VENT
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*******Undervalued Dog************* Vol. 4, No. 135, July 29, 1999
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analystgroup.com Initiates Coverage of Venturian Corporation (Nasdaq :
VENT) with a "Strong Buy" Recommendation
NASDAQ: VENT
Recent Price: $7.75
52-Week Range: $5 - $11.175
Daily Volume (3-month avg): 1.77 K
Market Capitalization: $9.38 M
Shares Outstanding: 1.21 M
Active Float: 450 K
Book Value: $9.66 per share
Price/Book: 0.80
Industry Price/Book: 6.30
Revenues (last 12 months): $41.4 million
EPS (12 months): $1.62
PE: 4.78
Industry PE: 23.51
Insider Holding: 50.4 %
Institution Holding: 12.4%
Shares Short (as of May 10, 1999): 5,000
Short-term target price: $14-$16
Initial Recommendation: Strong Buy
Business and Corporation Background:
Venturian Corp. (http://www.venturian.com/) through its subsidiary Napco
Industries (http://www.napcointer.com/) sells a broad range of defense
related products to commercial customers, the US government and foreign
governments. VENT also owns 45% of Atio Corp. (http://www.atio.com/), a
provider of automation online software.
For over 50 years, VENT, through its Napco subsidiary, has been a leading
manufacturer and supplier of high quality spare parts, assemblies and
functional upgrade systems to the U.S. Department of Defense, NATO and
over 60 Defense Forces around the world. VENT is an after market
manufacturer and supplier of special replacement parts for military
vehicles and military electronics. VENT supports U.S. produced tactical
and combat vehicles in the aftermarket with spare parts, functional
upgrades and major maintenance packages. VENT designs, engineers and
produces repower packages which upgrade, enhance the performance and
extend the useful life of the aforementioned military vehicles. In the
military electronics business, VENT specializes in the manufacture and
supply of tactical military VHF radios and intercommunication systems.
Through Napco, VENT also has an 80% owned subsidiary, International
Precision Machining, Inc. which manufactures precision machined components
to demanding customer specifications.
ATIO Corporation was founded in 1986 providing information technology and
communications technology solutions to public and corporate customers.
Today ATIO has a strong global presence and is a recognized leader in
customer interaction solutions with offices in
the USA, Europe, Asia Pacific and Africa. ATIO has numerous alliances
with industry leading suppliers in telecommunications, computers,
networking, software and voice processing. These strategic relationships
allow ATIO to deliver complete integrated solutions and enable its
customers to fully experience the capabilities and benefits of ATIO's
solutions.
Summary
Recently, the Company announced a major strategic initiative to become a
player in what many industry experts see as the near and intermediate term
consolidation of the small company supplier base of the global defense
industry. In order to facilitate its role in the consolidation, the
Company has retained industry experts to advise it in the initiative and
has completed a financing designed to assist it implement strategies
arising out of the initiative.
The strategic initiative to become a player in a consolidating industry
represents a refocusing for VENT, but not a departure from its basic
business. In effect, by refocusing its energies and resources in
opportunities afforded by consolidation between and among small companies
in the supplier and services base of the global defense industry, VENT is
"getting back to basics" and leveraging the strengths of Napco
International Inc., its wholly owned subsidiary.
Substantial increase of government spending levels in defense in the
following years will drive VENT's revenues and earnings up significantly.
A growth market in provision of services is being created by changes in
overall defense strategy that call for the downsizing of government
departments and the outsourcing of many tasks formerly assigned to
government employees. This alone will create more opportunities for VENT
to increase its revenues and earnings.
The stock has been traded on the sidelines since it peaked little over $9
last January. After the stock was basing at $5.50 in the past month or
two, the stock is very bullish now. Many technical indicators are showing
bullish, including 7 Day Directional Indicators, 10 - 8 Moving Average
Hilo Channel, Price vs. 20 Day Moving Average, 20 Day Bollinger Bands,
Medium Term Indicators, 40 Day Commodity Channel Index , Price vs. 50 Day
Moving Average, and 50 Day Parabolic Time/Price.
The stock has been underfollowed in the investment community in the past
year. That won't last long. When ATIO goes IPO, investors will
definitely notice that ATIO is owned by VENT (45%). This ownership alone
will add at least $10-$20 face value to the stock. Also, VENT will
report its earnings around August 6 for its second quarter. We believe it
will beat Wall Street's expectation easily. We see substantial
appreciation potential both from earnings growth and increased
recognition. This could be multiplied if investors come to realize that
the company's Internet subsidiary is going IPO. Hence, the stock is rated
strong buy with a short target price at $14 to $16.
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