Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : RSL Communications Ltd (RSLCF) -- Ignore unavailable to you. Want to Upgrade?

To: Tradegod who wrote (43)	7/15/1999 9:50:00 PM
From: Bill Lotozo	Read Replies (3) \| Respond to of 178

I bought in at 18 and I think that may have been the bottom. Its been moving up slow but sure from 18 and volume is picking up. Also, MSDW and several other major brokers rate it a buy. The emerging long distance carriers seem to have bottomed out as a group. Look at PGEX, STRX, PRTL, STGC all seem to have bottomed with some already moving up nicely in the last month. I wonder how long before these companies start to take part in the telecom mergers. Bill

To: Tradegod who wrote (43)	8/3/1999 3:40:00 PM
From: Maverick	Respond to of 178

Hilights of ML meeting w/ RSLC CFO 12 Month Price Objective: $45 Investment Highlights: · Reiterate strong buy opinion on RSL with a 12-18 month price obj. of $45 and continue to believe RSL is one of the most attractive small cap plays in the telecom sector. · On June 29, we met with RSL's CFO Don Shassian (formerly of Southern New England Telephone) to discuss 2Q and long-term earnings and recent weakness in the stock. We feel comfortable that our long-term targets for RSL are achievable, although we are lowering our North American revenue targets and increasing our European targets. · Highlight RSL as an attractive consolidation play, currently trading at only 1.1x 1999E revenues — a fraction of the estimated 3.0x and 4.3x 99E revs paid for some of its peers. Fundamental Highlights: · Maintain our 2Q99 EPS estimate of d$1.26, lowering our FY99 estimate by $0.02 to d$4.74 but no change to our 2000 estimate of d$3.35. · Lowering 2Q acquisition-stimulated revenue growth rate to 122% from 193% due to the continued move away from lower margin pre-paid & wholesale businesses in N. America. Also lowering 99 rev growth to 74% from 78%, no change to 00 growth of 35%. Highlights of our meeting with the CFO: 1. We expect company management to enter a period of restructuring, during which management plans to focus on integrating the several acquisitions it has made over the past 2 years to help improve efficiency through reduced back office costs and coordinated purchasing, least cost routing and network planning functions. This likely means taking a centralized management approach, both in Europe and the US, but we expect the company will continue to rely on local sales and distribution channels. While no specifics were highlighted, we expect this could mean some one-time (non-cash) charges in 2Q or 3Q to implement these changes. 2. RSL plans to continue to de-emphasize the low margin, highly volatile US-outbound international wholesale and pre-paid card business and focus on the much high margin small-to-medium sized business segment. Of the $148M of North American revenues reported in 1Q (43.5% of total), about $38M (25%) was wholesale and $49M (33%) was prepaid, $52M (35%) was business retail and $9M (6%) was residential. The wholesale and pre-paid card revenues have gross margins in the high single digits at best vs. business retail revenues with 30-40% gross margins. The majority of RSL retail operations came from the Westinghouse Communications acquisition it completed in 1998. As part of that acquisition, RSL retained CBS as a major data & voice customer (a contract which was recently renewed to 2002). Management plans to refocus its North American efforts on accelerating the growth in this segment and plans to do some targeted acquisition to complement this business. 3. Lastly, on the issue of insider selling — the company stressed that the sales that occurred May were made for personal asset planning reasons. The company maintains that no additional sales have occurred and the majority of the shares held by management are restricted. Investment Conclusion: We reiterate our intermediate and long term Buy opinion on RSL shares. Our intermediate-term price objective is $45 (125% upside). RSL is currently trading at only 1.1x 1999E revenues and only 0.8x 2000 revenues, a fraction of the estimated 3x 1999E revenues paid by GTS for Esprit (European retail), 4.3x GTS agreed to pay for Omnicom (European retail), and 1.9x paid by Qwest for LCI's US retail revenue stream. At our price objective of $45, RSL would trade at a conservative 2.0x 1999 estimated revenues and 1.5x 2000 revenues. We continue to believe that consolidation is likely in the alternative multinational carrier market — and we view RSL as one of the several attractive consolidation candidates given its broad-reaching customer base of over 900,000 worldwide, strong retail distribution alliances (such as Metro) and global network assets. In addition, the company has indicated a desire to “IPO” for its Delta 3 (internet telephony) subsidiary.