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Microcap & Penny Stocks : Diplomat Direct (DIPL) - Internet - $100 mil/yr proj. sale -- Ignore unavailable to you. Want to Upgrade?

To: JCinTC who wrote (51)	1/13/1999 2:30:00 PM
From: Andrew H	Read Replies (1) \| Respond to of 183

DIPL website up and running--here is a small part of the Buy rec which can be found at: diplomatdirect.com It is quite extensive and anyone interested in the company should check it out. Remember this report was written before DIPL became an Internet retailer, so it does not take into account ANY of the internet prospects. My guess is that when the website is up, the stock will follow--looks like a steal to me. Diplomat Direct Marketing Corporation (DIPL - NASDAQ) Recent Price $1 1/8 Price Range $ 1/2 - 4 3/8 EPS 1997 $0.16 1998E $0.14* 1999E $0.21* Shares Outstanding 11.05 million** ___________________________________ Fully diluted, from continuing operations On a fully diluted basis, 15.69 million shares are outstanding. Market Capitalization $12.5 million P/E Multiple Current 6.94 1998E 8.04 1999E 5.36* Net Sales 1997 $35.15 million 1998E $75.70 million 1999E $89.64 million ____________________________________ *Based upon earnings from continuing operations on a fully diluted basis Rating: BUY INTRODUCTION Diplomat Direct Marketing Corporation (NASDAQ - DIPL) is a niche retailer through mail order catalogs of a broad range of value priced, designer and private label apparel and accessories for women ages 35 and above. Its catalog offerings are made under the Brownstone Studio and Lew Magram names. The company also manufactures and distributes wholesale children's products to mass merchandisers through its Ecology Kids subsidiary. Diplomat has undergone a radical change in its operations over the past 12 months, having acquired the Lew Magram and Brownstone Studio catalogs and disposed of its Biobottoms children's wear and accessories catalog. We believe that Diplomat has succeeded in assimilating these operations and its future prospects are very favorable. We are rating Diplomat a "Buy" for the following reasons: Management of the company is impressive, possessing many years of experience in the retail catalog sales industry. The Lew Magram and Brownstone Studio catalog brands are well established among customers, both having been offered for more than 15 years, with a resultant base of consistent purchasers. The mail order sales segment of the economy continues to steadily increase, growing at a compounded rate of over 11% since 1985 and accounting for over $12 billion in sales in 1997 (source: Direct Marketing Association). Company management has demonstrated its willingness to change with the marketplace, evidenced by its recently announced strategic alliance with Enterprise Productivity Systems for the "e-commerce" syndication of its catalogs utilizing cd-rom and eventually interactive TV set-top boxes, which could ultimately provide the company with an alternative to distribution of hard copy catalogs. The company is a leader in catalog configuration, utilizing selectronic binding to tailor their catalogs to the attributes of the recipient, which results in a favorable rate of revenue per book and greater ease of sale of clearance items. The company has in place the infrastructure and systems necessary in the event of future expansion of its product lines and catalog titles. HISTORY OF DIPLOMAT Until mid-1997 the predominant business of Diplomat was concentrated in infant and toddler apparel and accessories sold through wholesale marketing and distribution. Diplomat first entered the mail order industry with its purchase in February 1996 of Biobottoms Inc., which sold apparel and accessories for newborns and preteens. In July of 1997 the company expanded its presence in the mail order industry by taking control of Lew Magram Ltd., a New York City based catalog retailer of women's fashions. The Lew Magram women's catalog had been in business over 15 years prior to its acquisition by Diplomat. Prior to entering the women's retail catalog business, the Magram company was well-known for its mens clothing and accessories, principally shirts. The company's position in the catalog industry was solidified in October 1997 with its acquisition of the assets of Jean Grayson's Brownstone Studios, Inc., which similarly to the business of Lew Magram sold women's apparel and accessories through direct mail catalog sales. Although Brownstone had curtailed operations for approximately four months due to bankruptcy problems, prior to that its catalogs had been offered to the mature women's catalog market for over 15 years. In April 1998, Diplomat divested itself of the Biobottoms operations, leaving it with two lines of business: (i) direct mail catalog retail sales of women's apparel and accessories through its Lew Magram and Brownstone subsidiaries, and (ii) sales of apparel and accessories for toddlers through preteens to mass merchandisers through its Ecology Kids division. The company's direct mail catalog retail sales represent over 90% of the company's revenues and net profit. While there is apparently no current intent on the part of Diplomat management to divest the Ecology Kids segment of its business, it is clear that Diplomat has become a catalog company; in fact, efforts are being undertaken to market the Ecology Kids product line through a business-to-business catalog. In essence, in the space of less than 18 months the company has repositioned itself through its acquisitions of Lew Magram and Brownstone and its divestiture of Biobottoms.