 |
 | |
 |  |
| We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level. |
The Stockman Forum just sent out a write up on this company. It looks like a ground floor opportunity to position stock with the managment instead of getting in late like many small stocks. The price is near the yearly low and the volume is good. The write up is complete in every respect and written by The Position Trader. Check it out for yourself. I have done very well following the Stockman Group. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject:NIAR North American Resorts Date: Mon, 4 Nov 1996 10:20:24 -0500 THE POSITION TRADER REPORT Monday, 11/04/96 Leroy, I thought that we could have a little fun with this first write up. As I mentioned before, I don't care what a company does, or what its stock price is, as long as I feel like I am buying an undervalued situation with markedly improving fundamentals. Both are key: undervalued so as to limit the downside risk, rapidly improving fundamentals to give the sharp upside potential. There are many stocks trading for book value that never go anywhere, because there is nothing going on to change the outlook. There is no guarantee that this stock will be a winner, but hopefully this write up will illustrate the type of exercise that I go through when trying to analyze a pick. The first company which I bring to you is in an industry which has never excited me, but everything has its price, and I think the price is right at this time for staking a position. Remember, I'll be happy if we get a sharp rise near term, but my objective is the 1-3 year time frame, to allow the fundamentals to evolve, and to allow full appreciation of the stock price. I have been building a position in the stock for the past several weeks, and have had a write up ready to fly at any minute, waiting for release of important fundamental developments regarding financing talks that are currently in progress. Over the past week, however, the price has fallen sufficiently to make the stock a compelling position buy at current levels, and I have come to the conclusion that if I wait to release a write up until we get a major news announcement, which could come in the next several weeks, then club members who are interested would have to pay 100% or more higher prices per share to get in. For this reason, I am sending this write up now, and will follow up with updates as news becomes available. The stock trading is now trading under a nickel, having touched its all time low (3.5 cents) twice this past week, although a hefty total of about 4000 shares, or $160 exchanged hands at that level. The company has negligible debt, is currently profitable, and may be earning several times the current stock price in 36 months. According to my charting service, the stock was as high as a buck and a half earlier this year, and according to my APL quote server, the 52 week high has been over $4 per share. Huge trading volume over the past three weeks caught my eye, and by the time I completed extensive due diligence, I came to the conclusion that money could be made on this one. If you adhere to the buy low sell high strategy, this one's for you. If anything, it is cheaper than an option, and I don't think this one should expire worthless. The company is North American Resorts (NIAR). First, a little background. I first heard about NIAR a few months ago, when some interest was expressed among some groups on the Internet. There was quite a bit of hype, with high book value estimates as high as $5-6 per share, as well as talk of high profit potential. Unfortunately, a number of assets were overstated, and 900,000 preferred shares(convertible into common, 10 to 1) were not considered in the stock valuation estimates. When I looked at the numbers, the best I could come up with was a book value well under a dollar, and a high PE ratio. The stock had a couple of upside blips, but otherwise went straight south until it became close to worthless. A number of interesting developments have occurred in the past month however. The old management is out, and new management is in. ACL has merged its assets into NIAR in return for a 51% ownership stake, and paid approximately 5 cents per share in the assets they have contributed. They have put in their own people in charge, including an experienced CEO. Why did the old management let them in at this price? I think the answer is money. Old management had not succeeded in bringing in the necessary capital to move the company forward. New management has brought in capital, expertise, and a letter of guarantee from a large capital source. According to what I have been told, this large financial backing will allow for a deal to be struck to bring in major amounts of capital. Now, this company which had fallen on hard times can move ahead. Here's the story: North American Resorts (NIAR, Nasdaq BB, closed 11/02 at 4.0 cents, 4.5 cents offered) Shares outstanding: 71 million; fully diluted: 77 million; float: 16 million. Assets: 3.87 million, including 2.8 million per 10-Q(6/96), plus assets brought in by new management, which include $200,000 in tradable notes, and 1.165 million shares of EVRO, worth $765,000. (note, these assets alone are convertible into 1.3 cents per share). Liabilities: $200,000(per recent 10-Q) Total NET assets approximately 3.7 million Fully diluted book value: 4.8 cents per share Revenues first 6 months 1996: 1.7 million(greater than all of 1995) Profit first 6 months 1996: $225,000; profit growth rate approximately 100% Phone Contact: Investor Relations: 1-800-340-0123 NIAR is in the timeshare development/vacation travel industry. The timeshare industry is a highly profitable and rapidly growing industry, with current annual sales of 1 billion dollars. Major players such as Disney have recognized the potential and recently entered the market. The profit potential is quite high, as margins of 20% are commonplace. NIAR is already making a profit selling vacation