Cassius Ventures Ltd. V.CZ.H

Speculative Buy From Canaccord

[cybertooth]

SPECULATIVE BUY Carbiz.com Inc. (CZ : CDNX : C$0.62 : Issued 30.1M) Jeff Rath, CFA [phone] [e-mail] HIGHLIGHTS * Carbiz.com announces a significant licensing agreement for its Full Spectrum 2000 e-commerce platform * Delays with both the TD Bank implementation and the closing of several previously announced acquisitions are now expected to reduce f2001 revenues from $10 million to $8.0 million. (We have placed our financial model and target price under review) * While the long-term viability of many newly created dot.coms particularly B2C) has now come into question, we continue to believe that CZ remains well positioned to survive this sector's pullback, allowing us to maintain our SPECULATIVE BUY recommendation, particularly in light of the recent sell-off its shares Recommendation: SPECULATIVE BUY 12-month target price: Under review 52-week price range: $8.00-0.48 Shares O/S: basic 30.1M f.d. 39.0M (inclusive of all announced acquisitions) Float: (est.) 21.0M Major shareholders: Mgmt. & dir.'s, 20%; TD Bank Working capital: $9.8M Cash: $4.5M Book value/share: $0.64/share Dividend/yield: Nil Weekly trading vol.: 191,000 shares Market capitalization: $18.7M Sector: Technology - Software Web site address: www.carbiz.com; www.independentdealer.com Carbiz.com Partners with Straightaway The company's management announced yesterday that it has entered an agreement to license its Full Spectrum 2000 e-commerce platform to 488 Straightaway locations over the next 18 months. Currently, CZ receives 5,000/sale and $300/month of additional service revenues, making this contract worth approximately C$2.44 million and C$150K/month. Additional transactional revenue streams include future credit bureau requests and on-line financing fees. Straightaway, a privately held company with ownership reportedly includes PEP BOYS (PBY : NYSE) and AOL (AOL : NYSE), has an agreement under which it plans on opening small, in-store locations at 488 separate PEP BOYS store locations across 38 states. Currently, Straightaway operates nine such locations in Florida and expects to build out the remaining 429 sites over the next 18 months. Straightaway is a Consumer-to-Consumer (C2C) company, created to improve the purchasing and sale of used cars between private consumers. Straightaway offers sellers a neutral site (non-dealer), asset validation (via inspection), marketing assistance, closing services, and title/registration services. The buyer benefits include: no commissions, all vehicles have been subject to an independent inspection, and competitive financing can be arranged. We do not expect this announcement to materially impact financial results for the remaining f2000. Revised Expectations Recent discussions with management suggest that CZ is now not likely to meet its previous forecast of $10 million in revenue and positive cash flow for f2001. Reportedly, the shortfall is directly related to delays with the closing of several previously announced acquisitions. Revised guidance suggests that CZ might now generate closer to $8.0 million in revenues. While we are disappointed with the above downward revision, it does not suggest a slower ramp-up (which is all too often the downfall with many early stage technology stories), but simply a delay in accounting recognition. Overall, individual product sales and operational income from the target companies remains the same. TD Launch Date Management also confirmed that its live launch with TD bank facilitating on-line car loan approvals) has once again been delayed. Originally, CZ's management expected to begin processing on-line credit applications in September 2000, this date has now been pushed back to January-February 2001. We believe any additional, unexpected delays here could eventually further impact our forecasts. We continue to believe the "backbone" of the value proposition offered by CZ remains its ability to offer on-line, non-dealer approved, used car financing (both prime and sub-prime). Implementation of this service is expected to support future software sales and to provide a platform from which other revenue streams might be created. Valuation and Recommendation We have recently completed a review of all Canadian-listed "dot.coms" to establish a better prospective on current valuation levels and overall investor sentiment. Most companies in this sector are now trading at or close to their 52-week lows (a 90-95% discount from their 52-week highs). Overall, the entire sector is now trading at valuation levels that we believe suggest that most investors no longer believe these to be viable businesses. The most dramatic de-valuation remains in the B2C sector. While overall we see little reason to believe this sector will benefit from any renewed investor interest, we do believe those companies independent of the capital markets fully funded and/or cash flow positive) will likely survive, suggesting 'bottom-fishers" might now find some attractive opportunities in this devastation. While we are disappointed with the delays outlined above and would normally expect that to impact our investment opinion and subsequent recommendation, we believe the overall negative sentiment surrounding the entire dot.com sector has in fact discounted CZ's share price beyond even our revised outlook (which still remains positive), allowing us to continue our SPECULATIVE BUY recommendation. We have placed our financial model and target price under review until CZ's management can provide better guidance resulting from these recent developments.