Last night, SYNTEL INC. (Nasdaq:
SYNT) announced that it had commenced
an initial public offering (IPO) of 3 million shares at $11.The issue surged
$3 to $16 1/2 today on volume of 1.1 million shares. Founded in 1980, the
company is a global provider of outsourcing solutions, "Year 2000" compliance
services, and professional
technology (IT) staffing solutions. With the new cash, Syntel plans to
purchase its affiliate operation in India, whose low-cost contract operations
will boost margins in similar fashion to COMPLETE BUSINESS SOLUTIONS
(Nasdaq: CBSL). After today's move, the company trades at 4.07x sales with
operating margins of 5.2% in its most recent quarter, placing it on a valuation
basis alongside its more mature peers like RENAISSANCE SOLUTIONS (Nasdaq: RENS). With IT becoming more critical to strategic positioning and projected
growth at 15% per year through 2000, the retention of key personnel and the
subsequent control of employee costs will be key to the continued success
of the company.
Call management software company MELITA INTERNATIONAL CORP. (Nasdaq: MELI) made a strong connection with investors today, moving up $1 1/2 to $9 1/2 on announcing that it had received certification from ASPECT TELECOMMUNICATIONS (Nasdaq: ASPT) for the integration of both companies' products on sites where they share customers. As Melita's press release explains, "When predetermined inbound call volume thresholds are exceeded, ActionPACT (MELI product) automatically reassigns, or "flexes'', outbound agents to handle inbound calls delivered from the Aspect CallCenter ACD. When inbound call volume decreases, the agents are flexed back to their outbound call route under the control of the Melita PhoneFrame CS system." This translates into more potential revenue for Melita, of course. [Aspect Telecommunications Message Board]
SBE INC. (Nasdaq: SBEI), a provider of high-speed communications controllers and remote access router products, reported a blowout third quarter, boosting shares $3 1/4 to $14 1/2. Revenues for the quarter were $7.4 million, a 155% increase over revenues reported in the same period in 1996, and EPS of $0.27 topped estimates of $0.18. The company's suite of netXpand products allow for data transfer among multiple sites of a single company (router function) and also provide remote access to the corporate LAN for employees operating away from the office. The company's share price has tripled since the beginning of the year, while improving its balance sheet numbers and liquidity ratios along the way. SEI's return on equity clocks in at 35%, and if the company continues to trade at 25x forward earnings, there might still be room for appreciation.
QUICK TAKES: Diversified electronics contract manufacturer EA INDUSTRIES (NYSE: EA), picked up $1 5/16 to $6 3/4 on news of a 1.8 book-to-bill ratio in its second quarter... Shoring up its #1 position in the manufacture of medium-sized and heavy trucks, NAVISTAR INTERNATIONAL (NYSE: NAV) bulked up $1 9/16 to $22 1/8 after it reached a tentative agreement to continue to supply diesel engines for several Ford products... A rally in its stock in Hong Kong extended to its American Depository Receipts (ADRs) in the U.S. as CHINA SOUTHERN AIRLINES (NYSE: ZNH) climbed $3 1/8 to $34 5/16 after announcing restructuring attempts that will replace the old-world style of adding shareholder value through asset injections... TERADYNE COMPUTER CO. (NYSE: TER) jumped $3 3/4 to $50 1/2 after announcing an order to install its 4TEL Access Network Maintenance System throughout Slovak Telecom's network... ISOMEDIX INC. (NYSE: ISO) climbed $1 3/8 to $20 3/16 on news that STERIS CORP. (Nasdaq: STRL) will acquire the provider of contract gamma radiation and ethylene oxide sterilization services for manufacturers of pre-packaged products... Benefiting from a Deutsche Morgan Grenfell "buy" recommendation, PERITUS SOFTWARE SERVICES (Nasdaq: PTUS) rose $3 1/8 to $24 5/8... MARKET FACTS (Nasdaq: MFAC) got all the facts right today, rising $2 7/8 to $22 7/8 as the market continued to digest approval of its Chinese research joint venture.
Hambrecht & Quist analyst Dirk Godsey raised his rating on CSG SYSTEMS INTERNATIONAL (Nasdaq: CSGS) to "strong buy" from "buy," prompting some "buying" that raised the stock $3 5/8 to $29 5/8... Shares of BIOMATRIX INC (Nasdaq: BIOX) grew $3 to $25 3/4 as it received Food and Drug Administration approval to market Synvisc in the U.S.... ASM LITHOGRAPHY HOLDINGS (Nasdaq: ASMLF) rose $10 1/4 to $91 3/8 in sympathy with APPLIED MATERIALS (Nasdaq: AMAT) rise of $9 to $99 3/8 today after reporting earnings last night... Retail drug store chain PHAR-MOR INC. (Nasdaq: PMOR) rose $3/4 to $7 after reporting positive earnings for 4Q 1997... WIZTEC SOLUTIONS (Nasdaq: WIZTF) showered some gains down on investors, moving up $13/16 to $7 3/4 after the software maker reported 2Q EPS of $0.06 with revenues up 61% over last year... Workplace child care IPO CORPORATE FAMILY SOLUTIONS (Nasdaq: CFAM) rose $3 5/8 to $13 5/8 as 2.35 million shares were sold... Supply chain management software company MANUGISTICS GROUP (Nasdaq: MANU) rose $2 1/2 to $43 3/4 today after the commencement of its secondary offering of 1,900,000 shares... XYLAN CORP. (Nasdaq: XYLN) climbed $1 1/2 to $17 1/2 as the beaten-down networker announced that its "OmniSwitch" product family had been selected for the IT-21 program, a four-year Navy initiative to upgrade the computing capabilities of the 300-ship U.S. fleet and a number of land facilities.
