An interesting play.
Tue, 19 Jan 1999, 10:13pm EST
NBC BUYS 9.9% OF TELESCAN, INC.; DEAL ALIGNS COMPANY WITH POWERFUL MEDIA PARTNER;
Stonegate Securities, Inc. Maintains 'Strong Buy' Rating
DALLAS, Jan. 19 /PRNewswire/ -- The following is being issued by Stonegate Securities, Inc., a member of the National Association of Securities Dealers, CRD number 6376:
Stonegate Securities, Inc. is maintaining coverage of Telescan, Inc.
(Nasdaq: TSCN) (www.telescan.com) with a "Strong Buy" rating. A full-text research report can be accessed at www.multex.com or by calling Stonegate Securities at 214-871-6939. On Friday, January 15, 1999, Telescan reported that General Electric's (NYSE: GE) NBC unit and Equity Capital Group (OTC Bulletin Board: EQCG) jointly purchased 1.22 million shares of newly issued Telescan stock at $7.70 per share. This represents 9.9% of the outstanding shares of Telescan. The company also announced it is negotiating with NBC to license its technology and content, as well as to provide hosting services. The potential licensing agreement with NBC is another example of Telescan's impressive partnerships with Internet brokerage, financial publishing, commercial banks, and other Internet companies. The company has licensing agreements with such companies as Fortune, Money Magazine, Citicorp, American Express, Web Street Securities, Standard & Poor's, and Fidelity.
While the terms of each of these deals vary, they typically call for up-front licensing and development fees, as well as ongoing subscription, advertising and transaction revenues.
According to a research report issued by Stonegate on January 15, 1999, "this potential licensing agreement could entail Telescan providing its services for CNBC.com, one of the most widely used financial Internet sites.
We believe this represents a significant event for Telescan, as NBC is one of the largest financial media companies in the world, and CNBC has 33 million viewers worldwide. As Telescan continues to build a base of partners, we believe there exists hidden value for this recurring stream of potential revenues.
"Additionally, Stonegate believes the IPO of MarketWatch.com, Inc.
(Nasdaq: MKTW), which was priced Friday at $17 per share and immediately opened trading above $85 per share, generates an interesting valuation comparison. At its closing price of $97.50 per share, MarketWatch.com is valued at $1.15 billion, or 164X trailing 12-month revenues. Telescan has a market value of $189 million, which represents a multiple of 13X trailing revenues. Additionally, MarketWatch.com lost approximately $3.5 million during the most recent quarter while Telescan is near breakeven, and Stonegate is projecting over $3 million in net income this year. Finally, Telescan has a longer operating history and its WallStreetCity site www.wallstreetcity.com) ranks favorably to MarketWatch.com in terms of
advertising value, page impressions, and click through rates.
Stonegate believes these two very similar companies present a valuation discrepancy which investors have not yet picked up on."
According to Stonegate, "the environment for Internet stocks has changed, and traditional P/E valuations no longer apply. Perceived value is now based on page impressions, viewers, and partnerships. With regard to these factors, Telescan is positioned extremely well. We believe the valuation discrepancy between Telescan and MarketWatch.com is unwarranted. Assuming MarketWatch.com is overvalued and trades down to its IPO price of $17 per share, this equates to 28X trailing revenues. An equivalent multiple for Telescan implies that the stock is significantly undervalued relative to its closest competitor.
Therefore, we are maintaining our "Strong Buy" on Telescan."
Disclosure and Disclaimer The information contained herein is based on sources which Stonegate believes to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Because the objectives of individual clients may vary, it is not to be construed as an offer or the solicitation of an offer to sell or buy he securities herein mentioned. Stonegate and/or its employees and/or
its individual shareholders and/or members of their families and/or its managed funds may have equity positions or options in the securities mentioned and, before or after your receipt of this report, may make or recommend purchases and/or sales for their own accounts or for the accounts of other customers of the firm from time to time in the open market or otherwise.
Stonegate Securities, Inc. has performed investment banking/advisory services for companies mentioned in this report, and has received remuneration for these services in the form of fees and options. This report is the independent work of Stonegate Securities, Inc. and is not to be construed as having been issued by, or in any way endorsed or guaranteed by, any issuing companies of the securities mentioned herein. While Stonegate endeavors to update the information contained herein on a reasonable basis, there may be regulatory, compliance, or other reasons that prevent Stonegate from doing so.
Opinions expressed are Stonegate's present opinions only and are subject to change without notice. Reproduction or redistribution of this report without the expressed written consent of Stonegate Securities, Inc. is prohibited. Additional information on any securities mentioned is available on request.
SOURCE Stonegate Securities, Inc.
-0- 01/19/99
/CONTACT: Arik Garner of Stonegate Securities, Inc., 214-871-6939/
/Web site: wallstreetcity.com
/Web site: telescan.com
(TSCN GE MKTW EQCG)
CO: Telescan, Inc.; General Electric Company; National Broadcasting Company; Equity Capital Group; MarketWatch.com, Inc.
ST: Texas, Connecticut IN: FIN SU: RTG
-0- Jan/19/1999 19:09
EOS (PRN) Jan/19/99 19:09 86
-0- (PRN) Jan/19/1999 19:24
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