Dear MonsterStock members:
Today's stock profile is presented below. This information was posted on our website at 2:00 p.m. EST today and normally would have been emailed to you simultaneously, however, e*groups experienced problems today and delayed our ability to mail this until now. For those members who desire fastest possible access to our profiles, we recommend utilizing the website.
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The MonsterStock.com Staff
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Tuesday, May 18, 1999, 2:00 p.m., EST
The new MonsterStock profile is Latin American Casinos, Inc. (NASDAQ: LACI)
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I. FUNDAMENTALS for LACI:
Ticker: LACI
Exchange: NASDAQ
Ask price (today's open): $1.46875 (1 15/32)
Bid price (today's open): $1.375 (1 3/8)
52 week price range: $0.8125 – $3.3125
Book value per share: $2.84
Revenues: $2.4 million
Net income: $531 thousand
Profit margin: 22%
Earnings per share: $0.16
P/E: 8.98
Average volume: 9,909 (3 month average daily volume)
Market capitalization: $4.1 million
Shares outstanding: 3.3 million
Float: 1.5 million
Employees: 96
Company address: 2000 N.E. 163rd Street
North Miami Beach, FL 33162
Phone (305) 945-9300
Fax (305) 756-7419
II. SUMMARY OF BUSINESS:
Latin America Casinos, Inc., based in Miami, FL, is the largest slot machine rental and remanufacturing company servicing South America. It refurbishes used five-reel slot machines (for which it pays about $500, compared to $6,000 for a new machine) and then rents them to licensed gaming establishments for $75 to $100 a month, primarily in Peru and Columbia. In addition, LACI offers short-term agreements in which the machine's winnings are apportioned 70% to the company and 30% to the customer. LACI is also expanding into the cigar distribution business through its World's Best Rated Cigar Company subsidiary.
For the year ended December 31, 1998, revenues rose 24% to $2.4 million. Net income totaled $531 thousand, up 102% from $261 thousand. Revenue increases reflect increased market penetration of the Company's slot machine operations in Peru, Columbia and Nicaragua.
III. FAVORABLE ASPECTS OF THIS COMPANY:
(1) Strong annual revenue growth (up 24% last year)
(2) Cost cutting in selling, general and administrative expenses as a percentage of revenue (down from 87% in 1997 to 72% in 1998)
(3) Impressive earnings growth (up 102% last year)
(4) A stock price on the move. From a low of 1 1/16 on April 5 of this year, LACI has moved up 40% in less than 2 months.
(5) Extremely healthy profit margins of 22%.
(6) A book value per share ($2.84) roughly twice its current stock price.
(7) LACI expects its expansion into selling premium cigars on a national level will be fully operational and profitable in the third and fourth quarters of 1999. [Note: This is a forward-looking statement. See Disclaimer section 10 and “Risks Associated with this Company” section below for additional information regarding forward-looking statements.]
IV. RECENT NEWS:
May 17, 1999 (yesterday): LACI reported first quarter earnings of $116,292 or $.03 per share on first quarter revenues of $609,420. Revenues were up sharply (85%) from the fourth quarter of 1998 due to an upturn in the Peruvian and Colombian economies.
V. RESEARCH LINKS:
Yahoo Research
quote.yahoo.com
SEC Form 10KSB (April 14, 1999)
sec.yahoo.com
Hoover's
hoovers.com
Silicon Investor
techstocks.com
Raging Bull
ragingbull.com
VI. KEY INDIVIDUALS:
Chairman and CEO: Lloyd Lyons
President, Latin American Casinos Peru: Angel Garcia
VP and CFO: Donald Schiffour
Human Resources: Jerry Lyons
VII. BUSINESS SPECIFICS (excerpts from LACI's latest SEC Form 10KSB filing):
(1) SLOT MACHINE OPERATIONS
LACI (“the Company”) concentrates its efforts on the rental of used five reel slot machines. The Company purchases these machines at a fraction of the cost of new machines which are then refurbished at facilities in Latin America for use in South and Central America. Whereas a new slot machine costs approximately $6,000, plus duty charges, the used slot machines purchased by the Company cost approximately $500 each, including freight, duty, and limited refurbishing expenses.
The Company entered the gaming and casino industry in Peru in 1994. Since January 1995, the Company has been engaged in the renting of slot machines to licensed gaming establishments in various major cities through its wholly-owned subsidiaries in South and Central America. In 1994, the Company formed its Peruvian subsidiary, in late 1995, the Company formed its Colombian subsidiary, and in 1997, the Company formed a subsidiary in Nicaragua.
