S.A. Advisory E-Mail Update
January 04, 1999
Subject: Stock pick for 99 ---part #2--www.saadvisory.com-CBLK-1/04/99
Dear E-mailer's www.saadvisory.com
We have decided that for 1999 we would feature two investment opps.,
that in our opinion offers huge upside potential during 1999 ( our
first pick was released on Dec 28,98 , namely FPCX--full story can
be reviewed via past e-mail messages list on our homepage).
#2 An Internet Play that already has great
Revenue and Earnings !!!!
CABLE LINK ,INC (cblk-OTC BB fully reporting
with SEC)
current price $2.25
Cable Link, Inc. (cblk) has two divisions:
1. Sells new and refurbished cable TV equipment in addition to repairing
equipment for cable companies within the US and various international
markets.
2. Auro Computer Systems is a full service computer technology services
and integration provider, partnering with such names as Inacom(ICO),
Compaq(CPQ),IBM(IBM), Cisco(CSCO), Toshiba and others to provide
services in the areas of procurement through installation, consulta-
tion to network design, help desk services to staff augmentation
nationwide. Auro is a one-stop resource for informantion technology
needs.
Select Financial Information:
Shares outstanding-1.9million fully diluted
Management controls--900K ( which includes 400k share option)
Free trading --around 1,000,000
SEC--fully reporting
Book value as of Sept 30th, 98--$1.31
Revolving Bank credit line--$3,100,000
Employees--140
Year end--Dec
shareholders of report--400
3 for 2 1/31/97 & 10% 8/11/97--stock dividend
High and Low for 96---.33 $2.88
97 $1.37 $4.63
98 --$1.25 $4.12
YEAR END NUMBERS
96A 97A 98E 99E
revenues 8.2 mil 10.1 mil 21 mil 32 mil
net income/
share .01 .45 .33 .50
fully diluted
shares
outstanding 1.4 mil 1.9 mil 1.9 mil 1.9 mil
9 month numbers ending Sept 30th 3 months ending Sept 30th
98 97 98 97
revenue $14.6 mil $7. mil $7.6 mil $2.7 mil
income/sh
fully diluted .29 .27 .11 .13
shares 1.9 mil 2.2 mil 1.9 mil 2.2 mil
CONSIDER A PRESS RELEASE THAT WAS RELEASED ON OR ABOUT NOV 11,98
"We will continue to search for business opportunities in both the
cable and computer segments.. We are presently exploring INTERNET
opportunities for doing business on both sides of the cable and computer
industries!"
OVERVIEW
Before we look at the possible INTERNET connection we first must look
at CBLK's current business! Based upon the estimated revenue and
earnings for just ending 98 and est. for 99 CBLK in our opinion is
extremely undervalued! When we look at the nine months ending Sept 30th
we can see revenue jumped to $14.6 million from $7.6 million with
earnings of .29 versus .27( NOTE: earnings for 98 are fully taxed, while
97 numbers were sheltered from taxes because of NOL).
For the year-ending Dec 31,98 management is aware of our fourth quarter
numbers, which yields a TOTAL revenue for 98 of $21 million and net of
around .33/sh fully diluted and fully taxed, while 97 year-end numbers
equalled $10 million and .45 fully diluted and NOT fully taxed! It is
quite evident that taxes makes a huge difference!!
When we look at the est. value for rev and earnings for 99 we can see
that management is confident that rev. will expand by 50% over 98 and
that earnings will also increase by over 50%!
Now that we have variables to work with-we can develop a meaningful
model for an est. share valuation for 98 and 99---NOT including any
rev or income from an internet connection!
If we look at rev during 97(10 million), 98 (21 million) that's a 100%
growth rate-- from 98 to 99 which is estimated to reach $32 million,
that's a 50% rev growth! Growth has been exceptional as well as explo-
sive!! We intend to value CBLK with a conservative PE of 18X!!
Many would value CBLK with a value of 25X to 40X PE, but we like to be
conservative in our calculations!
If we use 18X for the PE for 98 and 99 our estimated share price
would equal $5.94 for the year 98 just ending and $9.00 for 99!
This ofcourse indicates an extremely undervalued situation, when
you consider the fact that CBLK is currently trading at $2.25/sh.
At present CBLK is trading at 6.8X est 98 and 4.5X est 99!
If we look at PSR ( price to sales) and value CBLK with a PSR of .75,
which again is very conservative then a share price of $8.25 for year-
ending 98 and $13 for year-ending 99! As you see these values are
dramatically different from the current share valuation! At present,
CBLK is trading at a PSR of .20!
At present CBLK is only trading at 2x book--It could trade at 4X-6X
easily and not indicate full valuation.
If you really get overly excited one could use the PEG valuation, that
is PE/growth rate! A value of 1 is considered undervalued--This means
that CBLK could trade at $15 ...We of course do not use this variable,
but realize that it is used in today's market mania!
Concerning the INTERNET!
We believe that it is only a matter of time before CBLK develops an
E-commerce site , which will compliment the already corporate site:
It is in our opinion, that it is a natural progression for CBLK to
sell customized PC and PC networks via the Internet for consumers and
larger corps (NOTE: They sell products to WCOM and HBAN -just too name a
few key customers). We also believe that new and used cable equipment and
the potential for cable-modem sales is a logical progression for CBLK and
the Internet!(On the Cable-side CBLK buys and sells to both TCI and Time-
Warner).
CBLK in our opinion is very different from most Internet related issues!
The diffence is ofcourse CBLK does not depend on the Internet for its
existence, but may grow dramatically once a plan is announced and
executed! CBLK makes real money and does not value itself on eyeballs
surfing the "net"..
OVERVIEW #2
Cable Link,Inc. (CBLK) In our opinion we have an extremely under-
valued situation based upon strict fundamentals, namely, PE,PSR,book
value and growth rate. We have a fully reporting company with the SEC.
We have a company that intends to get listed on NASDAQ and is actively
seeking additional acquisitions. We also have a company that does
business with major US companies within the computer and cable industries.
Finally, We have a situation that is a perfect E-commerce candidate, which
could dramatically increase sales and earnings!
In our opinion, CBLK belongs in all mini-micro cap portfolios geared
towards short and long term capital gains. The Internet is a "new"
and powerful dimension in commerce and we believe that CBLK has the
perfect ingredients for becoming a player in this "new" business arena!
Corporate number#--614-221-3131--1-800-399-1371
Broker #--1-800-331-1355--Mike Chesler
Note: We first recommended CBLK on or about 2/28/96 @ $2.08.
Note: We have not been paid for this recommendation! We currently
own a position in cblk and may buy, sell or hold .. We have
the right to trade our own account. We will monitor a "NEW"
position of CBLK in latest portfolio for percentage gain
performance! Our phone service investors were informed to
purchase CBLK @ $2.00 on Dec 31, 98!
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Happy Investing
William Velmer
