July 4, 2002

ATP Oil & Gas Corporation (ATPG on NASDAQ), Houston TX, tel: (713) 622-3311. Price: July 3/02: $3.05, 52-week range: $12.00-1.47.  Last mention of the company in this newsletter was at $3.50 on April 15/02.  Gas production in 1Q02 was unchanged from that of 4Q01, averaging 78 Mmcfe/d but prices realized were higher generating cash flow of $11.5 million, or 56 cents/sh, based on 20.3 million shares out.  The company is paying down its credit facility $2 million a month so that ATP is getting a good return on the remaining 5.5 million of generated funds committed to development.  The company has agreed to repay $18 million of its current credit facility over the remaining 9 months of the year.  It expects to generate $34 million of cash flow during this period allowing it to spend $16 million on development expenditures on South Marsh Island and Eugene Island in the Gulf of Mexico as well as some on Block 47/10 of the Helvellyn Field in the southern North Sea.  If the company is successful in its juggling act with generated funds, bank debt will be down to $48 million at year-end from $70 million at the start of the year and would then be in a stronger position to negotiate a new facility in order to accelerate growth.  In the meantime, the stock is cheap trading at 1.4 times anticipated cash flow of $2.20/share in 2002.  A 2.5 multiple brings the share price to $5.50

Alimentation Couche-Tard Inc. (ATD.B on TSX), Laval, QC, tel: (450) 662-3272     Price: July 4/02: $33.95, 52-week range: $35.25-15.50.  Last mention of the company in this newsletter was at $34 on April 15/02 and first mention was on Sept 28/01 at $17.50.  The company is continuing to expand in the US.  It has acquired another small chain, this time the 16 Handy Andy convenience stores in the Indianapolis area which will contribute $31 million in sales.  This brings the total to 247 US stores, in the right direction for attaining the targeted 1000 stores.  This goes along with the 1710 stores in Canada.  Furthermore, Couche-Tard has placed a US$80 million bid for the 450 store chain of Hudson, Ohio based Daisy Mart Convenience Stores Inc., operating under bankruptcy protection, and expects to know the results of this bid by August. Meanwhile, the company announced results for fiscal 2002 ended April 28, 2002.  Sales for 4Q increased 52% to $566 million.  Same strore sales grew 2.7%.  For the full year, sales increased 46% to $2.4 billion.  Same store sales grew 5%.  Net earnings for 4Q were $8.7 million, or 20 cents/sh compared with $3.9 million, or 10 cents/sh.  For the year, net was $49.1 million, or $1.21/sh compared with $29.3 million or 77 cents/sh.  Operating income for the latest quarter was up 38% to $22.6 million, providing a profit margin of 4%.  For the year, operating profit was up 37% to $124.8 million, producing an operating profit margin of 5.1%.  The company has declared a 2 for 1 stock split to take effect July 19.  Earnings appear to be headed toward $1.40 (70 cents split)/sh for 2003 and $1.60 (80 cents split)/sh next year. A 25 multipe to this years earnings and a 22.5 times multiple to next year’s implies a $35 to $36 share price, or $$17.50 to $18 on a split basis.

Ashanti Goldfields Company Limited (ASL on NYSE), Accra, Ghana, tel: (212) 697-9191. Price: July 3/02: $5.45, 52-week range: $6.50-3.05.  Last mention of the company in this newsletter was at $2.25 on April 8, 2000.  Ashanti’s gold production from 7 gold mines in Africa was 1.66 million ounces in 2001, down from 1.74 million in 2000.  The company has recently straightened out its balance sheet by means of a series of manouvres consisting primarily of an early redemption of exchangeable notes, an early exercise of warrants and the completion of a new $200 million credit facility.  The end result is that there will be less shareholder dilution than originally proposed, more working capital and an improvement in the debt to equity ratio to 35% from 53%.  This should free up Ashanti to spend money developing and bringing into production higher grade gold reserves at its Obuasi complex in Ghana.  Issued stock will eventually increase from 113 million shares outstanding to 157 million.  Lonmin PLC holding would increase from 36 million shares to possibly 45 million bit its share ownership would drop from 32% to 28%.  Government of Ghana’s holding would increase from 22 million shares to possibly 27 million but its ownership would drop to 17% from close to 20%.  Although Ahanti’s hedging program would now be unconditionally margin free, the hedging is, nevertheless, still there and therefore limits the upside potential if gold prices were to increase substantially.  Earnings and cash low for 2002 are now pointing to 57 cents/sh and $1.05/sh and for 2003 the estimates are for 58 cents/sh and $1.10/sh.  Based on this and bearing in mind the lesser potential of a takeover because of political hang-ups, a share price of $6 to $6.50 over the next year appears to be reasonable.

