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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Rande Is who wrote (19010)	1/19/2000 10:32:00 PM
From: M. Walton	Respond to of 57584

Rande... I've noticed a number of people asking about NATS recently and wanted to re-post your views on NATS as I think this will refresh the memories of some people as to the reason's we originally considered NATS. I apologize that I was unable to find the exact date of the post, but this text was copied from another link. I would be curious to know whether you would modify this text or not at this date? Do you still a bright future for our NATS? ANALYSIS: [Nasdaq: NATS] Olympic Cascade/National Securities The corporate website: nationalsecurities.com The online brokerage website: nscdirect.com I believe Olympic Cascade to be greatly undervalued at current levels. The online brokerage website is nearing completion and is expected to be announced soon. The quarterly earnings for the 4th quarter are also due immediately. So there is much in the very near future that could change the landscape on this issue. I am placing a higher valuation on NATS, based on its move into the online brokerage business. This has proven to be an effective means at increasing earnings in the traditional brokerages. For comparison purposes, I have selected Siebert Financial and AB Watley, two similarly sized companies to Olympic Cascade, which does business primarily under the name National Securities [NATS]. Without getting too deep into detailed financial analysis of online brokerage firms, I am drawing a rather shallow conclusion. It is based on current revenues and the assumption that online brokerages have [or will soon have] an increased bottom line over traditional securities brokerages. The primary comparison for which to make this valuation is very simple: Annual revenues, net income and current market capitalization. Siebert Financial brings in about $34.1 million per year in revs and shows a recent weighted net income of about $4 mil/yr. SIEB share price is $16.625, with a market capitalization of $380,400,000! A.B. Watley Group [ABWG] grosses about $19.2 million per year in revs, with a weighted net income of $232 thousand per year. . .and has a market cap of $99,200,000, when stock price is at $12.50/shr. National Securities [Olympic Cascade] takes in $41 million per year in revs [weighted on 9 months revenues ending 6/25/99] . . . MORE than Siebert and twice that of A.B. Watley Group [and this income was without the online brokerage]. Now NATS showed a loss of about 21 thousand dollars in net income over the past year. . . At a share price of $5.75, NATS has a market cap of just $9,710,000. . .one-tenth that of A.B. Watley. Siebert's market cap is 39 times that of National Securities. So for National Securities to reach a similar valuation of ABWG, the NATS share price would need to rise to $58.70 per share. And to reach a similar valuation to Siebert Financial, NATS share price would need to reach a whopping $225.00. When National Securities' new online brokerage goes live, it puts them into the same sector division as ABWG, Siebert, JBOxford or Ameritrade. It is my opinion that they will gradually deserve a similar valuation. A market capitalization of $194,200,000 in one year is roughly twice that of the current market cap of AB Watley, yet nearly half that of SIEB currently. Seeing how NATS shows revenues higher than both companies, this seems in line with sector valuations after the company has shown it can both manage its online brokerage and begin to show profits. This valuation represents a stock price of $115.00 per share. This is 20 times its current price of $5.75. Taking into consideration that the entire online brokerage sector is considered by many to be undervalued at current levels, this entire scale of valuation could soon slide northward. However, the valuations I am placing on NATS represent current sector valuation. So at this point, my target prices for NATS are as follows: Within 12 months, the target is $100.00 per share. Within 3 months the target is $55.00 per share. The stock should be selling at $27 per share right now, giving NATS a market cap of just $45.63 million, and a price to sales ratio of about 0.65 as we await the opening of their online brokerage. See Summary below NOTE: Whatever National Securities reports in their quarterly filing, which is due any day, could change these valuations and targets one way or another. However, it is doubtful that poor reported earnings could substantially devalue the company, due to their coming online brokerage, which has proven to increase the efficiency of securities brokers sector wide, which in turn increases their bottom line. SUMMARY So it is my opinion that National Securities / Olympic Cascade [NATS] is greatly undervalued at current levels and carries minimal downside risk in the intermediate to long-term horizon. It should be considered an "aggressive buy" with a near-term target of $27, based on valuation alone. Upon successful launch and satisfactory servicing of the new online brokerage website, the intermediate target price is $55.00 per share. And upon evidence of 3 quarters of steadily increasing revenues, carrying through to at least 2 quarters of positive net income, my one-year target price on NATS is $100.00 per share, which I feel would bring it more in line with companies of similar size and business model within the sector. . .while projecting sector valuations will remain steady or grow slightly. Rande Is NOTE: I am not a licensed securities broker, but rather an independent investor/trader. This analysis is to be considered a guide for speculative investors only. The opinions expressed are my own. Everyone is urged to do their own due diligence prior to placing any funds into a speculative stock. U DO DD!. . . .Don't be a blind sheep!