In February 1997, the Company expanded into gaming route operations in Colombia and Nicaragua on a participating basis with the owners of various business establishments. Such arrangements benefit both the Company and those establishments which want slot machines, but do not wish to enter into formal long-term rental agreements. Participation also allows the Company to share in the profits of slot machine operations while minimizing the risks associated with the collection of accounts receivable pursuant to long-term leases. These participation arrangements occur primarily in Colombia; however, the majority of the Company's slot machines in Latin America are subject to leases.
As of December 31, 1998, approximately 1,000 slot machines were in operation in Peru and approximately 1,450 slot machines were in operation in Colombia. These machines are installed in, among other establishments, drug stores, pool halls, bars, restaurants and nightclubs. The entrance into gaming route operations provides the Company a broader base as an operational gaming company as well as a rental company. The Company is committed to enhancing its position for further growth in both Central and South America.
The Company competes with all the major gaming companies in Latin America, including IGT, Novomatic and Admiral. Many of the companies are more established and have greater resources.
(2) RENTAL OF SLOT MACHINES
The slot machines are rented to licensed individual owner operators under a rental contract usually for a term of one year or longer. All contracts are backed by a personal guarantee for the first four installment payments from the renter to insure against non-payment of rental fees in the contract's initial stage. The rental contracts also provide insurance to cover any loss by fire, theft, vandalism or political unrest.
(3) GOVERNMENT REGULATION
The governments of Peru, Colombia and Nicaragua have regulations governing gaming activities. Essentially, these regulations establish licensing requirements for slot machine operations. The Company takes appropriate steps to verify the licenses of its customer, particularly those involved in joint participation agreements.
The Peruvian government, in October 1996, imposed an excise tax of 200% on lessees of gaming equipment, including slot machines. The excise tax caused many of the Company's customers to return their slot machines to the Company rather than pay the higher tax.
In January 1997, the Company obtained a temporary injunction against the Peruvian government, prohibiting it from implementing the excise tax. The case is now on review before a three judge panel. The Company is optimistic about the outcome because two other gaming companies have succeeded in obtaining an injunction against the government. If the panel rules against the Company, an appeal to a higher court and eventually to the World Court could be taken.
The imposition of an excise tax in Peru could adversely effect future earnings. Accordingly, if the Company is not successful in preventing the tax, it would reevaluate its position in Peru.
(4) PREMIUM CIGAR OPERATIONS
Beginning in September, 1997, the Company directed its efforts into establishing a business of producing, distributing and selling premium cigars throughout the United States. World's Best Rated Cigar Company ("World's Best") was formed as a subsidiary.
In the summer of 1998, World's Best entered into contractual arrangements with five cigar manufacturers in Nicaragua, Honduras and the Dominican Republic. All of the manufacturers produce hand made 100% Cuban seed, long leaf filler premium cigars. The manufacturers are world renown and they manufacture cigars for over 20% of the brand name cigars currently on the market.
These agreements allow the Company to acquire cigars at a fraction over their cost and will enable them to be sold at a retail price significantly below the retail price for brand name premium cigars. The agreements require that the manufacturers use high grade long leaf tobacco, hand roll the cigars utilizing high grade filler and parchment wrapping of a grade selected by the Company and wrap the cigars individually in cellophane and box them for shipping. They also require the manufacturers to retain a specified amount of inventory at all times to satisfy the Company's cigar purchase orders. The cigars will be transported to the Company's facilities in Miami to be placed in individual containers and delivered to distributors.
The Company is in the process of establishing relationships with various distributors in the United States who supply convenience stores, restaurants, bars and supermarkets with products. The Company is attempting to place its products on display in these outlets initially on a consignment basis, at no charge to the distributor or retailer. Only when the cigars are sold and/or reordered, will payment for the cigars be required.
In this manner, the Company believes distributors and retail outlets will be more inclined to handle and display the Company's cigar products, thereby gaining immediate access to the public. Depending upon the relative success of this strategy and ultimately the acceptance of the products by the public, the Company will develop the necessary infrastructure to expand this business further.
VIII. RISKS ASSOCIATED WITH THIS COMPANY:
LACI's actual results could differ materially from projections due to factors which include, but are not limited to:
(1) the imposition of an excise tax in Peru affecting slot machine revenues;
(2) any decision by major retail chains to discontinue selling all tobacco products or to place humidors in disadvantageous locations within their stores;
(3) changes in government regulations, particularly relating to cigars or small cigars, tax rates and similar matters, or
(4) the termination of one or more of the company's agreements with the cigar manufacturers.
End of Monsterstock.com research report.
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We also encourage the reader to review the investing information available with the Securities and Exchange Commission (SEC) at sec.gov and the National Association of Securities Dealers (NASD) at nasdr.com.
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