FBCE is Microcap Investor's pick
MICROCAP INVESTOR 2000
February 14, 2000
Happy valentine?s day and welcome to the first issue of Microcap investor 2000! With the incredible rally over the last few months in the technology sector, one might be tempted to think that there are no more undervalued stocks waiting to explode. Seemingly every broadband/wireless, B2B, and fiber-optic company has already seen terrific gains, making investment at this point not only risky, but also certain not to return an additional 1,000% that several companies in these sectors have already run. So, if you didn?t buy BRCM, CSCO, JNPR, CMRC, JDSU, ARBA and others at their lows, you missed out, right? WRONG. In fact, in the year 2000 opportunity abounds. Whereas many companies have already posted fantastic gains through 1999 and the first part of 2000, their return underscores the market?s willingness to handsomely reward those companies who show the most promise in being able to take advantage of the burgeoning demand for internet speed, information and e-commerce. The key, of course, is to find THE NEXT BRCM, CSCO, JNPR, etc. Having someone recommend ARBA to you now is a waste of time, everyone recognizes them as a highflier. As opportunity for massive short term gain in the high fliers disappears, you can bet that hungry investors will be looking for the next tier of winners, which will lead them to smaller companies who are on the cusp of explosive growth. In each issue, we will focus on one or two best bets for the year 2000. In fact, each stock we will focus on has several things in common. They are each involved in some aspect of the internet revolution, have surging revenues, quality management, and most important, are only now beginning to be noticed by the market and are ripe for explosive growth.
One major theme developing in the market, coined the ?picks and shovels? theory by investing professionals Bryan Perry and Mark Burkhardt is that companies who are positioned to benefit regardless of who wins or loses will be the biggest winners. During the gold rush in California, most gold miners went home empty, and a few struck it big. However, those who sold picks and shovels to the hopeful miners won every time. In the context of the computer age, one can clearly see the value of this analogy. It didn?t matter, for instance, which among compaq, dell, micron, gateway, etc was successful if you were Intel. No matter who won and who lost, Intel stood to benefit because each of these ?miners? used their processors. As the insatiable demand for broadband and wireless access continues to grow, MANY companies will come to rely on fiberoptic networks to meet the demand for increased transmission of information and speed. No matter who wins and who loses, companies who provide the modern day miners with the materials to construct these massive fiberoptic highways are sure to be winners.
Our first company: FIBERCORE, INC. (symbol: FBCE)
Fibercore:
Based in Charlton, Masachusetts, FiberCore, Inc. is a fully reporting company, and has retained Deloitte & Touche as auditors. They are engaged in the business of developing, manufacturing, and marketing single-mode and multi-mode optical fiber and optical fiber preforms for the telecommunications and data communications industry. Preforms are the basic component from which optical fiber is drawn and subsequently cabled. The Company has developed a patented preform production process. Through its wholly owned subsidiary, Automated Light Technologies, Inc. (ALT), the Company manufactures patented cable monitoring systems, a patented long range fault locator, cable protection devices, and electro-optical talk sets.
Thus, Fibercore provides the essential raw materials needed to help construct the information networks responsible for handling the massive demand for the internet and wireless communications. In fact, earlier this year, Dr. Mohd Aslami, President and Chief Executive Officer of Fibercore, repeated this message, stating ?The fiber optics industry is poised for tremendous growth. As the Internet and other communication mediums expand, the need for information grows and, correspondingly, traffic increases. Furthermore, the growth in wireless communication is also accelerating the demand for optical fiber. Just think of cellular phones as cars and optical fiber as highways. The more cars you have, the more highways you need. In short, the industry is building the world's communication highways with fiber, the benefits of which will continue to add to the strong 1999 performance reported by the high technology companies in the communications industry, especially those companies in the fiber optics sector.?
Increasing Revenue:
For the past several years, fibercore has posted a clear increasing trend in sales in the United States:
While net losses continue to decrease:
In fact, 1999 has been a break out year in terms of revenue growth:
Sales for the three and nine month periods ended September 30, 1999 were $2,824,000 and $7,850,000, respectively, compared to sales of $2,301,000 and $5,743,000 for the same periods in 1998. This is an increase of $523,000 or 23% for the three months and $2,107,000 or 37% for the nine months ended September 30, 1999 compared to the same periods in 1998. This increase was due to increases in volume of approximately 67% shipped to new and continuing customers. With demand seemingly growing everyday, this trend of increasing sales is very likely to improve. Don?t be surprised to see revenue growth of 25-30% for the 4th quarter 1999 compared to 4th quarter 1998 when financials are released in March, 2000.