CIT Group (CIT on NYSE), New York, NY, tel: (212) 536-1390. Price: July 3/02: $23.  Last mention of the company in this newsletter was at $36 on May 12, 2000 at the time it was being taken over by Tyco International.  First mention of CIT was at $20.75 on Dec 26/99.  When Tyco bought CIT it paid the equivalent of $9.5 billion for the company and now by selling to the public the entire CIT by means of 200 million shares at $23/sh, the price tag becomes $4.6 billion.  The fact of the matter is that while CIT was in the Tyco stable a fair amount of cleaning up took place.  Lower return businesses were disposed of, operating expenses were reduced by $150 million and tangible equity ratios were improved.  Company management has not yet provided guidance for earnings nor has a dividend policy been established but earnings for this year should be about $3.50/sh and next year’s should trend higher.  That being the case, a 8 times multiple to earnings would indicate a stock price of $28.

Chittenden Corp (CHZ on NYSE), Burlington, VT, tel: (802) 658-4000, Price: July 3/02: $27.76, 52-week range: $34.18-21.75.  This is the first mention of the company in this newsletter.  Chittenden is a bank holding company (currently has 5 separate charters) with total assets of $4.4 billion.  Its subsidiaries include Chittenden Bank, The Bank of Western Massachusetts, Flagship Bank and Trust Company, Maine Bank & Trust Company, and Ocean National Bank.  It is the dominant bank in Vermont and has been diversifying through acquisitions outside the state, namely in Massachusetts, Maine and New Hampshire.  Its business is weighted toward commercial banking.  With the out of state expansion, 47% of total loans are now outside Vermont.  Recent returns are 16% on equity and 1.44% on assets.  Earnings are estimated at $1.92/sh for 2002, up from $1.80/sh in 2001 and street estimates are for $2.07 in 2003.  The company recently raised its dividend to 20 cents paid quarterly.  Chittenden expects to report 2Q earnings on July 17.  A 15 multiple to next years’ earnings implies a stock price of $31.

Christopher & Banks Corporation (CHBS on NASDAQ), Plymouth, MN, Tel: (763) 551-5000. Price: July 3/02: $40.02, 52-week range: $44.80-14.81.   Last mention of the company in this newsletter was at $37.25 on April 15/02 and first mention was at $7.29 on April 8/00, adjusted for splits.  The company continues to do exceedingly well.  Total sales for the 4 weeks ended June 29/02 rose 36% to $23.5 million.  Same store sales were up 13%.  For the 4 months ended June 29, sales increased 35% to $101.2 Million and during that period same store sales increased 11%.  At June 29, 2002, the company operated 392 stores compared to 319 on June 30, 2001.  For 1Q ended June 1, 2002, net income increased 49% to $9.8 million, or 37 cents/sh.  Based on 25.5 million shares outstanding, street estimates are for earnings of $1.65/sh for this year and $2.00 for next year.  Giving a 25 multiple for next year’s outlook, based on what appears to be an established growth record, implies at stock trading price of $50 over the next 12 months.

Commerce Bancshares (CBSH on NASDAQ), St.Louis, MO, tel: (816) 234-2081, Price: July 3/02: $43, 52-week range: $46.85-32.98.  This is the first mention of the company in this newsletter.  The company is a bank holding company with $12.3 billion in assets and conducting business through 340 locations in Missouri, Illinois and Kansas.  The bank is expected to announce 2Q earnings on July 10 of 73 cents/sh up from last year’s 69 cents.  Street estimates for the year are for $2.96 compared with last year’s $2.73 and are expected to gain another 10% next year to attain $3.30/sh.  Recent return on assets has been 1.55% and return on equity 15.2%. Dividends have increased for 34 consecutive years.  The company has a share buyback program to repurchase 3 million shares (65.6 million outstanding) and purchased 118,000 in the 1Q.  Because this bank holding company is on a growth curve, a p/e multiple of 15 could be awarded the stock, implying a possible share price of $49.

