CONTACT: En Pointe Technologies Inc. (ENPT)
Mark Bergman or Chris Djernaes, 800/545-3345
Hampton-Porter Investment Bankers Announces Investment Opinion: Global Equities Research Sales Notes
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Story Filed: Tuesday, July 13, 1999 5:15 AM EST
SAN DIEGO, Jul 13, 1999 (BUSINESS WIRE via COMTEX) --
Market Cap (Mil) 35.24M Price to Book 1.33
Avg. Daily Volume 46.7K Price to Sales .06
Shares Out (Mil) 5.935M ROE -12.10%
Float Shares (Mil) 3.21M LT Debt to
Capital 21%
Institutional Holdings 9.72% Proj. 3-year
growth rate 35%
No. of Institutions 11 Beta 1.63
52-week Range (NASDQ) 2 1/2-10 1/2 Monthly % Change -9.70%
FYE Sept. 30 1996 1997 1998 1999E
---- ---- ---- -----
Dec .20 .23 .28 -.01
Mar .10 .22 .04 -.76(a)
June .26 .25 .12 .05E
Sept .21 .26 .03 .11E
--- --- --- ----
Total .77 .96 .47
Rev 345.1 491.4 567.7 662.4
(a)Reflects closure of facility, related charge-off, accelerated restructuring.
Recommendation
We are recommending purchase of shares of En Pointe for the following reasons: First, the Company has turned around its core business, and we are projecting Q3/99 revenues (quarter just completed) to reach $165 million with an estimated EPS of $.05; Second, we believe the Company will shortly announce its completion of a $5 million private round of financing for its Firstsource subsidiary-reducing the current financial burden on corporate; and Third, we believe the Company will spin-off and take public this subsidiary for a total market value of $200-to-$300 million. If En Pointe retains a 50% post-IPO stake in Firstsource, it will add between $15 and $23 to its current market value.
Hampton Porter, All rights reserved.
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Company Background
En Pointe Technologies (located in El Segundo, Calif.) is one of the leading providers of information technology products, and enterprise-wide, value-added professional services. Its state-of-the-art network provides its customers with multiple product sourcing, acquisition, and delivery. Essentially, the Company is a virtual clearinghouse, focusing on the high-end Fortune 500 companies as well as state and local governments.
The company was founded in 1993, and went public in May 1996 at a price per share of $8.00. At present, the company employs about 300 people, (150 in sales and inside sales support; 150 in professional services and support and administration. The company markets nationwide through 22 sales offices.
En Pointe created and greatly expanded upon the virtual inventory model, which allows the customer to view multiple billions of dollars of inventory from major distributors within highly flexible formats. Customers use the company's sophisticated on-line system to place orders for immediate delivery. In addition, the company provides software application development, Web site design and other contractual business development services.
Last year, En Pointe completed its first acquisition of an Internet-based, purchasing-point company -- "Firstsource." Revenues in this subsidiary have grown dramatically over the past several quarters, and we are projecting approximately $50 million by the end of its fiscal year.
With top-notch management, a strong professional service organization, and future plans to become a leading E-Commerce company, En Pointe will, in our opinion, evolve into one a new breed of hybrid, all-electronic resellers of information goods.
Viewpoint
Although its shares have recently declined due to the fact that its gross margins have been declining along with relatively flat revenue growth, the Company continues to exhibit strong underlying fundamentals. Our projections for Q3/99 (just completed) show that En Pointe should experience, we believe, significant margin and revenue growth. It has built up enormous distribution power over a very short period of time (growth rates far exceed industry averages -- see "Valuation" Table), while demonstrating success at response-time fulfillment and technical support. En Pointe has developed a global platform (based upon proprietary software) that electronically links networks of the largest distributors. Given continuing industry-wide pressure on gross margins, and in an industry with low single-digit net margins, this electronic "virtual" inventory model, in our opinion, will be the surviving industry paradigm.
Reasons to Invest
There are several major reasons to invest in the company's shares in addition to projected earnings improvement coincident with substantial revenue growth (especially in higher-than traditional business areas, such as E-Commerce, agency business, high-end professional services, and Internet shopping.
-- The strong possibility that the company will continue to take
active measures to reduce its overall expenses and reshape its
core business.
-- The likelihood that within the next 90 days the company will
spin-off and take public its Firstsource subsidiary at an
estimated market value of $200 to $300 million.
-- A major expansion of marketing, sales and strengthening of
Firstsource in the booming e-commerce market space. The company
has recently hired a new CEO -- Joe Cox (from Disney) and intends
to continue to build-up its management and operating
infrastructure.
