And now for a non-JD stock you might want to keep your eyes on: HRCT. Currently trades OTC:BB, but gets listed on the NASDAQ within 3-4 weeks. Brian Volmer's website Investors' Edge has profiled this company for a couple of months now, and he and his team issued a STRONG BUY rating on this company last Thursday or Friday. Outlook is short-term, perhaps after the NASDAQ listing. Brian's call on HRCT is that it is grossly undervalued at its current 1 5/16 per share. He feels the price will shoot up dramatically upon listing to reflect his valuation of at least 4 per share. If you've got the time, enclosed are two research reports he just filed Friday.
Good fortune,
Pete
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Investors Edge
Institutional Equity Research
John R. Switzer/Brian Volmer www.investorsedge.net July 7, 1998
HARTCOURT COMPANIES, INC.
Price $1 1/16 $Book Value/Share $2.18 Investment Opinion Strg Buy
Price Range (52-weeks) $5/8 - $3 3/8 LT Debt $0.65 Market Cap (millions) 20m
Shares Outstanding 17.44 million Float 14.0mm 3-yr EPS(E) Growth 100%+
Average Daily Volume 50,000 Div. Yield (P'fd) 9%
Revenue Operating P/E Quarterly Earnings Comparable Companies Statistics
Year Millions Margins EPS Ratio Q1 Q2 Q3 Q4 Symbol $$ P/E97A Grow% MktCap
12/97A $20.8 N/A ($0.04) N/A N/A N/A N/A N/A RN(RJR)$24 65X 20% 7.8Bil 12/98E $26 7.0% $0.08 13X $0.00 $0.02 $0.03 $0.03 MOT $55 32X 10% 33.0Bil
12/99E $45 9.7% $0.21 5X $0.04 $0.05 $0.06 $0.06 SEG $23 5/8 N/A 25% 5.7Bil
12/00E $62 11.8% $0.35 3X N/A N/A N/A N/A KO $86 55X 10% 54.0Bil
Price $1 1/16 $Book Value $2.18 Investment Opinion Strong Buy
Price Range (52 week) $5/8 - $3 3/8 LT Debt $0.65 Market Cap (millions) $20mm
Shares Outstanding 17.44million Float 14 million 3yr EPS grow % 100%+
Avg Daily Volume 50,000 Div. Yield(p'fd) 9%
Revenue Operating P/E Quarterly EPS Comparable Companies Statistics
Year Millions Margins EPS Ratio Q1 Q2 Q3 Q4 Symbol $$ P/E97A MktCap
12/97A $20.8 N/A ($0.04) N/A N/A N/A N/A N/A RN (RJR) $24 65X 7.8Bil
12/98E $26 7.0% $0.08 13X $0.00 $0.02 $0.03 $0.03 MOT $55 32X 33Bil
12/99E $45 9.7% $0.21 5X $0.04 $0.05 $0.06 $0.06 SEG $23 5/8 N/A 5.7Bil
12/00E $62 11.8% $0.35 3X N/A N/A N/A N/A KO $86 55X 54Bil
 The Hartcourt Companies, Inc., is a rapidly expanding Holding Company based in Los Angeles, California. The Company has completed 2 major acquisitions in the past 9-months and is in the process of closing 3 more acquisitions expected to close in Q3/98. In addition, the Company is in negotiations with another 3 acquisition targets, one which will close in Q3/98, the other two in Q4/98. All acquisitions will be merged into its current operating divisions. The Company is focused on acquiring companies that are within the scope of its core markets, High Technology Manufacturing (ECS, Inc.), Environmental Control & Filtration Systems (Pego Systems, Inc.), and Aircraft Leasing (EmKay - to be closed in Q3/98).
 Hartcourt has evolved from a struggling concern with revenues of $74,000 in 1994 to a flourishing growth company with revenues of over $20 million in 1997 (Actual results). In addition, three new acquisitions planned for the remainder of 1998 (to be completed by end of Q3 1998), will add an estimated additional $75 million in revenue. Letters of intent have been signed for the three planned acquisitions.
 Hartcourt's wholly owned subsidiaries primary clients include: AT&T (NYSE: T), Coca-Cola (NYSE: KO), Proctor & Gamble (NYSE: PG), Motorola (NYSE: MOT), Intel (NASDAQ: INTC), 3-Com (NASDAQ: COMS), General Instrument (NYSE: GIC), Raytheon (NYSE: RTN), Arco (NYSE: ARC), Mobil (NYSE: MOB), and many others.
 Pego Systems, a leading manufacturer and developer of Environmental Control & Filtration Systems was acquired by Hartcourt in October, 1997. Pego's 1997 revenue was $6.6 million with net after tax earnings of about $10%. Hartcourt acquired Pacific Pneumatic (closing Q3/98, 1997 revs of approximately $2 million) and merged it into Pego. In addition, the Company is currently in negotiations to acquire HBS Equipment. HBS 1997 revenue was approximately $20 million with $4 million in net earnings. This acquisition should add at least $4.00 in value to Hartcourt common stock when the transaction closes at the end of Q3/98.
 ECS, a leading High Technology Contract Manufacturer, was acquired in October, 1997. The Company specializes in the manufacturing and assembly of printed circuit boards, telephone wire and cabling, and coil winding and plastic injection. ECS had sales of approximately $14 million in 1997. Hartcourt is also closing 2 additional acquisitions in Q3/98, ELAN and FM Technologies (combined revenue of almost $4 million), merging them into ECS. In addition, the Company is currently in negotiations to acquire SVPC, a large high-tech manufacturer located in the Silicon Valley. SVPC 1997 revenue was over $18 million, with earnings of over $1 million. This acquisition should add another $1.50 in value to Hartcourt common stock by the end of Q3/98.
 Based upon Hartcourt's high growth profile, successful acquisition and consolidation campaign to-date, acquisitions in-hand for the remainder of 1998, high quality products, stable customer base, and the technology element of its core business units, we believe Hartcourt is more fairly valued at between 20X -to-25X 1999E earnings or between $4.20 and $5.25 (this does not include acquisitions that have not closed ie. EmKay, HBS and SVPC). Compared to other high-growth technology companies, Hartcourt is significantly undervalued. We recommend purchase of Hartcourt as a STRONG BUY. |
