4th Quater info:
Headline: Primus Telecom Gp: Fourth Quarter and 1997 Preview Author: Bath/Moore 1(212)526-4386/5063 Company: PRTL Industry: TELECM Ticker : PRTL Rank(Prev): 1-Buy Rank(Curr): 1-Buy Price : $ 12 1/2 52wk Range: $15-10 Price Target: $ 25 Today's Date : 01/10/97 Fiscal Year : DEC ------------------------------------------------------------------------------ EPS 1995 1996 1997 1998 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: - (0.10)A (0.10)A (0.23)E (0.23)E 2nd: - (0.16)A (0.16)A (0.22)E (0.22)E 3rd: - (0.18)A (0.18)A (0.21)E (0.21)E 4th: - (0.20)E (0.20)E (0.22)E (0.23)E ------------------------------------------------------------------------------ Year:$ - $ (0.59)E $ (0.59)E $ (0.89)E $ (0.89)E $ (0.25)E $ (0.25)E Street Est.: $ (0.60)E $ (0.60)E $ (0.91)E $ (0.91)E $ (0.25)E $ (0.25)E ------------------------------------------------------------------------------ Price (As of 1/10) : $ 12 1/2 Revenue (1997) : 306 Mil. Return On Equity (97): N/A Proj. 5yr EPS Grth : N/M Shares Outstanding : * 20.2 Mil. Dividend Yield : N/A Mkt Capitalization : 252.5 Mil. P/E: N/A; N/A Current Book Value : N/A Convertible : - -Debt- to-Capital : 20.5 % Disclosure(s) : C, A * Fully Diluted ------------------------------------------------------------------------------ * 4Q Preview: Network Development Continues, 37% Revenue Growth We expect Primus to report EPS of $(0.20). We estimate revenues of $55.2 million, up 37% year over year and 6%-7% sequentially. Revenue growth should be driven by the continued ramp up in the salesforce and maturation of the U.S. and UK operations. Network development continues with the expectation of the five Australian, 1 Canadian, 2 U.S., and 1 UK switch operational by 2Q97. Primus's receipt of a facilities based international license in the UK is a positive step in its transition to switch-based provisioning.
* 1997 Preview: Core Network Operational, 50% Revenue Growth We expect the core network to be operational by 2Q97. In addition to deployment of switches (see above), the fiber optic cables (LA-Sydney and New York-London) should also be operational. With the network in place, we expect gross margins to expand from the estimated 8% level for 1996 to low double-digit levels in 1997.
* We estimate revenues to grow about 50% as the non-Australian operations continue to develop (300%+ estimated growth vs. 20%+ estimated growth in Australia) and an estimated 45%-50% increase in the direct salesforce. International revenues are expected to double as a percent of total revenues (1996E-13% vs. 1997E-26%).
* INVESTMENT SUMMARY: Poised to Capitalize on Deregulating Markets We view Primus as an attractive way to play the highly profitable and fast-growing international long distance market. With a strong management team, global network, and deregulating global market, we believe Primus can capitalize on the international opportunity and achieve our 12-month price target of $25..
* VALUATION: Valuation Discount Should Narrow in 1997 Currently, Primus trades at a 0.95 firm value multiple of run-rate revenue, a significant discount to the average industry multiple of 2.0-2.5. We believe this gap should narrow as Primus's margins improve and the stock looks toward profitability in 1998. ------------------------------------------------------------------------------
BUSINESS DESCRIPTION: Primus is a global telecommunications services provider specializing in international long distance. ------------------------------------------------------------------------------
Joe |
