Itor's stock picking

**itor06** Wed May 10, 2006 8:36 pm

Itor's stock picking
5/10 VHI -- undervalue play

Holding company of KRO(83%), NL(57%), TIE(39%) and others

Value calculations:
1. 83% of NL = 693*0.83 = 576; 57% of KRO = 1480*0.57 = 843.6; 4% of TIE = 6620*0.04 = 264.8.
2. 100% of Waste Control Specialists; 100% Tremont, which owns 35% of TIE = 6620*0.35 = 2317.
3. Total equity value is at least: 576+843.6+264.8+2317=4001.4m
4. Current enterprise value = 3230m, mktcap 2970m
5. One year earlier: holdings of NL, KRO are about the same value, TIE is about 1/9 of value, so the minimum value 1 year earlier is: 576+843.6+(2317+264.8)/9 = 1706m. However, 1 year earlier, it’s mtkcap is 18/25.6*2970=2088m, a 300m premium over its known holdings. The similar relationship holds when calculating based on prices of 2 years ago.

Plan:
1. Minimum target: 25.6*4001/3230=31.7 if TIE doesn’t drop much.
2. High target: 25.6*4300/2970=37

**itor06** Wed May 10, 2006 8:42 pm

05/06/06 SPAR

Pros:
1. Five continuous growing Q.
2. 1Q 06 EPS 0.35. In year 05, EPS 0.65 (including small part of non-recurring), trading around 15pe. Year 03 @ 28pe, 02 @ 20PE.
3. Fire rescue truck business is good. RV(recreational vehicle) business decrease a little but company see growth in 06.
4. Add new order to supply chassis for an additional 79 Cougar Joint Explosive Ordnance Disposal Rapid Response Vehicles (JERRV). Previous order is for 100 JERRVs.
Cons:
1. Niche market. Highly uncertainties of the industry trend.
2. Growth of its traditional business sounds uncertain and should be slow (What is the effect of the new Clean Air Act?). Will it be sustainable? Not sure whether they could get new orders for JERRV. FRPT.OB is better for JERRV play because it should have better profit margin (need researches).

Suggested operation:
1. Sell high before the 2Q06 result.
2. Target: 15pe*1.2(my estimation EPS) = 18.

**itor06** Wed May 10, 2006 8:43 pm

05/06/06 SWW

Pros:
1. Management gives good outlook for 06. 06 EPS is estimated to be 0.3-0.33, Industry average PE is 37.5.
2. Revenue over 1b, MktCap only 339m, P/S much smaller than TTEC(919m/1.1b) & SYKE(700m/495m).
3. Recently gain business from France Telcom and a major Telcom in the US.
4. Took over Sony’s contract center in the Europe.
5. A hedge fund pushes to sell the company.
6. Steady up on relative small volume (daily volume/float shares).
7. Insiders buy.

Cons:
1. Lose GM business in the 1Q (Contract expire), their biggest customer, which contributes 100m annual revenue for them.
2. Profit margin is lower than competitors (why?).
3. 05 10K delayed for accounting reason (not big deal).
4. 1Q 06 ER will be reported on 05/11 before open, don’t know the risk.

Minimum Target:
2. Target: 20*0.3=6.

**itor06** Wed May 10, 2006 8:44 pm

Does anybody watching around here?

There is too much noise in Goofiz and no sound here. What a world!