Message-ID: <25842546.1075845224749.JavaMail.evans@thyme> Date: Wed, 6 Jun 2001 11:44:41 -0700 (PDT) From: textsf@stockfirst.com To: alewis@ect.enron.com Subject: Research Report - ELEC Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: STOCKFIRST @ENRON X-To: alewis@ect.enron.com X-cc: X-bcc: X-Folder: \Lewis, Andrew H.\Lewis, Andrew H.\Deleted Items X-Origin: LEWIS-A X-FileName: Lewis, Andrew H..pst **********RESEARCH REPORT********** from STOCKFIRST and TheInvestorOnline www.stockfirst.com www.theinvestoronline.com _____________________________________ eLEC Communications Corp. (Nasdaq: ELEC) Recommended: 01/04/01 - $1.03 Price as of: 06/01/01 - $1.01 Target: $3.00 52 Wk Range: $0.406 - $3.469 Market Capitalization - $14.9M Shares Outstanding - 14.9M Float - 13.3M Daily Volume (3-month avg) - 48.5K Daily Volume (10-day avg) - 41.0K Delayed Quote - http://quote.yahoo.com/q?s=elec&d=v1 * Financial Summary eLEC Communications Corp. is a full-service telecommunications company that focuses on developing integrated telephone service in the local exchange carrier industry. eLEC reported revenues for the first quarter ended February 28, 2001, of $4,730,647, an increase of $2,504,414, or 141%, over the revenues from the first quarter of fiscal year 2000. The company also reported a net loss of ($1,473,772), or ($0.10) per share, and an EBITDA loss of ($1,105,976), or ($0.08) per share for the quarter ended February 28, 2001. These amounts compare to a net loss of ($648,900), or ($0.06) per share and an EDITDA loss of ($524,372), or ($0.04) per share for the prior year quarter. The gross profit increased by approximately $933,000 to $1,674,808, or 35.4% of revenues, for the fiscal 2001 quarter, from $741,777, or 33.3% of revenues, for the fiscal 2000 quarter. * Business Description eLEC Communications Corp. is a full-service telecommunications company that focuses on developing integrated telephone service in the emerging competitive local exchange carrier industry. The Company offers an integrated set of telecommunications products and services, including local exchange, local access, domestic and international long distance telephone, calling cards, paging, Internet access, dedicated access, high speed access via Digital Subscriber Lines (DSL), Website design, Website hosting, Internet-based yellow pages directory listings and other enhanced telecommunications services. eLEC is a competitive local exchange carrier, a "CLEC," and they are building the company using the unbundled network element platform ("UNE-P"). The UNE-P service offering is the most rapid and profitable way to enter a new market. The Company believes that it is more important to build a customer base first - before building the network. Using this method, eLEC is able to use their capital resources wisely and avoid the high cost of underutilized facilities. Furthermore, eLEC believes that a large portion of their UNE-P base will eventually migrate to packet telecommunications offerings, such as local voice over DSL. Therefore, the most intelligent way to build their business is to lease circuit-switched equipment via UNE-P and build a packet-switched network. Visit the Company's website at www.elec.net More from Investors Spotlight - www.theinvestoronline.com/research/elecspotlight.htm * Analyst Summary eLEC's chart has show quite an improvement lately and is now in the midst of what technicians refer to as a flag formation. A flag formation is one in which the stock is consolidating in a rectangular tight range for 3-15 days following a big move. This is considered a bullish consolidation when following an up-move and is usually the half way point in a move. If the stock breaks out to the upside, look for a probable move from the breakout equal to the distance from the beginning of the move to to the top of the flag, which would be $1.29 [See chart ($0.53 to $0.92 = $0.39, $0.92 + $0.39 = target of $1.31)]. Flags reach their target 86% of the time and once a breakout occurs only fail 4% of the time, so this stock looks good right now. Bullish consolidating flags like this one breakout to the downside 14% of the time. The stats are with us on this one. Good luck. We believe the stock has a $2.50 a share value on price to sales and a $3.00 discounted value on price to book. We also believe it's a speculative value play based on sales growth and assets alone. If they reach profitability in 2001, they could be valued near $7. Much of eLEC's value resides in their approach to the market, which allows for rapid market entry via the UNE-P service offering, with high growth potential, a very large addressable market, and high margins. Additional strength is provided due to no stranded plant costs, no costs associated with technological obsolescence and no costly delays that occur when a company has to install equipment in the field. The Company will reach breakeven much sooner than most companies and they will do it with flexibility - which is very important in a dynamic marketplace. eLEC is not captive to their own network, like many other companies. Other companies have a relatively small addressable market and are forced to overspend on marketing in order to attract customers to their network. eLEC has a ubiquitous reach in each state in which they are licensed. 85 million lines as an addressable market in 26 states. When eLEC receives licensing in all 48 states, the addressable market may be approaching 200 million lines. Rapid market entry, high margins, ubiquity, no equipment installations, no salesmen carrying around network maps, the ability to telemarket the entire state, ability to service multi-location businesses within the state and with multistate presences. eLEC attracts customers first, building a customer base, instead of putting equipment in the field first, like everyone else has. The Company is, in essence, a virtual LEC. They are using the existing infrastructure of the incumbents to further their business so they can 'own' their customers. They are provisioning DSL in Orlando FL from Norwalk, CT, without having any equipment in the field (The Company is virtual). eLEC runs their DSL pipe thru 3 ATM clouds owned by the incumbents. eLEC controls the bandwidth and services for the customer by capping both ends of the pipe. We know of no one else who is doing this. eLEC Communications Corp. is creative, flexible and talented. The spending to build networks has come back to haunt many of those that went with the network first plan. Those companies are now scrambling to stay alive. eLEC's model of building the customer base first appears to be the answer. Kaufman Bros, LP recently initiated coverage with a Buy, go to www.kbroresearch.com for report. Visit the Company Website at www.elec.net and go to www.theinvestoronline.com/research/elecrep3.html to see complete Research Report. -------------------------------------------------------------------------------- IMPORTANT DISCLAIMER TheInvestorOnline is an independent electronic publication providing information on selected public companies. Any company profiled by TheInvestorOnline pays cash or stock consideration for the electronic dissemination of the company's information for a specified time period and/or our comments about the company and/or our development of the company's website. 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