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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: HeyRainier who wrote (947)	5/20/1998 12:28:00 AM
From: Scott H. Davis	Respond to of 1720

[A withdrawl of prior recommendation - TRIBY] Twice this winter I recommended Trinity Biotechnology on this thread. While the price is still above it's price when I recommended it, several changes have occured, along with confirmations of negative trends. While TRIBY will most likely succeed quite well, and long term provide investors a good return, I believe the stock will not mave much appreciation potential the rest of the year. 1. EPS is flat and will remain flat on a rounded basis for several quarters. The last three qtrs was .02, .02 and .02. While TRIBY mgmt forcasts a 30% growth rate, that translates to .0215, .0230, .0245 and .0260 (which potentially might be reported as .03 due to rounding) he next 4 qtrs. Revenues and product line is growing very well, and efforts have been made that will reduce their operational costs while providing much more capacity going forward. Problem is shares outstanding grow almost every qtr. Since they are cash flow positive, a 30% increase in shares outstanding has eaten up EPS growth. 2. We were expecting an FDA approval of a point of care, rapid HIV test. Due to lack of disclosure on both the company and TRIBY longs part, it only came out after my very direct inquiries on the thread that it is now not expected until next year. 3. Unrealistic expectations. The loan analyst covering TRIBY (DLJ) sees the potential of the company in terms of growing product line, improving margins, growing distribution channel... but apparantly was counting on the FDA and a stable # of shares, and has a 1998 estimate of .20. Problem is management is projecting .09, and based on trends, they will only make this by rounding. So we're guaranteed at least a 100% EPS downeard surprise. No bueno. EPS downside guaranteed 4. Since EPS growth and an FDA approval have not materialized, the lone remaining catalist would be a successfull and publishized outcome of a court dispute over ownership of 800,000 shares of SLF. This was recently settled at an 80% level in favor of TRIBY, so they have a lot of assets now on the book (they had been on the books at $1.00, since SLF is now at 10 7/16, that's a lot of investment assets for a company with a market cap < 50m). Only problem is they don't want to publicize it for fear of spooking the SLF market. And speaking of silence, their financial statements barely qualify as being "fully reporting" - the detail in minimilistic at best (no expense breakdown at all, you can't even compute a current ratio). There is not attempt to disclose what the shares were issued for. Some was option exersize (insiders have done very well), a little ill-advised warrent conversion, but where did all the shares go? I spoke with their USA president (TRIBY is an Irish ADR) who promissed me this info and other clarifications on their end of year statement (which I never received) I could go into a long history of management indiference to the expectations of US investors (used to US corporate disclosure norms) but suffice it to say that TRIBY is typcal of a European company in this regard. It's none of our business (even tho the vast majority of RIBY shares are owned by US investors) So again, no catalist and flat EPS combined with a guaranteed EPS downward surprise. The final stray was the retaining of OTC Communications as their PR firm. For those not familiar with OTC, they cater to development stage companies who can't afford an investor relations dept, and often need to raise funds by selling shares into vague releases. They played a role in the SEXI affair. Put it together and I believe it's flat money for months at best. Since I had made bullish recommendations on this thread, I thought I should update you. I'll check back on them, but I'm exiting. Scott