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Strategies & Market Trends : Stock Watcher's Thread / Pix of the Week (POW) -- Ignore unavailable to you. Want to Upgrade?

To: Jerry S. who wrote (2224)	2/6/1999 1:12:00 AM
From: Jerry S.	Read Replies (1) \| Respond to of 52051

HS post on Marketgems thread: To: Jerry S. (24580 ) From: Diamond H Saturday, Feb 6 1999 1:02AM ET Reply # of 24615 HS is an outstanding value pick. Here are some fundies for those of you who may be interested. Earnings come out the week of the 22nd. I'm expecting the usual runup. <H> 12164 of 12171 Company Brief: Distribution - Technology Kristi Thiese ? x2502 January 26, 1999 (727) 573-3800 Ken Avalos, Research Assoc. CHS ELECTRONICS (NYSE-HS) — RATING: BUY (1) Suitability: Aggressive Growth Current Price (1/25/99): $15.88 CHS Electronics, based in Miami, Florida, is a leading international distributor of microcomputers, storage and computer peripheral products, networking equipment, and software. Recent market volatility, concerns about Latin American economic growth, and earnings disappointments at U.S.-based PC distributors have combined to keep the price of CHS Electronics shares in check in recent weeks, providing investors with a compelling entry point. Based on our confidence in Q4 and 1999 estimates, combined with an attractive P/E valuation of only 7.6x our 1999 EPS estimate, we strongly reiterate our BUY (1) rating on the shares of CHS Electronics at current levels. Comfortable with our 4Q98 expectations, a penny ahead of consensus We continue to be very comfortable with our current EPS estimates for CHS Electronics. For the company's 4Q98 ended December, we have projected sales of $2.78 billion, up from $1.83 billion in 4Q97. The company recently issued a press release indicating that December sales crossed the $1.0 billion mark, a historic event for the company and evidence for us that CHS is likely to exceed our revenue expectations in the quarter. We now expect that CHS's 4Q98 revenues will be in excess of $2.8 billion, with the sales growth driven primarily by strong Western European demand for technology products. The strong expected revenues in the quarter increase our confidence that CHS can report 4Q EPS in the $0.67 to $0.68 range, exceeding current Street consensus expectations of $0.66 per share. Our published 4Q98 estimate calls for $0.67 in earnings per share, compared to $0.45 in 4Q97. 4Q98 strength from Western Europe, Mass Storage products Our comfort with current EPS estimates is strengthened by continued indications of strong Western European demand for IT products, including mass storage products. At 66% of 3Q98 revenues, Western Europe represents CHS Electronics' largest geographic market. Recent EPS releases from major technology manufacturers including Intel (NASDAQ-INTC), IBM (NYSE-IBM), and Seagate (NYSE-SEG) indicate a very strong Q4 Western European market for technology products. Intel's sales to Europe were up 16.9% in the December quarter, while IBM's December quarter sales growth to Europe of 9% was more than double the corporate average of 4% growth. Seagate indicated Western Europe moved from 35% of September quarter sales to 39% of December quarter sales, for a 29% sequential increase in sales to the region. IBM and Seagate both noted strong sales of hard drives and other mass storage items. IBM highlighted its HDD sales as a positive in the quarter, with unit growth in excess of 50%. Seagate's hard drive revenues were up 16% year-over-year, including 24% growth in desktop drives, Seagate's fastest-growth item in the quarter. In particular, Seagate commented on the strength in Western European demand for drives, which the company expects will continue over the next six months. Mass storage products represent nearly 30% of CHS's product mix, and we expect that the company's gross margins will continue to benefit from the strong demand and continued allocation of hard drives in the fourth quarter. Gross margins were 7.40% in 3Q98, during which time the company also experienced mass storage allocation. We have modeled 4Q98 gross profit margins for CHS of 7.27% vs. 7.04% in the fourth quarter of 1997. Exposure to Latin America Sales to Latin American markets represented 18.5% of 3Q98 revenues for the company. Sales to Brazil were approximately 3.5% of company sales in 3Q98. Our relatively lower growth expectations for Latin America, combined with the ongoing strength of the European market, should bring Latin America down to less than 15% of 4Q98 sales. We remain cautious about growth in demand for technology products in Latin America during 1999. Our current EPS estimates assume internal growth in CHS's Latin American sales of 7% in 1999, down from internal growth rates of 20% to 25% experienced over the last 18 months.

To: Jerry S. who wrote (2224)	2/6/1999 9:54:00 AM
From: Francois Goelo	Read Replies (1) \| Respond to of 52051

Jerry, Ref:HS/CHS Electronics... This Company appears to have great fundamentals and may be undervalued, however three thinks disturb me: 1) This economic sector is becoming more and more competitive. You even have Internet based Companies selling computer products at manufacturers cost, making profit on their site's advertising only. 2) If the Company prospects are so good, how do you explain all the insider selling? 3) Short ratio is high at 7 days. This may be a tremendous buy, but IMO requires some in depth research, which I might be able to do, as I am going to Miami shortly. Regards, F. Goelo + + +