Post by
turr on Feb 06, 2002 3:55pm
small cap research
I posted this yesterday on the yahoo board
StreetSignal: Small Cap Research
Editorial by Dan Deadlock
Tuesday, February 5
2. Onvia (ONVI $0.48)
Coverage Initiated: 08/19/01 $0.35 www.onvia.com
Our Estimate of Year End Cash Position: $80 million (approx.
$1/share)
Forecasting break even Q3/02
Our Estimated Cash Position Q3/02: $65 million ($0.80/share)
Since the summer of 2001, our premium newsletter has been
tracking 30 cash rich technology stocks on Nasdaq. All trading
below $3 and at the time, at discounts of 50% to 70% of cash in
the bank. While the strategy has proven very successful for us,
Onvia has been the most frustrating stock of the bunch. This
week I am flogging this dead horse once again because the
recent market selloff has pushed the price back into the 0.40's
where it trades at a substantial discount to large cash reserves.
In this market, financing for technology stocks is next to
impossible. The odds of trying to raise $60 to $80 million in this
market would be near impossible. While the Onvia [ONVI]
business model still has a long way to go, they appear on track to
control costs and ignoring everything else about this company,
the cash alone just has to command more value than this. Even if
this company were run by "monkeys", one would think that at
some point a controlling shareholder or fund could step in and
make efficient use of this war chest.
Keep in mind that in 2001 burn rates were brought way down to
$15 million and the business model has improved a lot. However,
by spring we may face a rollback to preserve the Nasdaq listing if
it doesn't move solidly above $1 by then. It's not a huge risk but
it's still a concern. I believe they will release financials by the end
of this month and we'll be very interested to see what the cash
position actually looks like.
The current valuation places a 50% discount on cash reserves
and assuming they achieve their goal of cashflow breakeven by
next summer, a 40% discount on Q3 cash. The company is
forecasting to hit breakeven with $75 million in the bank but I
believe this is unrealistic given the share buyback program
announced in Oct/01 for $5 million. Assuming a possible worse
case scenario I think we're safe forecasting cash of $0.80/share.
This is no longer a play on the technology or business model, but
purely a play on cash. As the technology sector struggles along
with the broader market, CASH remains KING. Unless these guys
have really goofed something up that the general public is not
aware of, I cannot see where such a large cash position would not
command a higher value. The logic behind this stock price makes
no sense so I continue to go out on a limb with this company until
such time as I see news indicating they have made serious errors
in judgement somewhere.
About Onvia
Onvia.com, Inc. [ONVI] helps businesses secure government
contracts and government agencies find suppliers online. The
company manages the distribution and reporting of requests for
proposals and quotes from more than 400 government agencies
nationwide in the $400 billion state and local government
marketplace. The size and strength of Onvia's network allows
suppliers and agencies to find better matches quickly, saving time
and money.
www.streetsignal.com