When investment adviser Richard Geist saw Laser Friendly (LFIIF) flash on his computer screen three months ago amid a short list of undervalued stocks, he was skeptical: The issue traded on the Vancouver Stock Exchange, and Geist, like many other U.S. investors, tends to stay away from such stocks, partly because of the inadequacy of information disclosure in the Canadian market. But he took a closer look, since he knew some of the managers involved. Sure enough, Laser Friendly, a high-tech printer for specialty markets, including gaming and pharmaceuticals, looked enticing. (Laser expects to change its name soon to Gaming Lottery.)
Following three years of strong growth, Laser "will double in size almost overnight," Geist thinks. The shares, which started trading on the NASDAQ on June 6, are at 4 3/4. Geist believes they should jump to 9 this year and 20 in the next two years.
Here's why: Laser is working on an acquisition that Geist figures will double revenues and earnings. It's buying "one of the largest U.S. suppliers of gaming products"--but management is keeping mum. Laser has secured $20 million in financing through a private placement of 5 million shares to fund the purchase.
Current shareholder equity of $30 million will jump to $55 million, figures Geist, and book value of $1.50 a share will increase to $2.20.
More important, Geist sees earnings soaring to 64 cents for the year ending Jan. 31, 1996, up from an estimated 38 cents before the acquisition. He thinks the buy will hike revenues to $87 million, up from an estimated $43 million. Competition in the business is stiff, so without this acquisition, Laser is not likely to be among the major players.
Geist reckons that Laser, which operates five printing plants in the U.S. and one in Canada, will continue buying companies. In the past year, Laser acquired Printing Associates, a major maker of online selection slips and terminal rolls for the U.S. lottery and pari-mutuel markets. Laser also acquired Specialty Manufacturing, a producer of break-open pull-tab tickets for bingo and charity gaming.
In late June, the company announced it had signed a contract with the New York State Lottery to supply tickets for a new game called Quick Draw. There will be a drawing every five minutes, so Geist expects ticket demand to be brisk. Laser thinks Quick Draw may eventually put lottery terminals in bars, hotels, and restaurants. In May, the company also won contracts from Kentucky Lottery and YIN 88 Gaming.