First Midwest Bancorp (FMBI on NASDAQ), Itasca, IL, tel: (630) 875-7450, Price: July 3/02: $26.65, 52-week range: $32.16-23.04.  The company, with assets of $6 billion is a banking company conducting business through 70 offices in 40 communities primarily in northern Illinois and, in particular, in and around the suburbs of Chicago. 1Q earnings were strong, 45 cents/sh vs. 38 cents producing a return on assets of 1.55% and a return on equity of 19.4%.  Earnings for 2Q should be announced on July 17 and are expected to equal the strong 1st quarter results.  For the year, the company is forecasting growth of 11%-12%.  This implies earnings of $1.83/sh.  Street estimates for next year average $2.00.  The bank has an active share buyback program, purchasing about 500,000 shares each quarter.  There are 48.5 million shares outstanding.  5 for 4 stock splits have taken place in December 2001 and in December 1999.  Because of its growth curve, the bank’s stock could be awarded with a 15 multiple to earnings, implying a stock price of $30 over the next 12 months.

MAAX Inc. (MXA on TSX), Ste-Marie-de-Beauce, QC, tel: (418) 387-3641, Price: July 4/02: $20.46, 52-week range: $21.75-8.70.  Last mention of the company in this newsletter was at $12.55 on March 1, 2000.  The company reported excellent results for the 1Q ended May 31, 2002.  Sales were up 20% to $162 million and on the strength of better margins at 10.2% vs. 8.7% earnings excluding goodwill amortization increased by 42% to $10.8 million, or 44 cents/sh, from $7.5 million, or 31 cents/sh.  The bathroom & kitchen division accounted for 85% of sales and were up 16% to $133 million.  Sales in the spa division, which had been a laggard, were up an impressive 46% to $29 million and represented 15% of sales.  MAAX, in the last 2 years, has taken on the production of kitchen cabinets to go along with their well-established bathroom items, mainly showers.  Home Depot continues to be the company’s most important customer.  MAAX has been opening more showrooms closer to customers and has, also, been able to make use of excess manufacturing capacity to accommodate the increasing demand for high-end kitchen and bath products. Earnings should attain $1.35/sh this year, fiscal 2002, based on 24 million shares outstanding.  A premium multiple of 20 times, indicative of good growth potential, points the way to a $27 share price.

Old National Bancorp (ONB on NYSE), Evansville, IN, tel: (812) 461-9099, Price: July 3/02: $24.88, 52-week range: $26.00-22.38.  This is the first mention of the company in this newsletter.  Old National is a $9.2 billion bank holding company headquartered in Evansville, Indiana and operating 140 banking offices in Indiana, Illinois, Ohio, Kentucky and Tennessee.  1Q earnings were particularly strong at $27.9 million a 26% improvement over last year $22.1 million.  On a per share basis, the increase was 31.4% to 46 cents/sh vs. 35 cents, based on 61.2 million shares out , down from last year’s 63.1 because of an ongoing stock repurchase program.  Street estimates are for earnings of $1.82/sh this year and $1.95 for next year.  A 14 multiple to next year’s earnings implies a stock price of $27.30.  The company is expected to announce 2Q results on July 25 at which time a better understanding of prevailing trends will add visibility.