Non-standard home equity lender CITYSCAPE FINANCIAL CORP. (Nasdaq: CTYS) dropped $1 7/8 to $10 1/8 as the Blair government in Great Britain
stepped up its look at the amount the company charges for loan prepayments
and late payment fees. Unfortunately for sub-par borrowers in the U.K., this
may hamper their ability to access mortgage loans, as the market there is
riskier than in the U.S. judging from delinquency rates. Fortunately for
Cityscape, most of its business is done in the U.S., but the U.K. has been
targeted as a growth area, and loan originations and securitizations are
more profitable in the U.K. The company warned about the Blair government
looking at the industry last month, though, so the information this morning
probably should not have been a total surprise. [Cityscape Financial Corp.
Miami-based CAPITAL BANCORP (Nasdaq: CBCP) lost $5 3/8 to $40 5/8 after the company announced that it has agreed to merge with Tennessee bank UNION PLANTERS CORP. (NYSE: UPC). Capital Bancorp shareholders will receive 0.8525 shares of Union Planters for each of their shares, valuing Capital Bancorp shares at $43. Capital Bancorp subsidiary specialty finance company CAPITAL FACTORS HOLDING (Nasdaq: CAPF) lost $3/4 to $17 3/4 on news of the merger, but there was no mention in the press release of what is planned for that company. It would probably add more to Union Planters if it were kept as a separately traded subsidiary and would be useful as a vehicle to buy loans or accounts receivable.
Memory chip and PC maker MICRON TECHNOLOGY (NYSE: MU) was hit again today, this time for a $7 3/8 loss to $42 3/4 on a Merrill Lynch rating downgrade and a 1998 EPS estimate cut of 32%. Analyst Tom Kurlak believes the transition to 64 megabit dynamic random access memory (DRAM) chips will happen slightly faster than expected, making 1998 more of a transition year for Micron. In a conference call this afternoon, Kurlak also said that he believes the sell-off is overdone. A continuing problem with the outlook for Micron is the almost obsessive focus on prices for DRAM. Historical pricing trends show that semiconductor prices do not have to be stable for a company to make money. At least half the investment thesis on the company has to do with its ability to cut costs through process step reduction and shrinking of semiconductor feature sizes. That said, some investors wonder why Kurlak would say a 14% drop is overdone when he just lopped 32% off his 1998 EPS estimate. [Micron Technology Message Board]
QUICK CUTS: Transaction printer manufacturer DH TECHNOLOGY
(Nasdaq: DHTK) lost $4 1/2 to $19 1/2 after announcing that most of the
company's shares had been tendered at $25 per share to French acquirer Axiohm...
ASI SOLUTIONS (Nasdaq: ASIS) dropped another $1 to $8 3/4 after the
human resources outsourcing company said yesterday that it sees earnings
next quarter being hurt by lower revenues and higher levels of investment
in corporate infrastructure... Zinc cold lozenge company QUIGLEY CORP.
(Nasdaq: QGLY) lost $2 13/16 to $14 9/16 on reporting Q2 EPS of $0.07 and
EPS of $0.47 in its seasonally slowest quarter... GOLDEN BOOKS FAMILY
ENTERTAINMENT (Nasdaq: GBFE) slumped $1 5/8 to $10 1/2 after the publisher
of children's books reported a decline in revenues for its first half (excluding
revenue from a unit that has been sold) and continued negative earnings.
Spinal fusion equipment company SPINE-TECH INC. (Nasdaq: SPYN) fell $6 to $45 7/8 on a Hambrecht & Quist downgrade from "strong buy" to "buy"... ACE*COMM CORP. (Nasdaq: ACEC) dropped $1 7/8 to $15 after pre-announcing record quarterly revenues of $11.1 million; however, the company implied that it might not make earnings estimates for the quarter... Crash safety products maker SIMULA INC. (NYSE: SMU) ticked down $1 1/4 to $21 1/4 after Q2 EPS fell short of estimates of $0.03, but were saved from further damage by the company's reporting a book-to-bill ratio of about 1.3 for the quarter... Eldercare company CAREMATRIX CORP. (AMEX: CMD) slid $1 5/8 to $22 7/16 on announcing the issuance of $100 million of convertible debt... Call center software company VERSATILITY INC. (Nasdaq: VERS) lost $1 to $8 after pre-announcing Q1 EPS of $0.06, below the analysts' consensus estimate of $0.07 but up 50% year-over-year.
