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Strategies & Market Trends : Lizard King's Trading Swamp -- Ignore unavailable to you. Want to Upgrade?

To: Paul A who wrote (7067)	8/4/1999 7:42:00 PM
From: LzzrdKing	Read Replies (1) \| Respond to of 7396

I wouldn't buy BRAD at these levels, prefer to see a fade there. Risk/Reward isn't great for it with the weakness of the overall market and retail in general.

To: Paul A who wrote (7067)	8/4/1999 10:30:00 PM
From: LzzrdKing	Read Replies (1) \| Respond to of 7396

I don't like KELL. I think it is going to take a while to turn, they have basically changed their biz model. I think there are better things out there when the market turns. I do like SFP, this came out late. I think SFP can be explosive when the market improves. 02:26pm EDT 4-Aug-99 DLJ Securities (Peter N. Schaeffer) SFP SALTON, INC.: Offer Delayed by Share Price; Buy Reiterated; Est. Raised DLJ **** DONALDSON, LUFKIN & JENRETTE **** DLJ August 4, 1999 Peter N. Schaeffer US (212) 892-4864 Jasmine Koh US (212) 892-8948 SALTON, INC. (SFP: $22.69) Offer Delayed by Share Price Buy Reiterated / Est. Raised Range: Earnings Per Share 1999 vs 1998 % Chg 34-15 Old New P/E Ratios F1Q $0.68A vs 0.20 +240% (FY:Jun.) 2000E $2.71 $2.84 7.7 F2Q 0.83A vs 0.27 +207% 1999E 2.17 2.17 10.1 F3Q 0.36A vs 0.11 +227% 1998 0.75 29.3 F4Q 0.29 vs 0.17 +65% Yield: % Market Cap.: $225 5-Yr. Growth Rate: 25% Dividend: $0 Avg. Trading Vol.(000): 96.6 Book Value: $4.47 RATING: Buy Change: None 12-Mo. Target: $40 Management Expects to Exceed Q4 Expectations Estimates Raised for FY2000 VIEWPOINT Salton announced today its decision to delay their planned follow-on offering as a result of poor market conditions. At filing, the stock was trading at $33 adjusted for the recent 3 for 2-share split. We are perplexed by the recent pullback in SFP's stock price, as the company is poised to report exceptionally strong Q4 results. We believe a sharp uptick in the short interest position in the stock (see attached chart) as well as unfavorable market conditions added to the price pressure. On a fundamentals basis, Salton's business has never looked stronger, with sales of core products trending well coupled with the highly-anticipated launch of the Rejuvenique facial toning system, as well as several new George Foreman product extensions including cookware, an electric rotisserie and in the spring, a barbecue line. Salton has been running Rejuvenique infomercials since March and consumer backlog orders on the product to date have been exceptional. We expect Rejuvenique to produce $25 million in sales in FY00 and $50 million in FY01. It should be noted that Rejuvenique infomercials have actually tested better than preliminary George Forman Grill infomercials, reinforcing the company's enthusiasm for the product. It is our impression that the new Forman products as well as the Rejuvenique product line, are sold out for the Christmas season. In addition, we anticipate significant improvement in the recently acquired Toastmaster division, both in sales and gross margins. Today, management announced that they expect their Q4 earnings to exceed analyst's estimates. Our estimate, for the quarter is $0.29 against $0.17 in the prior year. Based on management's confidence and our belief that sales will exceed expectations for FY99 and FY00, we are raising our estimates for FY00. We are raising our FY00 estimate to $2.84 from $2.71 based entirely on higher sales expectations. (Note: our estimates for Salton had not been revised to reflect the recent stock split). On a calendar basis, our 1999 estimate goes to $2.53 from $2.44. We are also projecting a fiscal 2001 estimate of $3.38, which represents a 19% EPS increase on a very conservative 14 percent sales increase. With Salton's recent price correction, Salton is now the most undervalued stock in our universe, trading at a 54% discount on a P/E basis and a 61% discount on a cash flow basis to our DLJ Core Branded Group Index (see below table). The downward momentum in the stock has caused investors to overlook the company's bright earnings outlook and sound fundamentals. We therefore expect a positive upward move in the stock once the company announces its fourth quarter earnings results. In addition, we believe that short sellers will be forced to cover their short positions once a reversal is seen in the stock's price momentum, which should propel the stock further up. Taking into account the company's high leverage and limited float, we apply a 20% discount to our Core Branded Group's 2000 P/E of 15.6x, arriving at our current price target of $40, or 12.5x our CY2000 estimate of $3.20. We strongly reiterate our Buy rating.