Purcell Energy Ltd. (PEL on TSE) Calgary, AB, tel: (403) 269-5803, Price: July 4/02: $2.60, 52-week range: $4.23-2.35.  Last mention of the company in this newsletter was at $3.05 on Jan 23/02.  1Q02 production averaged 4,689 boe/d down from 4Q01 production of 5,111 boe/d and 3Q01 production of 5,196 boe/d.  This compares with average production rate of 4,604 for all of 2001.  Management indicates that it anticipates reaching its target of 6,000 boe/d for 2002.  It will be interesting to see where the company stands on this when reporting 2Q results around August 20.  The company has been employing the cash flow generated from its first class Fort Liard project, which produces gas at a rate of 21 Mmcf/d, and applying it to exploration and development elsewhere.  This applies to oil in Alberta at Rainbow and Sturgeon Lake and in Saskatchewan at Grassdale and Griffin.  For natural gas, development is taking place in Alberta at Peco and Nisku.  Last year, Purcell bought back 2.2 million shares at an average price of $3.51/sh.  This year, the company has put into place a buyback program for 2.3 million shares.  There are currently 26.8 million shares outstanding.  The company may very well feel more inclined to pay down some of the $27 million of debt.

Reitmans (Canada) Limited  (RET.A on TSE), Montreal, QC, Tel: (514) 384-1140, Price: July 4/02: $41, 52-week range: $47.00-18.05.  Last mention of the company in this newsletter was at $33.71 on April 15/02 with the first mention being at $25.75 on Jan 23/02.  The company continued on its growth track reporting 1Q03, period ended May 4/02, sales increase of 8% to $126 million.  Comparable store sales increased by 2%.  Net earnings increased by 21% to $5.1 million, or 60 cents/sh. and represents a net profit margin of 4.07%.  These results do not include those of Shirmax, which purchase transaction closed on June 7, 2002.  Reitmans, inclusive of Shirmax, nw operates 801 stores through 7 divisions: 328 Reitmans, 149 Smart Set/Dalmys, 122 Penningtons, 28 RW&CO, 69 Addition-Elle, 39 Addition-Elle Outlet and 66 Thyme Maternity.  The company is on target to produce sales revenues of $760 million.  If margins are maintained at 4%, this would produce net income of $30.4 million, or $3.50/sh based on 8.7 million shares outstanding.  A minimum 15 multiple to these earnings produces a share price of $52.

Sobeys Inc (SOB on TSX), Stellarton, NS, tel: (902) 752-8371, Price: July 4/02: $42.45, 52-week range: $45.75-22.50.  Company, which has its origins in 1905, operates a food retail & distribution network in Canada consisting of 1350 stores and 27 distribution centers.  400 are corporate stores and 950 are under franchise.  Banner names are primarly IGA 550 stores, Sobeys 134 stores and Price Chopper.  In addition, company operates 65 Lawtons drugstores in the Atlantic provinces.  Total sq.footage of selling space has been increasing from 20 million in 2001 to 21.6 million in fiscal 2002 and currently stands at 22.6 million sq.ft. in this now being fiscal 2003.  Company sold SERCA, its food service operations, to Sysco Corporation (SYY on NYSE) for $411 million on March 30, 2002 in order to concentrate on retail distribution.  In so doing, Sobeys debt to capital ratio was lowered to 29% from 43$.  For fiscal 2002 ended May 4, 2002 and excluding SERCA sales increased 6.2% to $9.73 billion, 4Q sales increased 5.7% to $2.42 billion.  Same store sales including those that had in-house expansion increased 4.9% during the year and 3.7% in the most recent quarter.  Operating earnings, ex-SERCA, were $142 million, or $2.25/sh, for the year up from last year’s $91 million, or $1.50/sh.  4Q operating earnings were $37 million, or 56 cents/sh compared with last year’s $25 million, or 39 cents/sh.  Trading margins in the 4Q improved to 4.28% from 3.72% a year ago and for the full year to 4.09% from 3.51%.  Company has just increased its dividend by 50% to 9 cents quarterly.  This year, fiscal 2003, changes in accounting relating to amortization will be kicking in with the effect that reported earnings will be higher.  Had fiscal 2002 been reported on this basis, operating earnings would have been $2.45/sh rather than $2.15.  For the current year, management is forecasting an increase of 14% in earnings on a 7% increase in sales.  This implies operating earnings of $2.80/sh.  If markets award a p/e multiple of 18 to these earnings, Sobeys stock would then trade at $50.