Capturing world markets:
Fibercore has taken steps to meet the global demand for information superhighways. The Company has a preform and fiber plant in Jena, Germany to serve the European Market, and provide needed capacity for the Company's present and anticipated global customers. In the longer term the Company is also planning to build additional manufacturing plants in the USA and the Pacific Rim. This is necessary in order to meet the future global market demands: created by the ever increasing need for additional bandwidth required to support wide and local area networks, and generated from strategic alliances and joint venture partners. In addition, the Company intends to manufacture both single-mode and multi-mode optical fibers for independent cablers. The Company?s product/market focus is Europe and the US for multi-mode fiber and overseas markets, including countries from the former Eastern European Block, the Middle East, Asia, and the Pacific Rim for single-mode preform and fibers. Their efforts are starting to pay huge dividends.
New contracts:
In 1999, Fibercore landed six major contracts that have contributed to record growth around the globe. The most recent of these, announced Feb 1 2000 is a continuation of a South American contract, valued at 1.2 million dollars. In addition, Fibercore has contracts in North America, Europe and South Africa.
The market is beginning to take notice:
The chart below illustrates the fact that until December, 1999, Fibercore?s stock price languished. In fact, the 52 week low is .16. The stock closed on February 11, 2000 at 3 13/16, with a 52 week high of 4.28 set on January 27, 2000:
Given that the stock has enjoyed a huge percentage increase over the last 2 months, one might be concerned about buying in now. You shouldn?t be. In fact, we see much bigger things ahead for the rest of 2000.
Still markedly undervalued:
As an illustration of how undervalued Fibercore is, we have chosen to compare them with a competitor within the fiberoptic industry, Optical cable (OCCF). Optical cable, much like Fibercore, manufactures and markets fiber optic cables for high bandwidth transmission of data, video and audio communications. This stock has also enjoyed a nice run-up recently, recently hitting an all time high of 48 dollars a share, giving Optical cable a market capitalization of 1.8 billion, almost 13 times the 142 million market cap of Fibercore. For Fibercore to match this market cap, its shares would have to trade at 48.75! Are we suggesting that Fibercore deserves to share a market cap with Optical Cable? Of course not. Optical cable has roughly 4 times more sales than Fibercore and has been profitable this year. However, given increasing sales, and stabilization of the price for fiberoptic components, profitability is within sight. Given the market?s willingness to reward those companies involved in making the new internet a reality, it is reasonable to award fibercore a market cap of roughly 30% that of optical cable, thus justifying a stock price of roughly 14.5 dollars/share, or 400% above the closing price of 3 13/16 on Friday, February 11, 2000.
Nasdaq Listing:
The company is eager to be listed on the Nasdaq exchange. Companies seeking admittance to The Nasdaq Small Cap Market must first satisfy certain listing requirements. FiberCore currently meets all the criteria, except for a Minimum Bid Price of $4. As the market continues to reward Fibercore, this last milestone will be achieved, and the company can apply for listing.
Final Analysis:
Fibercore is a growing company involved in the right industry at the right time. We feel very comfortable that they will continue to improve sales and march toward a record year 2000 as the demand for their products continues to grow at a remarkable pace. We repeat our target of 14.50/share within the next six months.
Company Information:
Website:
fibercoreusa.com
253 Worcester Road
P.O. Box 180
Charlton, MA 01507
Phone: (508) 248-3900
Fax: (508) 248-3906
Company officers:
Mohd A. Aslami, Chmn./Pres./CEO
Michael J. Beecher, CFO/Treas.
Charles De Luca, Exec. VP/Secy.
Shares Outstanding: 36 million
Float: 20 million (roughly)
Symbol: FBCE
Price: 3 13/16 (feb 11, 2000)
Target: 14 «
About Microcap Opportunity 2000:
Our goal is to seek out those securities on Nasdaq, Nasdaq small cap, and otc:bb that show incredible potential to take advantage of the internet revolution. The areas we concentrate in are infrastructure (broadband, wireless, etc) and ecommerce. We only feature securities that we feel have tremendous short and long term potential. We have received no compensation of any kind from any of the companies featured in the news letters, but often do hold positions in these securities. We reserve the right to buy and sell these securites as we see fit and as market conditions change. We urge all readers to do their own due dilligence before considering purchase of any security mentioned herein. |
