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Strategies & Market Trends : Cents and Sensibility - Kimberly and Friends' Consortium -- Ignore unavailable to you. Want to Upgrade?

To: Alex MG who wrote (86)	3/23/1999 7:56:00 AM
From: Kimberly Lee	Respond to of 108040

Gradeaux, welcome. Thanks for the analysis, and it clearly shows MMPT's compelling value. Here is the highlights of Keith Benjamin's original report on MMPT. Perhaps we can email him to remind him of the valuation discrepancy between MMPT and DCLK. I N T E R N E T R E S E A R C H March 3, 1999 MODEM MEDIA POPPE TYSON Initiating coverage of a leading interactive marketing agency. Buy. Keith E. Benjamin, CFA (415) 693-3285 keith_benjamin@rsco.com Michael Graham (415) 693-3514 michael_graham@rsco.com BancBoston Robertson Stephens BancBoston Robertson Stephens Modem Media Poppe Tyson MMPT $28 5/8 3/3/99 Industry: Internet Advertising Keith E. Benjamin (415) 693-3285 CHANGE IN... YES/NO WAS IS Michael Graham (415) 693-3514 Rating: New BUY Cristy Barnes (415) 676-2877 EPS 1998A: ($0.38) FY Dec 1998A 1999E 2000E EPS 1999E: New ($0.32) EPS: 1Q ($0.02) ($0.14) ($0.04) EPS 2000E: New ($0.05) 2Q ($0.10) ($0.08) ($0.02) 52-Week Range: 55-31 3Q ($0.13) ($0.06) ($0.01) FD Shares Outstanding(MM) 13.0 4Q ($0.14) ($0.05) $0.01 Mkt Cap (mil) $372.1 Year ($0.38) ($0.32) ($0.05) Avg Daily Trading Vol (000) 199 P/E --- NM NM 9/98 Bk Value/Sh $2.83 Cal Yr ($0.38) ($0.32) ($0.05) 12/98 Tot Debt/Tot Cap 0% CalYr P/E --- NM NM C1998E ROAE Revs ($M): 1998A 1999E 2000E Price/Book Value: 10.1x 1Q $9.0 $10.5 $15.5 Net Cash/Sh $3.08 2Q $10.5 $12.5 $16.5 Div/Yld: 0.0% 3Q $10.9 $14.5 $18.0 3-Yr Sec Growth Rate: 40% 4Q $12.1 $15.8 $20.0 Year $42.5 $53.5 $70.0 Mkt Cap/Revs: 8.7x 7.0x 5.3x Key Points: · Modem Media Poppe Tyson (MMPT) is a leading interactive marketing agency developing on-line customer acquisition strategies for leading international brands. · Services include Web site design, Internet marketing campaign development, and implementing strategies for e-commerce transactions. · MMPT's strategy is to provide deep service and partnership to a focused number of clients, rather than a few services to many clients. · We believe this focused strategy matches the biggest opportunity, as leading brands should spend a disproportionate share of the advertising and direct marketing dollars on the Web, using targeting technology to build deeper customer relationships. · Current revenue is service/consulting revenue based on cost plus a profit, and fees for executing online media buys that approximate 15% of the spend on a project. A smaller portion could come from performance-based lead generation fees, none of which are our estimates. · We expect MMPT's current model will exhibit scalability as MMPT increases revenue and media spending per client. This model has high recurring revenue. · We view any performance-based pay as mostly incremental to our estimates. We believe this enhanced service model can be successful and would facilitate faster revenue growth at higher margins. We estimate each 1 million leads per year would add $0.50 to annual EPS. · We believe revenues will grow 30% per year and EPS much faster. We believe the range of possible EPS before amortization in 2002 is from $0.50 to $1.00 or higher.