Sovereign Bancorp (SOV on NYSE), Philadelphia, PA, tel: (877) 768-2265, Price: July 3/02: $13.81, 52-week range: $15.90-8.13.  This is the first mention of the company in this newsletter.  Sovereign headquartered in Philadelphia is the parent company of Sovereign Bank, a $37 billion financial institution with approximately 530 community banking offices in Pennsylvania, New Jersey, Connecticut, New Hampshire, Rhode Islandd, Massachussetts and New York..  It is currently the 3rd largest in Pennsylvania and the 3rd largest in New England.  Much of its size was created by integrating the retail branches of BankBoston in New England, divested due to the Fleet transaction.  Sovereign is in transition to switch into a bank charter from a thrift charter which should materialize over the next year and a half.  Charter banks command a higher P/E ratio in the market place, 14 to15 times vs. 11 to12 for a thrift.  A good example of this is the recent transition involving Charter One, currently trading at a 14 multiple.  Management has provided guidance indicating earnings of 32 cents/sh for 2Q02 and $1.30/sh for the year, $1.45 for 2003, $1.75 for 2004 and $2.00 for 2005.  If this materializes, a share price of $30 could be attained at some point 2 to 3 years down the road.  Nearer term, SME stock could trade at 14 times anticipated earnings of $1.45 for next year, bringing it to $20.

Storm Energy Inc.  (SME on TSE) Calgary, AB, Tel: (403) 264-3959, Price: July 4/02: $14.17, 52-week range: $15.49-7.55.  Last mention of the company in this newsletter was at $9.70 on Jan 23/02.  First mention was at $2.30 on Dec 26/99.  Storm intends to reorganize through a plan of arrangement that would see its shareholders receive units in a new oil and gas income trust that will hold approximately 75% of Storm’s assets (weighed largely to natural gas), and a separate high-growth, exploration-oriented producer (New Storm) that will hold certain of Storm’s light oil weighted assets and undeveloped lands.  Shareholders would receive a proportionate number of common shares of New Storm as currently held in Storm Energy and a proportionate number of trust units in the income trust, or at their choice, a proportionate number of exchangeable shares.  The rationale in effecting such an arrangement is to help defer an estimated $10 million of current taxes in 2003.  Shareholders will be asked to vote on this at a meeting planned for a date prior to August 20, 2002.  Since the company continues to meet with excellent results from exploration and development, the proposed arrangement should work out very well for SME stockholders.

TouchTunes Music Corporation (TTMC on OTC BB), Las Vegas, NV, tel: (702) 792-7405, price: July 3/02: $0.35, 52-week range: $1.15-0.25.  This is the first mention of the company in this newsletter.  The company is involved in the digital distribution of music content to interactive, music-on-demand applications.  The first such interactive music-on-demand application is its digital jukebox.  Revenues are generated fromsales and leases of the Digital Jukeboxes to jukebox operators in the US as well as from the music service contracts associates with such sales.  As at March 31, 2002, the Company had delivered a total of 4,925 Digital Jukeboxes as compared with 3,270 on March 31, 2001.  The company appears to be approaching profitability, judging by 1Q results for the period ended March 31/02.  Over the last 4 quarters, TouchTunes has generated sales revenues of  $21.1 million.  March revenues were $5.9 million ompared with $4.3 million a year ago.  This produced an operating income of $65,623, its first.  Breakdown of the $5.9 million indicates that revenues from Digital Jukebox sales amounted to $2,950,000 compared with last year’s $2,221,000; music service revenues were $1,662,000 compared with $924,000 and Digital Jukebox leasing and financing revenues were $1,080,000 compared with $1,126,000.  The improvement in profitability has come about through a restructuring which involved cutting payroll to 92 from 140.  Management considers the company has a 35% share of the market.  It points out that of the 250,000 to 350,000 jukeboxes operating across the US only about 4,000 a year are being replaced with those of the newer technology.  The company appears to be on tract to sell 1,800 units this year.  To date, the company has been financed by the Canada Economic Development fund in conjunction with the National Bank of Canada and by three arms of the giant Quebec pension fund, Caisse de Depot.  While there appears to be 14.8 million shares outstanding, there could be an additional 13.3 million shares to the Caisse de Depot.  In fact, all told there could end up being 43 million shares outstanding, 62% of which would be owned by the Quebec pension fund.

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