Looking for something a little less volatile in the y2k sector?
--CM Oliver 12-month target for GPW: $10.20--
Here is an excerpt from the Year 2000 research report put out by investment house CM Oliver in Vancouver on June 19, 1998. Still relatively unknown, GPW has not been a affected by y2k hype near as much as SEEC nor has it had the earnings disappointments that have plagued SEEC. (Although I agree with everyone here that SEEC is now grossly undervalued.)
Of the 8 Canadian "y2k" stocks analyzed in the report, GPW was rated as having the highest upside potential (108%) over such leaders as LGS (67%), and CGI (33%):
Group West is a systems integrator for the midrange and mainframe computer market, which includes platforms such as AS/400, Digital and UNIX. The company was established in 1976 with operations across Canada and
the Western United States. The company is focused on three areas of business:Year 2000, systems integration
and hardware and software sales. To benefit from the growth in y2k, Group West acquired the license to market
a portfolio of software tools called INTO 2000.
The company's y2k focus is in AS/400 systems, in which the INTO 2000 tool specializes. Group West was
recently recognized to have established more contracts for AS/400 systems than any other AS/400 service
provider. The company believes it has a competitive advantage in the midrange market, as these systems are
much smaller and less glamorous than the larger mainframe systems. Another advantage is that small and
medium sized businesses are behind in their y2k initiatives, which is expected to generate increasing demand for
y2k conversion services. The company has over 20 successful y2k conversions under its belt and is well
positioned to take advantage of this opportunity. To expand its resources, Group West completed a number of
acquisitions over the past year, with its most recent and largest one to date - AASKI Technologies in Ontario.
AASKI has a current backlog of $3.5 million with projected revenues of $8 million for 1998.
For the six months ended March 31, 1998, revenues increased by 40% to $2.1 million from $1.5 million in
1997. Net income remained flat at $40,763 or $0.007 per share versus $41,878 or $0.01 per share. Gross
margins also remained flat at 82%, while EBITDA margins improved slightly to 1.7% versus 1.0% in 1997.
Group West is the smallest Canadian IT company in our list based on market cap and TTM revenues, but with
recent acquisitions and more planned in the future, has the potential to be come a larger player in this highly
fragmented market. We expect to see significant improvements in the top and bottom line in Q3 and Q$. Our
earnings estimates are $0.15 for 1998 and $0.60 for 1999. Based on a P/E of 40 and P/S of 5.6, we have a
12-month target price of $10.20.
Check the Group West thread for more. |
