Cory Johnson.... Two faces, no waiting.
The SAME Cory Johnson that wrote this for TheStreet.Com in August, 1997 ???......
$10 Store: Why TPRO May Go, Go, Go
By Cory Johnson
Staff Reporter
Think high tech.
Seriously: think high tech.
Now what did you think of?
You probably didn't consider that sweaty, grimy automated wonder: the
factory floor. And when you think of the Year 2000 crisis, you probably don't imagine its direct effect on the United Auto Workers or Coca-Cola bottlers.
But for the last year or so, Topro (TPRO:Nasdaq) has been thinking plenty about Y2K's factory floor implications. And, of late, so have the traders. They've driven once-lowly TPRO stock up 215% in the last six weeks. This week alone, driven by rabid postings on the Motley Fool and Silicon Investor (by notorious posters such as TokyoMex), the stock is up 18.2%. Best yet, some traders and analysts think the stock, which closed Friday at 6 11/16, is still quite cheap.
Topro has been in the business of "control system integration." That means, basically, that the company goes into the factories, takes an inventory and then designs and installs systems to coordinate disparate pieces of hardware and software. When Topro started to test for Year 2000 problems (the widespread problem of computers and software that will crash after Dec. 31, 1999) they found tremendous cracks in the systems and no one else around to fix them.
"This is very different from most Year 2000 problems," says Topro President John Jenkins. "If you go to a financial institution or an insurance company, you've got one or two types of computer mainframes and millions of lines of code -- the problem has a narrow scope and it's very deep. But on the factory floor, you can have dozens of computers and systems and software, but there's not much code. So there you have a problem that's very broad and shallow. It's truly different and needs a different approach."
So Topro has been offering that approach. From their established base on the factory floors of Coca-Cola, Amoco (AN:NYSE), Boeing (BA:NYSE) and Georgia-Pacific (GP:NYSE), Topro is now selling Y2K assessments and fixes. "The assessment is going to be a huge deal for this stock," says Skip Davidson, a money manager with First New York Securities. "They go into a company and say, 'For $10,000, we'll find all your factory floor Year 2000 problems.' Now what company isn't going to spend that to stay in business? They have approximately 5,000 customers: Right there is $50 million."
Of course, once Topro gets a foot in the door to do an assessment finding problems can lead to a lot more business. "They did an assessment for Sun Oil that involved three plants," says Davidson. "When they found a problem in the third plant they checked, Sun asked them to just go ahead and replace the entire $300,000 batch control system. So three $10,000 assessments grew into $330,000 in revenue right fast."
Year 2000 isn't all their business, of course. Last year Karl Drobnic, who writes the investment newsletter Venture Returns, picked TPRO as a turnaround story because they'd put behind an ugly past as a control systems integrator for municipal projects and wastewater treatment plants. "I liked these guys before they were in the Year 2000 space," says Drobnic. "Systems integration is a mom-and-pop business and these guys are stepping in here and, through acquisitions and a national sales approach, taking a big piece of this business. And the new management under Jenkins is doing a
terrific job."
Davidson is also enamored with Jenkins. "The guy is aces," says the money manager. "I like the management: There's no bullshit with them. They know they stumbled on to this and they'll say it. But they're also doing everything they can to capitalize on this to make some long-term gains from this problem."
In the quarter ended March 31, Topro reported revenue of $11.2 million, up from $5.9 million one year earlier. Net income rose to $500,000, or 5 cents per share, from a loss of $1.1 million, or 26 cents a share, a year ago.
But past earnings aren't much guidance when looking at a company that has just discovered a pot of gold. "We're still doing modeling of the impact of Year 2000," says Jenkins. "In the next two to three weeks we'll be able to talk to analysts and give them some guidance on the Year 2000's impact on earnings going forward."
Davidson, for one, isn't waiting for earnings (the June 30 quarter will be reported in the next four weeks) -- he's buying now. "I started buying it at $4, I paid $6.50 for it today and I'm still buying it. I was the bid all day long on the stock, and I've already got about half a million shares."
Those calculations figure that Topro -- in the next year -- will earn $80 million in its basic business and Year 2000. At 16 times revenue -- comparable to other Y2K companies like Data Dimensions (DDIM:Nasdaq) at 15 times revenue and Zitel (ZITL:Nasdaq) at 19 times revenue -- that would give them a $400 million market cap. Topro will probably continue its Wayne Huizenga-ish approach of acquiring new companies with stock options, so in a year, Davidson figures Topro will have a 21.5 million-share float. And that would give it an $18 stock.
"Maybe I'm nuts," says Davidson. "But I'm still buying. Who doesn't need a home run?"
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Sometime you can't tell the players without a scorecard. On the web, we keep score forever.
Zebra
(who was not surprised by the KO announcement, because he learned to listen to people like Karl and Skipard) |