-- The fact that its shares (not including its "Internet" value) are
trading at a substantial price-to-sales discount to its
comparable industry group
In conclusion, we would expect the company to continue to improve its core business as well as more actively move into the E-Commerce arena, perhaps with additional acquisitions. With a Firstsource IPO likely to occur in the near future, we strongly believe that investors should purchase its shares at current prices. Our six-month target price is $20.
Sector Comparison
30-Jun (ttm)
(ttm) MKT 2-Jul % Off PRICE/
COMPANY SYM Sales CAP Price High SALES
EN POINTE ENPT 617.8 35.6 6 1/2 (0.38) 0.06
ALPHANET ALPH 156.2 24.2 3 7/8 (0.66) 0.16
COMPUCOM CMPC 2,310 196.5 4 5/16 (0.39) 0.09
ELCOM ELCO 747.9 130.6 4 13/16 (0.46) 0.17
MANCHESTER MANC 217.6 23.3 3 (0.68) 0.11
POMEROY PMRY 627 163.5 14.125 (0.50) 0.25
(mrq) 3 yr 3 yr
COMPANY PRICE/ (ttm) (ttm) Rev EPS Shs Out
BOOK P/E EPS Grwth Grwth (mil)
EN POINTE 1.34 nm (0.63) 41.41 21.34 5.94
ALPHANET 0.57 nm (0.15) 32.34 (46.14) 6.25
COMPUCOM 1.02 53.91 (0.15) 16.07 nm 47.64
ELCOM 1.55 nm (1.04) 34.85 nm 27.67
MANCHESTER 0.61 15.37 0.04 5.84 (1.27) 8.20
POMEROY 1.38 7.84 1.78 39.62 33.15 11.73
EN POINTE TECHNOLOGIES
FISCAL YEAR END SEPT. 30
96 YR 97 YR
Net Sales 345,093 491,358
Cost of Sales 316,165 447,276
Gross Profit 28,928 44,082
Selling 15,253 22,339
General & Administrative 5,948 10,905
Non-recurring Expenses 525
Operating Expenses 21,726 33,244
Operating Income 7,202 10,838
Interest Income (expense) (1,673) (1,238)
Other Income (expense) 116 194
Non-operating Income (1,557) (1,045)
Pretax Income 5,645 9,793
Income Taxes 2,315 3,961
Net Income 3,330 5,831
EPS ($) Primary 0.788 0.99
Avg. Shs. Outs, Primary 4,225 5,890
Growth Rates YOY YOY
Net Sales 71.9% 42.4%
Gross Profits 80.4% 52.4%
Operating Income 142.2% 50.5%
Net Income 373.7% 75.1%
EPS ($) Primary 280.1% 25.6%
Profitability Ratios
Gross Margin 8.4% 4.8% 9.0% 7.0%
Operating Margin 2.1% 39.1% 2.2% 5.7%
Pretax Margin 1.6% 172.6% 2.0% 21.8%
Net Margin 1.0% 141.2% 1.2% 23.0%
Expense Ratios
Cost of Sales 91.6% 71.1% 91.0% -0.6%
Selling 4.4% 63.9% 4.5% 2.9%
General & Administrative 1.7% 58.4% 2.2% 28.8%
Operating Expenses 6.3% 70.8% 6.8% 7.5%
Tax Rate 41.0% 0.0% 40.4% -1.4%
Estimated
98 YR 1999 FY
Net Sales 567,739 662,459
Cost of Sales 514,168 608,770
Gross Profit 53,571 53,688
Selling 34,258 36,741
General & Administrative 13,665 15,449
Non-recurring Expenses 7,578
Operating Expenses 47,923 59,768
Operating Income 5,648 6,080
Interest Income (expense) (2,165) (3,860)
Other Income (expense) 237 4,595
Non-operating Income (1,928) 735
Pretax Income 3,720 (5,345)
Income Taxes 1,488 1,679
Net Income 2,232 (3,666)
EPS ($) Primary 0.37 (0.51)
Avg. Shs. Outs, Primary 5,875 5,935
Growth Rates YOY YOY
Net Sales 15.5% 16.7%
Gross Profits 21.5% 0.2%
Operating Income -47.9% 7.6%
Net Income -61.7% -264.2%
EPS ($) Primary -62.6% -237.8%
Profitability Ratios
Gross Margin 9.4% 5.2% 8.1% -14.1%
Operating Margin 1.0% -54.9% 0.9% -7.7%
Pretax Margin 0.7% -67.1% -0.8% -223.1%
Net Margin 0.4% -66.9% -0.6% -240.8%
Expense Ratios
Cost of Sales 90.6% -0.5% 91.9% 1.5%
Selling 6.0% 32.7% 5.5% -8.1%
General & Administrative 2.4% 8.5% 2.3% -3.1%
Operating Expenses 8.4% 24.8% 9.0% 6.9%
