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Gold/Mining/Energy : Aastra Technologies - telephony, e-cash, mini-ATM -- Ignore unavailable to you. Want to Upgrade?

To: Jean-Robert Grenier who wrote (131)	7/16/1999 1:52:00 PM
From: Marc	Read Replies (2) \| Respond to of 233

FWIW- Some coverage by Sprott and Canaccord ======================================================== Toronto, July 15 (Bloomberg Data) -- Aastra Technologies Ltd. (AAH CN) was reiterated ''strong buy'' by analyst Brandon Osten at Sprott Securities. The 12-month target price is C$ 9.30 per share. ======================================================= Canaccord Capital Daily Letter Aastra Technologies Limited (AAH : TSE : $5.65) Tony Yue, Ph.D. (604) 643-0195 Recommendation: BUY 12-month target price: $7.00 52-week price range: $5.75-0.95 Shares O/S: basic 9.4M fully diluted 9.8M Major shareholder: Shen family, 45% Weekly trading volume: 100,000 Market capitalization: $53.1M Q2/f99-Another Very Strong Quarter For Q2/99, Aastra again reported very strong quarterly results. While sales were up 160.0% to $21.24M from $8.17M, the gross margin increased 165.1% to $3.89M from $1.47M, EBITDA operating income surged 440.4% to $1.92M from $0.36M, and net income jumped 457.6% to $1.14M from $0.21M. EPS (basic) also gained 300.0% to $0.12 from $0.03 a year ago. The Q2/f99 results represent the ninth consecutive quarter of growth in sales and the fifth straight quarter for an increase in earnings. As in the case of Q1/f99, the reported results for Q2/f99 are also ahead of our expectations. For the first six months of f1999, sales were up 197.6% to $39.34M from $13.22M, the gross margin increased 212.8% to $7.11M from $2.27M, EBITDA operating income surged 862.7% to $3.53M from $0.37M, and net income gained 151.2% to $2.05M from $0.08M. EPS (basic) increased 22-fold to $0.22 from $0.01. US Customers Continue to Drive Growth Continued strong sales to US telephone companies (telcos) were the key driver for growth, although US retail sales also posted impressive gains. Sales to telcos were up 4.8-fold in Q1 and up 3.0-fold in Q2, and accounted for about 72% of the total sales for the first six months of f1999. Aastra achieved higher penetration with the expanded operations of Bell Atlantic, and sales to TELMEX of Mexico also picked up in Q2 and reached the $2M level. Meanwhile, retail sales doubled in both Q1 and Q2 and accounted for 28% of the first six months total sales. Strong sales of headset telephones, colour, and integrated telephones at the retail level continued. Rising Profit Margins A higher proportion of telco sales also has a positive impact on profit margins, as Aastra markets directly to telcos. In contrast, retail sales have lower margins and US retail sales are carried through TT Systems, which also assumes credit, inventory, and warranty risks. The gross margin was 18.3% in Q2/f99 and 18.0% in Q1/f99, compared with 16.0% in Q1/f98, 18.0% in Q2/f98, 16.9% in Q3/f98, and 15.9% in Q4/f98. The net margin was 5.4% in Q1/f99 and 5.0% in Q2/f99, compared with (2.5)% in Q1/f98, 2.5% in Q2/f98, 5.7% in Q3/f98, and 4.9% in Q4/f98. Note that Aastra became fully taxable in Q4/f98. Profit margins in Q4 were also affected by seasonally strong retail sales and seasonally soft telco sales. Telco sales are traditionally stronger in the first half, while retail sales are stronger in the second half. Outlook: Growth Momentum Will Remain Strong Management has indicated that Aastra should achieve quarter-over-quarter improvements on a sequential basis for the balance of f1999 and the growth momentum should remain strong in f2000. We have revised our forecast sales to $84.0M from $72.5M and EPS to 0.44 from $0.36 for f1999, and our forecast sales to $115.0M from 104.0M and EPS to $0.70 from $0.60 for f2000. While sales to both US telco and retail chain customers will remain strong, sales to TELMEX of Mexico will also increase at a faster pace in the second half of f1999. We believe that Aastra can continue to grow 15-20% annually beyond f2000, and on a much-expanded sales base of $115M. Investment Opinion: Reiterate Our BUY Recommendation We have revised our 12-month target price to $7.00 from $6.50 and we reiterate our BUY recommendation on Aastra shares for growth-oriented investors. Our target price is conservative and only represents 10.0X forecast earnings and 5.9X forecast EBITDA for f2000. We continue to believe that Aastra shares have very attractive risk/reward at the current level. In addition, the Company has a clean balance sheet with $7.95M of working capital (1.88 current ratio), $1.00M of cash, no debt, and $9.34M of shareholders equity or $1.00/share.