Apr 1, 2000 12:00 PM

Short Work

Short Work– There's no scorn like that of a disdainful daytrader. When Internet analyst Vik Grover recommends eGlobe as a buy, Anthony Elgindy whacks his recommendation. Buy This Stock! "We have certain standards. At the end of the day, I would be surprised if Anthony even had a diligence file on EGLO. I have a […]

Short Work- There's no scorn like that of a disdainful daytrader. When Internet analyst Vik Grover recommends eGlobe as a buy, Anthony Elgindy whacks his recommendation.

Buy This Stock!

__ "We have certain standards. At the end of the day, I would be surprised if Anthony even had a diligence file on EGLO. I have a 1,000-page file," says an indignant Vik Grover, the Internet analyst at the brokerage firm Kaufman Bros. He adds that he knows EGLO intimately. "I've written about EGLO 20 or 30 times in the last three years. This is my life." On the other hand, Anthony Elgindy, Grover's perpetual pain in the ass, "wakes up one day and pisses on the stock." Here's Grover's pitch for buying EGLO, which was posted on Kaufman Bros.' Web site on January 5:

Vik Grover, CFA
Communications Services
212-292-8123
vgrover@kbro.com
Call the KBRO Trading Desk at 1-800-807-8723
KBRO Research
EGLOBE, INC. (EGLO $5)
RATING: BUY
PRICE TARGET: $12
DEVELOPMENT OF PAC-RIM B2B PORTAL PROMISES TO PUT COMPANY IN THE SPACE OF HIGH MULTIPLE INTERNET COMPANIES

We have learned that EGLO is 75% owner of a Pacific Rim focused business-to-business (B2B) Internet company, with an initial presence in China. The portal can be found at http://www.i1.com. i1.com. Founder Hsin Yen is President of Network Services of EGLO and was instrumental in the development of EGLO's IP voice/fax subsidiary, IDX International, which has a strong presence in the Pacific Rim. Chris Vizas, Chairman and CEO of EGLO, serves on i1.com's Board of Directors. We think the official launch of the portal, which could occur within the next few months, will plant EGLO squarely in the space of high multiple "Internet stocks" that are benefiting from strong growth in demand for B2B and Internet access services worldwide, including VerticalNet (VERT $152 9/16), Harbinger (HRBC $28 9/16), ARI Network Services (ARIS $11 7/8), Pacific Internet (PCNTF $60), Korea Thrunet (KOREA $62 7/8), and Internet Initiative Japan (IIJI $104), among others. In general, these companies have achieved multi-billion dollar valuations despite their relatively nascent business plans. Against this backdrop, we think EGLO's evolution into a "Internet stock" will result in significant incremental interest in the company's story, prompting its valuation to expand during the coming months.

We are meeting with EGLO management next week to discuss the "new" company's business plan, which includes the accelerated rollout of IP voice and fax, unified messaging, remote access to the Internet and VPNs, and &##91;apparently] Internet commerce services to carrier customers worldwide. It is our firm belief that 2000 is EGLO's breakout year, during which the company's misunderstood, global IP-based network strategy will garner significant interest on the Street, which is endorsing emerging Internet business plans with strong valuations. With pro forma (to reflect EGLO's imminent merger with TransGlobal Communications) 2000E revenues of $200MM to $250MM, 2000E positive EBITDA, a blue chip customer base that includes the largest telcos in the world (e.g., Telia, Chungwa, Qwest/US West [Q $43; USW $66 9/16], SBC &##91;SBC $44]), a strong management team capable of building a billion dollar run rate company (e.g., Mr. Vizas founded Orion Network Systems, which was sold to Loral [LOR $22 1/8] for several hundred million dollars a few years ago), and a full arsenal of IP-based voice, data, and e-commerce services, we see significant upside to this forgotten next-gen telco.

Given the development of a Pacific Rim B2B portal, which is in a space of unprecedented demand on the part of investors (e.g., see yesterday's ISP acquisition and portal launch in India by STARTEC Global [STGC $27; STRONG BUY], which resulted in a 100%+ move on record volume), we recommend investors aggressively buy EGLO at current levels, which represent an estimated pro forma diluted enterprise value of roughly $400MM, or 1.5-2x 2000E revenues. We reiterate our BUY on EGLO. Our price target remains $12, which implies an enterprise value of $1BN, or 4-5x pro forma 2000E revenues, well below the valuations of other emerging international ISP/B2B peers.

For Vik Grover's full coverage of eGlobe, visit Kaufman Bros.' research database atwww.kbroresearch.com.

This report is for informative purposes only. Under no circumstances is it to be construed as an offer to sell or a solicitation to buy any security. The information contained herein has been obtained from sources believed to be reliable, but its accuracy and completeness, and that of the opinions based thereon, are not guaranteed. Kaufman Bros., L.P., its affiliates and subsidiaries, and/or its officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein. Kaufman Bros., L.P. may also perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this report.

This Stock Sucks!

__ "Hey Vik, I make millions shorting your strong buys," is Anthony Elgindy's response to Grover. "EGLO was easy and obvious. Keep picking them turds, Vik." Here's his January 10 post to his followers, regarding Grover's assessment of EGLO.

Pacific Equity Investigations initiates (NASDAQ: EGLO) with an immediate Sell / Short Sell recommendation and a short term price target of 4 dollars per share and an intermediate term price target of 1 dollar per share. The stock doubled Friday to 9 3/16, and traded up to 13¼ in aftermarket trading.