Tax Rate 40.0% -1.1% 0.3% -99.4%
EN POINTE TECHNOLOGIES
FISCAL YEAR END SEPT. 30
1998
1Q 2Q 3Q 4Q
Net Sales 130,189 135,303 143,811 158,436
Cost of Sales 116,798 122,510 130,258 144,602
Gross Profit 13,391 12,793 13,553 13,834
Selling 8,130 8,625 8,547 8,956
General &
Administrative 2,956 3,476 3,557 3,676
Non-recurring
Expenses
Operating Expenses 11,086 12,101 12,104 12,632
Operating Income 2,305 692 1,449 1,202
Interest Income
(expense) (427) (419) (298) (1,021)
Other Income (expense) 53 81 70 33
Pretax Income 1,931 354 1,221 214
Income Taxes 792 145 501 50
Net Income 1,139 209 720 164
EPS ($) Primary 0.18 0.04 0.12 0.03
Avg. Shs. Outs,
Primary 5,843 5,862 5,898 5,922
Growth Rates
Net Sales 16.6% 16.0% 12.0% 17.6%
Gross Profits 35.9% 33.0% 15.6% 7.4%
Operating Income -1.2% -72.4% -48.2% -62.5%
Net Income -4.0% -84.2% -50.8% -91.2%
EPS ($) Primary -14.3% -82.6% -52.0% -90.0%
Profitability Ratios
Gross Margin 10.3% 9.5% 9.4% 8.7%
Operating Margin 1.8% 0.5% 1.0% 0.8%
Pretax Margin 1.5% 0.3% 0.8% 0.1%
Net Margin 0.9% 0.2% 0.5% 0.1%
Expense Ratios
Cost of Sales 89.7% 90.5% 90.6% 91.3%
Selling 6.2% 6.4% 5.9% 5.7%
General &
Administrative 2.3% 2.6% 2.5% 2.3%
Operating Expenses 8.5% 8.9% 8.4% 8.0%
Tax Rate 0.6% 0.1% 0.3% 0.0%
1999E
1Q 2Q 3QE 4QE
Net Sales 170,607 144,918 165,207 181,727
Cost of Sales 157,225 133,878 151,660 166,008
Gross Profit 13,382 11,040 13,547 15,719
Selling 8,765 9,065 8,921 9,990
General &
Administrative 3,940 4,571 3,304 3,634
Non-recurring
Expenses 7,578
Operating Expenses 12,705 21,214 12,225 13,624
Operating Income 677 (10,174) 1,322 2,095
Interest Income
(expense) (855) (1,255) (850) (900)
Other Income (expense) 31 4,464 80 20
Pretax Income (147) (6,965) 552 1,215
Income Taxes 60 2,429 (244) (566)
Net Income (87) (4,536) 308 649
EPS ($) Primary 0.09 (0.76) .05(a) 0.11
Avg. Shs. Outs,
Primary 5,924 5,935 5,935 5,935
Growth Rates
Net Sales 26.1% 11.3% 14.9% 14.7%
Gross Profits 4.6% -17.6% 0.0% 13.6%
O 514,168 608,770
Gross Profit 53,571 53,688
Selling 34,258 36,741
General &
Administrative 13,665 15,449
Non-recurring
Expenses 7,578
Operating Expenses 47,923 59,768
Operating Income 5,648 (6,080)
Interest Income
(expense) (2,165) (3,860)
Other Income (expense) 237 4,595
Pretax Income 3,720 (5,345)
Income Taxes 1,488 1,679
Net Income 2,232 (3,666)
EPS ($) Primary 0.37 (0.56)
Avg. Shs. Outs,
Primary 5,875 5,935
Growth Rates
Net Sales 15.5% 16.7%
Gross Profits 21.5% 0.2%
Operating Income -48% -208%
Net Income -62% -264%
EPS ($) Primary -63% -252%
Profitability Ratios
Gross Margin 9.4% 8.1%
Operating Margin 1.0% -0.9%
Pretax Margin 0.7% -0.8%
Net Margin 0.4% -0.6%
Expense Ratios
Cost of Sales 90.6% 91.9%
Selling 6.0% 5.5%
General &
Administrative 2.4% 2.3%
Operating Expenses 8.4% 9.0%
Tax Rate 40.0% 0.3%
(a) Does not include loss associated with ongoing operations of Purchase Point.
Buy Price: $8 3/8
July 8, 1999
Copyright (C) 1999 Business Wire. All rights reserved.
CONTACT: En Pointe Technologies Inc. (ENPT)
Mark Bergman or Chris Djernaes, 800/545-3345
WEB PAGE: businesswire.com
GEOGRAPHY: CALIFORNIA
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also see access1financial strong buy rating on en point
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