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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (25358)	2/19/1999 9:51:00 PM
From: Tae Spam Kim	Read Replies (2) \| Respond to of 120523

What do you guys think if Pacific Internet (PCNTF) at these prices? -Tae Kim Pacific Internet (PCNTF) looks good. Read this message I found yesterday in the PCNTF SI thread: Tonight I had a very informative discussion with Mr. Ravi Sarathy, Lehman Brothers' Asian Telecommunications Analyst. I reached him at his office in Hong Kong. He is the gentleman who brought the deal to Lehman (the lead underwriter of PCNTF's IPO) and who will be the axe in this name. Here are some highlights of our conversation: First of all, Mr. Sarathy has already written a research report on the company where he recommends purchase and sets an initial twelve month price target of $60 on the stock. However, due to US securities laws, the report cannot be released in the US until 25 days after the IPO. At that time the report will be made available through First Call notes and on Lehman's website. Let me be quite clear regarding the law here - Mr. S. may discuss his recommendation here now, but he cannot publish it in the US until 25 days after the IPO. The company will report earnings very soon, within the next two weeks. Mr. S. believes they will blow out his full year 1998 net income estimate by almost 70%. We had a very lengthy and detailed discussion of how Mr. S. values the company. In a nutshell, he uses a 10 year discounted cash flow model and then assigns a range of multiples to come up with a range of values. The IPO was pitched to institutional investors with $23 being the minimum present value of the company (and thus assuring a pop when priced at $17). That value assumes a 4.6X EBITDA multiple, about the same as ELNK's (which is one of the lowest of any of the public ISPs). IMO, Mr. S. used some very cautious assumptions in his models (regarding cost of capital, for instance). Using more aggressive assumptions regarding market penetration, and a 13X EBITDA multiple, he comes up with a $70 present value. That multiple is a little higher than MSPG's. (My personal belief is that the Street will eventually assign the company an AOLish multiple and a triple digit stock price). Coverage will also be initiated by Bear Stearns' teleco analyst Dan Whittaker and Cowen's teleco analyst Pamela Yip. The company is keenly aware of its need to build a public relations effort in the US. Expect to see press releases and hear conference calls here in the US. We talked a bit about the company's core geographic markets. Mr. S. notes that Hong Kong and Singapore are the most broadband friendly city/states in the world, with over 40% of the buildings already wired with fiber. Singapore also has the 5th highest penetration of cellular in the world, which lends itself to the ubiquitous deployment of the internet over the new generation of hand held devices. It may very well turn out that Mr. S.'s market penetration assumptions are too low. Hope this helps. And get ready to rumble.....