GUMM --- STRONG BUY RATING -- $24
We are reiterating our Buy rating on GumTech International with a FY 1999 price objective of $24. This price objective is based on sales estimates of $23.5 million and $56.1 million for FY1999 and FY2000, respectively. Based on our sales estimates, GumTech could post per share earnings of $.47 for FY1999 and $1.64 for FY2000.
We continue to de-emphasize Q3 and Q4 operating results, however, based on the infancy of new product lines including Breath Asure and Ranir, and to some extent the dental gum market, while maintaining a bullish longer-term outlook. Shipments of these new gums into distribution channels have commenced, and primary indications point to strong demand for both products.
We believe that Breath Asure could capture 8.9% of the $390 million dental gum market by FY2000, while Ranir could capture as much as 7.1%. During this period we are confident that at least one, if not several, branded oral care companies will be participating in the market for dental gums.
Since the FDA apparently views plaque as a disease, and any products claiming to reduce plaque are considered to be drugs, we view GumTech's sole position as a U.S. gum manufacturing facility that currently follows the Food and Drug Administration's "drug Good Manufacturing Practices" as a clear competitive advantage in the dental gum market.
Although we decline to cite a definitive time frame, GumTech should commence domestic and international distribution of nicotine (drug) containing gums, as well as further penetrate the market for diet aiding gums, by FY 2000.
GunnAllen Financial
Jay Gunn 1-800-713-4046
his long term clients own over 4 million shares
and they have no intention to sell until the company gets bought out.
(Talk to him about the buyout price of GUMM)
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