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Gold/Mining/Energy : American Eco (ECGOF, ECX on Toronto exchange) -- Ignore unavailable to you. Want to Upgrade?

To: Robert K. Schott who wrote (2394)	4/16/1998 9:52:00 PM
From: david james	Respond to of 2841

Although I sold a bit on the way down the last few weeks, I unfortunately still have most of my shares. And despite the arguments that the company has been shown to be weak in several areas, I see no reason to sell any shares in the 7s - barely above book value and at price to sales ratio of around 0.6. The big question now in my mind now is whether institutions with serious clout will take an interest in Eco. Despite all the great numbers that Eco has posted in the last 5 years (not including those last two), they've never had a big institutional following. My only guess as to why, is that Eco's numbers were never trusted - or that there was simply not enough information to judge risk etc. One analyst at Meyerson that I talked to said that they wouldn't be taken seriously until they were fully taxed - which I thought odd at the time. Now they've gone to the trouble of going to a Big 4 auditor (and paid the price) and became a full reporting U.S. company with the SEC, and paying full taxes. All of those are likely to help with U.S. institutions worried that they are Canadian. And they've hired a CFO with a bit of experience. The numbers are lower than we wanted, but they are likely to be more trusted. I am sure we could go through the comparisons of companies in the industry and compare the cash flow, earnings, debt etc - to show that Eco is undervalued based on that - but I am not in the mood. Much of the present drop in the price of the stock is because management gave us high expectations then failed to deliver. If Management had started us out saying that they would hit say 90 cents for the year, then came in with $1.08, I suspect that the stock would be much higher than today. In the same vein, if they had guided analysts towards 10 cents the first quarter with strength in later quarters, I suspect that the stock would have responded much better. These sorts of surprises can damage a stock in the short term as we have seen, and lose some loyal shareholders. Have they learned this lesson? The question I can't answer for certain is whether that 70 to 80 cents is conservative allowing them considerable freedom to beat those numbers. If they are changing their strategy from shooting high, to taking a more conservative approach it will do well in the long run. But many of us are no longer so happy with taking a long term approach with this company. From what I know of MM Industra and SRS, they should make the 70 to 80 cents easily. However, it sounds like Chempower is acting as a drain - something is hurting them more than the legal expenses of DBCO. EIFH was a considerable drain on cash flow in 97. If they can get their $17 mill back this year, that will look a hell of a lot better. I do wonder whether there are any groups out there looking at Eco's valuation thinking they can make a profit by taking it over and selling the parts. In term's of Eco's current valuation, the whole is certainly a valued a lot less than the sum of its parts. David