Mr. King, u r so wise... here is a gift for u. buy w/ a 38 target ..
what was ur entry??if u belive in something...double up..
mortgage your house, wife, kids, cats etc... I normally do not invest in an ipo but this one looks reasonable. Do you know anything about the mngmt? or how did u get this one thru a broker recommendation.
==============================================================
Initiating Coverage with a BUY and a $38 Price Target.
-Initiating with a BUY and a $38 price target. Our $38 price target is predicated on a
proposed revenue multiple of 8x applied to our calendar 1999 revenue estimate of $53 million.
This multiple represents a 22% discount to the comparable group's 10.3x 1999 revenue
multiple. We believe there is upside potential to our conservative 1999 revenue growth
estimate of 25%, but we remain conservative to reflect the company's excess capacity post
acquisition of Poppe Tyson.
- Leader in rapidly growing Internet E-commerce Services market. The company provides
"mission critical" creative/systems integration services to Fortune 500 companies seeking to
establish large-scale web-based points of presence to exploit the full range of web-based
applications from branding to direct selling and after-sale customer service and support. IDC
estimates the Internet and E-commerce services market to grow from $4.7 billion in 1998 to
$22.1 billion by 2002 - a 48% compound annual growth rate (CAGR).
- Blue-chip client base represents large re-occurring revenue stream. The company has
approximately 34 domestic clients and 20 international clients, including blue-chip clients in the
financial services, communications, retail and electronics industries (the top 5 customers
accounted for 57% and 55% of revenue for 1997 and the nine months ended 9/30/98).
Customers include AT&T, Citibank, IBM, JC Penney, John Hancock and Sony. The
company's established 1997 relationships accounted for roughly 85% of revenue during 1998
and we expect this trend to continue.
Valuation and Model Discussion
Attractive Valuation. We believe Modem Media.Poppe Tyson's shares are currently trading at
a discount to the company's closest comparables which provides a good opportunity for share
appreciation. MMPT is currently trading at 6.1x and 4.7x calendar 1999 and 2000 revenue
estimates of $53.3 million and $70.0 million versus the comparable universe of 10.3x and 5.8x.
We are establishing a $38 price target representing a 26% appreciation from the 3/1/99 closing
price of $30 1/8.
- Increased amortization. In connection with the Modem partnership combination, True North
is obligated to pay the former owners of the Modem partnership up to $18.6 million as
additional consideration upon completion of the IPO. The amount will increase amortization of
goodwill by roughly $300k per quarter for the next 18 years.
- Taxes. The company is paying taxes, despite pretax losses, because of issues relating to its
foreign subsidiaries. The company's domestic operations are profitable, generating taxes
payable, but MMPT did not recognize a tax benefit from the losses on foreign subsidiaries and
amortization of goodwill is a non-deductible expense.
Key Selling Points
Leadership Position. Modem Media is a leading, full service provider of digital interactive
marketing solutions for Fortune 500 companies, and emerging companies with online business
models. The company has approximately 34 domestic clients and 20 international clients,
including blue-chip clients in the financial services, communications, retail and electronics
industries. Customers include AT&T, Citibank, Compaq, JC Penney, John Hancock and
Sony. The company has won numerous industry awards and currently has four offices in the
U.S., three offices internationally (Toronto, Hong Kong, London), and an affiliate in Sao Paulo
Brazil.
|
