JR, Here's a preview of an article that will appear at www.bizfn.com :
The stock market correction has left us with the opportunity to look for undervalued stocks. Looking off the beaten path and concentrating on lower priced stocks, we found Safety Razor (RZOR), Quacker Fabric (QFAB), Titan Holdings (TTN) , PTI Holdings (PTII) and Advanced Technical Products (ATPX) stocks worth keeping an eye on.
RAZR
This company has been around since the late 1800's producing razors,blades and other bath products. The stock has been beaten up due to Gillete's new product introduction. Gillete's new product is expensive
and could end up giving RAZR an opportunity to add market share. After reviewing options to sell the Company or to develop a strategy to improve shareholder value RAZR plans to introduce a new
razor blade early next year. Insider buying demonstrates their belief that RAZR will rebound.
From a recent WSJ article:
"This year, ASR gave investors a surprise nick, recording a drop in first-quarter
earnings (before restructuring charges) to $1.4 million from $2.6 million a year earlier. ASR
blamed heavy promotional spending by competitors. It also said some retail chains delayed
orders to leave shelf space for the Mach 3. "
Reported Earnings
Report Period...Year Ago EPS...Mean Estimate...Reported EPS...% Surprise
Jun98 Q 2 .........0.28....................-- ..........................0.17.............................
Mar 98 Q1 .........0.21................... 0.11.......................0.11.................... 0.0%
Dec. 97Q4..........0.33....................0.36.......................0.38....................+6.0%
Jun 97 Q3..........0.34....................0.37.......................0.37.......................0.0%
Jun97 Q2......................................0.27.......................0.28.....................+4.0%
Mar97 Q1....................................0.20........................0.21......................+5.0%
QFAB
QFAB designs, manufactures and markets woven upholstery fabrics for residential furniture worldwide. Their customer list includes virtually every major furniture manufacturer in the U.S. Approximatly 21% of sales are to foreign customers.
Demand for QFAB's products has exceeded their capacity to manufacture. The Company has nearly completed an $80 million capital investment program. From their last 10q;"The decrease in gross profit margin percentage was primarily due to 1.) lower operating efficiencies and other period costs associated with the $80.0 million, two-year capacity expansion plan which the Company began implementing in 1997 and which is now substantially complete, and 2.) heavy overtime expenses associated with operating almost all of the Company's manufacturing areas on a six and one-half day per week schedule to meet customer demand."
Reported Earnings
Report Period...Year Ago EPS...Mean Estimate...Reported EPS...% Surprise
Jun98 Q2............0.21....................0.17......................0.19....................+12.0%
Mar98Q1............0.34....................0.15......................0.15......................+0.0%
Dec97 Q4...........0.41....................0.34.......................0.31.......................-9.0%
Sep97 Q3...........0.24....................0.41.......................0.35.......................-15.0%
Jun97 Q2......................................0.29........................0.32.....................+10.0%
Mar97 Q1....................................0.27........................0.34......................+26.0%
TTN
TTN has been transforming itself from a defense communications company to an information systems company by making internal changes and by aqcquisitions. In 1997 TTN organized itself into five divisions; communications systems, software systems, information technologies, medical sterilization and food pasteurization, and emerging technologies and businesses. This year the Company has acquired DBA Systems Inc., for about $36 million in stock ,VisiCom, an information technology solutions firm for $25 million and Horizons Technology, a provider of systems and program management services, for $19 million.
Joseph Charles recently initiated coverage citing: "Titan has reached the critical mass needed to compete as a modern defense company. There are a series of catalysts that could drive the share price in the near term. They include spinning off minority interests to the public in its subsidiaries, winning large defense contracts, getting food-pasteurization orders for its Surebeam Systems, which kills E.Coli bacteria, or a pickup in orders for its commercial satellite-phone systems. As its commercial ventures are spun off we believe that it will attain a valuation similar to incubator/holding companies Thermo Electron and Safeguard Scientific. Therefore we are applying a forward P/E of 26 times our 1998 estimate, 35 cents a share, and establishing a six-month target price of $9.10. Our 18-month price target is $11.75, or 26 times our calendar 1999 earnings estimate of 45 cents."
Noteworthy: In August 1998, TTN received a one-year, $7.5 million U.S. Navy contract for submarine radio communications equipment, with options for four years that could bring the total value to $74 million. Earlier this year TTN won a contract to provide Y2k services for the state of Wisconsin.
In June 1998, TTN withdrew a planned IPO to spin off Linkabit Wireless due to mrket conditions.
Reported Earnings
Report Period...Year Ago EPS...Mean Estimate...Reported EPS...% Surprise
Jun98 Q2............0.05....................0.07.......................0.08.....................+14.0%
Mar98 Q1...........0.04....................0.07.......................0.06......................-14.0%
Dec97 Q4...........0.00....................0.10.......................0.09.......................-10.0%
Sep97 Q3.........-0.14.....................0.07.......................0.08.......................+14.0%
PTII
PTI's stock has been in a relatively tight trading range for the last three years but that may soon change.
The Company recently became the principal supplier of bicycle helmets and accessories for all Target stores. The agreement is expected to add $10 million to 1998 sales. PTII has entered into a licensing agreement with Hasbro, Inc. to manufacture and market helmets, bicycles and bicycle accessories, and with Mattel to make helmets under the Barbie brand name, along with a license to sell Barbie bicycle accessory products.
Reported Earnings
Report Period...Year Ago EPS...Mean Estimate...Reported EPS...% Surprise
Jun98 Q2............--........................0.24.......................0.30....................+25.0%
Dec97 Q4..........--.........................0.12........................0.06....................-50.0%
Sep97 Q3..........--.........................0.13........................0.13.....................+0.0%
ATPX
ATPX, a manufacturer of advanced composite material products was formed earlier this year from the merger of publicly traded LUNN and TPG, a private concern. The two companies anticipated that their potential synergies and the growth prospects for
the almost untapped commercial products that TPG offered would make the company a success. The stock
recently moved from the Nasdaq Small Stock to a Nasdaq National Market listing.
We are anticipating that a public offering will be announced in the near future and that at least one more
ananlyst will initiate coverage.
The commercial segment represents only 20% of ATPX's present revenues. The Lincoln Division has products that have commercial importance with the natural gas vehicle (NGV) tanks being particularly interesting. Air pollution laws will result in an increase in gas powered vehicles throughout the world. ATPX is currently working on several uses for these tanks and has a developmental contract with Honda. Another developing commercial source of income is the oil industry. ATPX is participating on a National Institute for Science and Technology grant for the development of a production riser for deep sea rigs. The product is designed to be lighter and less expensive than steel or titanium. ATPX is under contract to develop a composite drill riser for deepwater application for Norske, Conoco and Kvaerner.
Alcore divisio opened its new 100,000 sq. ft. facility in Maryland during the summer to expand production. Alcore recently acquired a French honeycomb business giving the Co. further exposure into the European and Asian markets. Foreign sales currently are less than 10% of the total.
Competitive bids currently pending award include a bid to provide chemical defense reckon vehicles for the US Marine Corps and a bid to produce water purification units for the US Army. The fiscal year for the DOD starts in Oct. and contracts are usually awarded prior to the start of the fiscal year.
Intellitec's $30 million developmental contract with the DOD is potentially a huge production contract. The contract includes options totalling $173 million for the production of chemical agent monitors. |
