affinity Technology Group, Inc., in April 1996.
AFFI: Signs Two "Big Name" Contracts; Estimates Cut
AFFI announced that it signed two significant contracts, representing votes
of confidence for the ultimate success of the ALM and AFFI's ability to deliver
financial services electronically. We expect these signings to be viewed
positively.
o First, AFFI signed Associates (one of the largest consumer finance
companies) to a contract for an initial 50 ALMs. In addition, Associates
will become the preferred second look partner. This should help with
approval rates. Management said that if Associates wants to maintain
this status, it will need to purchase 50 ALMs per quarter for the next
two years. This should provide a stable revenue stream.
o Second, AFFI announced that it has signed a top 10 bank to pilot 13
ALMs. If this pilot is successful, a larger roll-out could follow.
o Third, AFFI announced Tuesday that it has signed a strategic alliance
with Home Financial Network to make its automated loan software
available to institutions with home banking applications. This is a
potentially huge market. No terms were released.
Nonetheless, we have preliminarily cut our 1996 estimate from a loss of
$0.21 to a loss of $0.40 and our 1997 projection from $0.45 to break-even.
AFFI's change in strategy toward multiple distribution channels and targeting
larger financial institutions will likely delay significant earnings
contributions to beyond 1997. Perhaps most significantly, to facilitate these
sales, AFFI's leases are expected to be mostly operating going forward rather
than capital. This means revenues will be recognized monthly rather than
upfront, negatively affecting EPS. Our cut in estimates is preliminary because
it is not clear at this point how the company will get paid in the new
distribution channels.
AFFI's stock is not for the weak of heart, but could provide appeal for
those who are willing to look out to 1998 and beyond.
First Call Corporation - all rights reserved. 617/345-2500
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