GRAND POWER LOGISTICS GROUP INC. V.GPW

RE: News Article

[stubbs]

This is what Wong had to say: Interesting recommendation.Sorry if this has already been posted. Recommendations From Canaccord 1. BUY Group West Systems (GPW : TSE/VSE : $2.60 : Issued 6.3M) Wong Strong Q1/f99 results Q1 revenues up 252% Q1 EPS $0.045 versus nil Group West Systems (GPW : TSE/VSE : $2.60) BUY Target: $6.00 52-week price range: $8.85-$2.10 Shares O/S: basic 6.3M fully diluted 7.2M Cash/share (Q1/99) $0.05/sh Debt/Equity (Q1/99) 0.13 Weekly trading vol.: 15,500 Market capitalization: $17.7M Y/E Sep. 30 EPS P/E P/S P/EBITDA 1997 $0.01 46.5 5.9 NM 1998E $0.11 25.4 1.8 11.2 1999F $0.25 10.9 0.8 5.8 2000F $0.35 7.5 0.7 4.0 Financials Q1/f99 revenues ended December 30, 1998 and were $5.2M versus $1.4M in Q1/f98, which is an increase of 252%. Net earnings were up significantly to $282,641 ($0.045/share) compared to $21,357 ($0.004/share) in the previous year. Gross margins were up slightly to 31.1% versus 30.6% in f1998. However, EBIDTA margins increased significantly to 11.2% from 2.0% in the previous year. Diversifying away from Y2K We are impressed with GPW's Q1 results as the Company continues to diversify away from Y2K and into specialty areas such as printing and publishing. In addition, the Company has “re-tooled” its Aaski operations from Y2K to re-engineering related projects, such as conversion of mainframe environments to client-server technology. We project that Y2K will drop as a percentage of revenues to about 17.5% in f1999 versus 26.5% in f1998. Forecast and Valuation We believe the current weakness in the stock may be from the overall correction in the technology sector along with the late release of its Q1/f99 results. The Company anticipates its future quarterlies to be released on a more timely basis as its recent acquisitions are fully assimilated and follow the same accounting year end. We are maintaining our projections of $21.0M and EPS of $0.25/share for f1999 and $27.9M and EPS of $0.35/share for f2000. Our current revenue and earnings projections exclude any future acquisitions by the Company. Based on our blended valuations, which are listed in the table below, we have increased our twelve-month target price from $5.00 to $6.00: for more details, please refer to the February, 1999 issue of Equity Search. We believe GPW is undervalued and is a BUY. Group West Price Valuation P/E P/EBITDA P/S Projection 20.0 16.0 2.2 Per share $0.25 $0.44 $2.82 Target price $5.00 $6.98 $6.20 Average $6.06 Dave Wong [phone] Stubbs