From Kaufman Brothers today .....
ABLE TELCOM HOLDING CORP. (ABTEª-$9)
RATING: BUY/BUY PRICE TARGET: $26
4Q98 FINANCIAL RESULTS RELATIVELY IN-LINE WITH EXPECTATIONS
Yesterday after the close, ABTE reported 4Q98 revenues and EPS (including
non-recurring charges) of $103MM and $0.16, versus $25.2MM and $0.02 during
the prior year's same period and our estimates of $101MM and $0.22.
Further, the company indicated that the money required to take-out its
outstanding $10MM high yield notes and $18MM series B convertible preferred
stock has been placed into escrow. We anticipate that ABTE will close these
transactions during the next few business days. We think the company has
already entered into firm agreements with the holders of these securities
and anticipate that news of the recapitalization will be released to the
Street imminently.
During 4Q98, we believe ABTE incurred $1.2MM of unusual G&A expenses,
related to due diligence and legal consultation, which adversely impacted
the company's reported EPS by roughly $0.07. Excluding those items, we
believe the company's reported EPS would have been above our estimate of
$0.22.
WE BELIEVE THE COMPANY'S RECAPITALIZATION IS ALMOST COMPLETE
In our view, in 1998, ABTE common shares fell under pressure due to a
liquidity crisis brought about by the purchase of MFS NT, which promised to
overwhelm the organization (i.e., the guppy found it difficult to swallow
the whale). We believe this crisis brought about a major inflection point
in ABTE's story. We believe the company has made significant progress
during the past few months that has resulted in a strengthened financial
condition, bolstered management and Board representation, new auditors, and
growing backlog (now tops $1.2 billion). We believe the company has moved
past its inflection point and is headed for banner performances in 1999 and
beyond. We believe any confusion in the investment community over the
company's reported 4Q98 results or chances of closing its recapitalization
could present investors with a strong opportunity to initiate new positions
and/or continue building sizable stakes in ABTE. We continue to believe the
company represents considerable value at current levels, which imply a
price/FY99E EPS of roughly 6x, a price/FY99E EBITDA per share of roughly 3x,
and a price/FY99E revenues of 0.3x.
WE THINK POTENTIAL CONFUSION REPRESENTS A BUYING OPPORTUNITY
Against this backdrop, we recommend aggressive purchase of ABTE common
shares in anticipation of continued releases of data points that should, in
our view, attract additional investors to the company's story. We believe
investors will pay north of $20 per share for ABTE within the next twelve
months as the dust begins to settle around this controversial story.
Vik Grover
Senior Equity Analyst
Kaufman Bros., L.P.
800 3rd Avenue, 25th Floor
New York, NY 10022
O: 212/292-8123
F: 212/292-8103
vgrover@kbro.com |
