Formula Systems : FORTY Message Board

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Technology Stocks : Formula Systems : FORTY

FORTY 170.00

+2.5%

Jan 9 1:31 PM EST

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To: Josef Svejk who wrote (16)	3/1/1998 8:26:00 AM
From: ERM	Read Replies (1) of 141

I have 2 Merrill Lynch research reports on FORTY. For copyright reasons, and because they are not in electronic format, I will only post the highlights. November 18, 1997 (price at $27.75): "Formula trades at a 13% discount to NAV--even a discount to listed holdings. We believe Formula deserves a premium. Formula trades at a discount to its growth rate. Were its 98E multiple to converge with its growth rate--Formula would trade at NAV. We consider 20% upside justifiable--with future IPO's potentially exposing further value. We initiate coverage with an accumulate recommendation. Formula is structured as a holding company, yet practically it is a hybrid between a strategic venture capital firm and a single industry operating company. Although complex, the firm remains software focused. Formula is a leading software firm focusing on consultancy and turnkey projects. 1997 sales should be USD150mn with USD60mn in exports. We believe Formula is entering a high growth period-a strong domestic base & expansion abroad should boost revenues by 40% p.a. Underlying earnings look poised to double in 1998. 12 month price objective: $33" January 28, 1998 (stock price $25.50): "Formula Systems now trades at a 20% discount to estimated NAV, and even a 13% discount to its listed subsidiaries + net cash. We feel Formula deserves a premium due to the parent's proven ability to create value. A discount to listed holdings seems totally unjustified. We reiterate our accumulate recommendation on Formula Systems and we now include it among our list of preferred stocks in Israel. With low exposure to Asia and limited competition from Asia, Formula's earnings outlook remains compelling. Formula represents a rare case of a holding company that is lean enough, aggressive enough and successful enough to add value at the holding company level. 12 month price objective: 5% premium to NAV." The reports go on to breakdown FORTY's subsidiaries by ownership percentage, estimated 1997 revenues, and valuation estimates for both public (7 companies) and private (8 companies) securities.

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