memberships for two resorts in Mexico and Florida, and plans to build more resorts in choice locations. The company's choicest property at this time is Cypress Island, a 200 acre island in Lake Tohopekaliga, located 10 miles from Disney World. This beautiful island is already a tourist attraction, containing a number of indigenous wildlife, and both land and water activities. The plan is to build over 600 units, and for timeshare weeks to be sold for $5000. Can NIAR build and run this resort successfully? My bet is YES. NIAR's new management has extensive experience in the timeshare industry, and is responsible for building a large upscale timeshare resort in Florida, in the Orlando region. At Cypress, NIAR's corporate plan is to target the low end timeshare price spectrum. The company feels that a niche can be filled in this price range, and is planning on selling vacation memberships for $5000, rather than the typical $12-15 thousand. Management thinks that the lower priced timeshare units will sell like hot cakes. The resort will contain numerous amenities, including a gold club. The importance of the location, and its bearing on the potential for success can not be understated. Tourism in Florida is projected to continue to grow at a high rate, and Disneyworld is a major attraction. The profit potential is significant, and the company hopes to earn $30-40 million (50 cents per share) on this project alone. In addition, the company will operate other projects. NIAR is now negotiating for a property for timeshare in Manhattan, and also plans to build a hotel in Wisconsin that will be part of Radisson chain. In addition to timeshare sales, the company has reached an agreement to place travel agencies within Montgomery Ward stores, and finally, it is developing vacation/travel sales capability on the Internet. Here are corporate projections for revenues and profit for the next three years: Year Revenues EPS 1997 12-15 million .03 1998 26 million .07 1999 53 million .14 As you can see, if these projections hold, the current stock price is a bargain. Chart Action: Major, major volume over the past three weeks, at the lows, in the 4-8 cent range, after a long drawn out decline. The float has changed hands. My guess: Tax related selling and disgruntled investors tossing in the towel at the lows. The incentive to sell for tax benefits of the loss are quite strong at these levels. Consider that for an investor in the top tax bracket who bought NIAR at $1.00, the tax benefit of dumping their shares down here could be as high as 45 cents per share, or an immediate 10 fold return basis the current stock price. As one can see from the chart, it looks like the whole float has been dumped on the market in the past 4 weeks. The stock is now trading as if the company is going bankrupt, and certainly as if the company will achieve nothing. On the other hand, someone is picking up a lot of stock down here. The upside is this: all this selling is already factored into the stock price, and new holders should not represent any significant overhead supply once the stock begins to move. I think the downside here is nill, given the assets in hand, lack of debt, rapidly growing revenues and profits, and who knows: the recent tax sellers may actually be looking to get back in soon. The key to the upside potential will depend on the outcome of negotiations currently in progress for major financing. The investors package on NIAR talks of negotiations ongoing with a west coast developer for access to a 100 million dollar line of credit for its receivables. I have been told that the negotiations are looking favorable. Why is this important? The timeshare business is capital intensive. Timeshare units are sold, buyers put down 20%, and the rest is financed. Up to now, the company has had nothing but dreams, as the capital has been lacking to finance the 80% for buyers. It is this lack of financing which resulted in the protracted stock decline in my opinion, and I think it was the percieved ability of new management to bring in capital that probably lead old management to make the recent deal with ACL. Once capital is in hand, the company can move forward, and begin to generate cash immediately. In the words of a company director within the CFO office, " there will be many Cypress Islands. What we do there we can repeat elsewhere over and over again. The numbers that we can eventually put together could be staggering". Summary: NIAR is poised to make significant strides in the growing and profitable timeshare industry. It has management experience in this sector, and will hopefully soon have the financial backing to move ahead. The company's shares are trading below book value, 7 times current earnings, and potentially 2 times next 12 months earnings, and at 1/3 of earnings three years out. With no significant debt, a 100% projected growth rate, share price at book value, and low PE, the downside should be limited, and the upside could be significant. If the company earns 10 cents per share per annum in 2 -3 years, a low PE of 4.5 would yield a ten fold return from current levels. I like the fact that I can buy in at the same price that new management has paid in to participate. They would not do so if they didn't feel that they could make a profit, and if they win, I win. Here is a chance to get in on the ground floor with them. THIS IS KEY: AT THIS PRICE, WE ARE GETTING IN AT THE SAME PRICE AS INSIDERS. One more point: old management let new management in at this low entry price: the only reason I can surmise for this is that old managment sees potential in the deal. I have staked a position for my account for significant long term returns. The Position Trader | ||||||||||||
|
| Home | Hot | SubjectMarks | PeopleMarks | Keepers | Settings |
| Terms Of Use | Contact Us | Copyright/IP Policy | Privacy Policy | About Us | FAQ | Advertise on SI |
| © 2026 Knight Sac Media. Data provided by Twelve Data, Alpha Vantage, and CityFALCON News |