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Non-Tech : Radica Games (RADA) -- Ignore unavailable to you. Want to Upgrade?

To: Wayne who wrote (3228)	3/3/1998 6:45:00 PM
From: Craig Brenner	Read Replies (3) \| Respond to of 7111

Radica has a very low effective tax rate (.6% - 6%). My concerns are the companies earnings will erode if (or when) this tax rate increases. The average tax rate for similar companies is around 35%; .6% is an extreme low. Anyone have any insights into this? Outside of the previously stated concerns about product mix and long term customer interest, I agree that many of the other fundamentals are quite strong. Before I buy, however, I would like to get a better understanding of the tax treatment they seem to be receiving. -Craig

To: Wayne who wrote (3228)	3/4/1998 9:46:00 AM
From: mod	Read Replies (2) \| Respond to of 7111

Wayne, You make some good points. However, it is not me you have to convince, the question is what will bring in the money managers? While I believe Bass Fishin' et al will be an ongoing product line, with only 2 years sales history, we are not beyond being labeled a "fad" yet. With 50% sales in Fishin', this is too concentrated for broad investor support, IMHO. I doubt any of the new games, with the possible exception of NASCAR, will sell anywhere near the number of units of the Fishin' line this year, even in the aggregate. Maybe next year, we will see non-Fishin' products finally start reducing the share of the Fishin' products. RADAF will have a great year in 1998. Sales will be up strongly, though the year over year comparisons won't look as good over the next few quarters, due to good quarters in the previous years. The stock price should go up nicely. However, I am not convinced RADAF will get a decent market multiple, as long as they are highly dependent on a single product line of unproven longevity. At Mattel, Barbie is 37% of sales, but Barbie is now hundreds of products, with a long, proven sales history. At Hasbro, no product line accounts for more than 5% of sales. There are 2 wild cards that could really affect the stock price this year. The first is coverage, which would definitely help the stock, but appears unlikely to happen at the moment. The second is HAS/Tiger. On the CC, much was made of the Hasbro/Radica relationship. However, it was all old news, orders in the pipeline. There were many qualifiers "of course there is no guarantee" etc. Pat Feely said that customers would not want to be "dictated to by the Hasbro Games Group", and would want Radica as a strong competitor. Well, competitors don't usually design and make products for each other. Since Hasbro has still not yet closed their Tiger deal, they probably are being cautious in what they are telling suppliers like Radica. While Radica's 1998 Hasbro production is secure, 1999 is still a question mark IMHO. Without the Hasbro business next year, Radica will not be able to fully utilize their expanded production facilities. What is the point of this long-winded message? That Fishin' sales will drive profits and the stock price up to some degree, but the p/e multiple won't go up as much as we would like. We need diversification of sales to get away from the "hit-driven" view of Radica, and I don't see that happening until at least FY1999. Dennis