Former taxicab driver Wade Cook continues to demonstrate the power of advertising
on the airwaves of local radio stations. Without anything even resembling
a nationwide publicity campaign, the author of Wall Street Money Machine
and Stock Market Miracles currently holds the number four and number
six spots on the Business Week best-seller list. Reflecting the success of
his publishing empire as well as a three-for-one stock split announced today,
Cook's PROFIT FINANCIAL CORP. (OTC: WADE) shot up $7 1/2 to $18 today
on seven times normal trading volume. The move is particularly notable given
that Cook's work stresses stock splits as part of his path to the somewhat
outrageous doubling of your money every two-and-a-half to four months.
For readers unfamiliar with Cook, his books promote ideas like using both stocks and options to speculate on "rolling" stocks, splits, "dividend capture" and other rather suspiciously simple notions. His claims of doubling your money every two-and-a-half to four months are difficult to take seriously, given that $10,000 doubled every four months would turn into $34.9 trillion after only ten years. Despite the obvious exaggeration of the potential results using his "techniques," the books have been selling like hotcakes and apparently the seminar business has picked up for Cook as well. The somewhat naive interest in Cook's investment approach has apparently now transformed into a blind interest in the stock of his publicly traded holding company, with shares shooting up from a low of $5 on July 23 to today's perch of $18.
Cook's company is so small that it currently does not have to make quarterly filings with the Securities Exchange Commission. Trading on the over-the-counter (OTC) Bulletin Board, the shares are not Nasdaq listed in spite of the fact that they have a four-letter ticker symbol. Nasdaq in its ever-increasing quest to distance itself from the speculative and sometimes outright criminal activity in OTC Bulletin Board stocks refuses to allow its name to be associated with them. Since almost all institutional investing charters specifically prohibit any pension fund, mutual fund, insurance company, or private money management concern from investing in "non-listed" stocks, the entire volume in Profit Financial Corp. is unfortunately probably made up of individual investors who are relatively new to investing.
The parabolic rise of Profit Financial recalls another company whose exaggerated claims caused its stock to run up from $0.75 to $57 in a few months on the OTC Bulletin Board only to crash all the way back to $2.81 today -- INTERNATIONAL AUTOMATED SYSTEMS (OTC: IAUS) and its supposed development of a 14.0 gigabit/second modem that could be used over conventional telephone wires. The company has never demonstrated the technology, and the hollow promises of many months ago to eventually show the product after it was evaluated by large telephone companies have not come true. While certainly Profit Financial Corp. is now making money from the seminars and books the company is selling, the fact that the only information we have on the company comes from a 10-12G filing to issue more stock does not raise any confidence that the company that will start to report complete financial details on a regular basis. The company recently announced year-end 1996 revenues in July of 1997 -- a mere seven-month delay.
Based on the financial statements from fiscal 1996, Cook's company current trades at 2.8 times sales and 38 times earnings. The company's profit margins are around 10%, although a whopping 50% of revenues was eaten up by sales, general and administrative expenses -- probably the combination of advertising, generous commissions, and even more generous salaries. Despite all this, the company has negative working capital. Even more interesting, even though Cook's website (www.wadecook.com) claims to be "the only place on the Internet teaching you how to double your money in 2 1/2 to 4 months" using stocks, according to the 10-12G the company has been investing its excess cash in real estate -- specifically hotels. Although the filing is remarkably detailed, the fact that the company trades on the over-the-counter market combined with the poor visibility on future financial updates make the current price seem somewhat generous relative to the risks that appear to be present.
AUTOMATIC DATA PROCESSING (NYSE: AUD)
(800) 633-8284 (reservation # 2748489) -- replay
HADCO CORP (Nasdaq: HDCO)
(800) 633-8284 (reservation #288 3483) -- replay through 8/13 @ 7:00 pm EDT
ASPEN TECHNOLOGY (Nasdaq: AZPN)
(402) 220-0112 -- replay from 8/13 @ 8:00 pm EDT through 8/14 @ 8:00 pm EDT
COMPUSA (NYSE: CPU)
(800) 642-1687 (code: 555471) -- replay through 8/14 @ 1:00 pm EDT
SARA LEE (NYSE: SLE)
(402) 220-3124 -- replay through 8/14
CISCO SYSTEMS (Nasdaq: CSCO)
(800) 633-8284 (code: 2875731) -- replay through 8/15
APPLIED MATERIALS (Nasdaq: AMAT)
(800) 642-1687 (code: 522530) -- replay from 8:30 pm EDT through 8/14 @ 8:30 pm EDT
DOLLAR GENERAL CORP (NYSE:DG)
(402) 220-1032 -- replay through 8/15 @ 6:00 pm EDT
FOUNDATION HEALTH SYSTEMS (NYSE: FHS)
(402) 220-0104 -- replay through 8/15
SEAGRAM (NYSE: VO)
(800) 558-5253 (reservation # 601492) -- replay through 8/15
THIS WEEK'S CONFERENCE CALL SYNOPSES
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