NEW YORK, April 21, 2004 (PRIMEZONE) -- (Investrend Research Syndicate) -- Investrend Research affiliate Fundamental Research Corp. has initiated coverage of VHQ Entertainment Inc. (TSX Venture Exchange: VHQ) with a "Buy - 3 (Average Risk)" rating and fair value of C$1.20.
According to analyst Brian Tang, CFA, the company operates a chain of 59 video stores which are strategically placed in secondary and smaller urban markets with little or no direct competition from larger players such as Blockbuster (NYSE: BBI). The analyst notes that this is the same initial strategy used by Wal-Mart (NYSE: WMT) to gain advantages such as lower competition and lower fixed costs. VHQ recently entered the online DVD rental market with the launch of www.vhqonline.ca; at least 9 months ahead of Netflix which announced intentions to enter Canada sometime in 2005.
The initial 16-page report, is available free at www.fundamentalresearchcorp.com and http://www.investrendresearch.com.
Fundamental's initial report mentions that VHQ will likely gain significant first mover advantages as the only major Canadian video store chain to enter the online DVD market in Canada. From an analysis of industry data, the analyst concludes that "DVD has fuelled growth in home movies." Further, "As sales and rentals of VHS movies decline, we believe that DVD will not only replace VHS, but lead to growth in an otherwise saturated market. The driver of this growth is the fact that DVD player owners tend to rent more and purchase more movies than VHS owners. Threats from competing products such as VOD, we believe, are relatively minor."
Tang's C$1.20 valuation of VHQ is based on a DCF model and industry comparable multiples. Forecasts assume that VHQ will be able to successfully implement its online strategy, and carry through with its stated goal of opening 10 new video stores per year in its target markets. Fundamental's geographic analysis has identified 60-100 new potential locations for video stores across certain regions of Canada.
Fundamental Research Corp. is an affiliate of Investrend Research and both subscribe to the "Standards for Independent Research Providers" at http://www.firstresearchconsortium.com.
The fee for Fundamental's standard coverage is $25,000, and a fee is being paid by the company.
Complete information about this company is available at the company's InvestorPower page at http://www.investrend.com/company/list.asp?sPathParam=yes , and the full report, including important disclosures and disclaimers, is available at: http://www.fundamentalresearchcorp.com/PDF/vhqinitiating.pdf and www.investrendresearch.com . Investors are advised to read disclosures carefully before trading in the equities of any enrolled company.
Anyone interested in receiving alerts regarding VHQ Entertainment Inc. research should email contact@investrend.com and distribution@fundamentalresearchcorp.com with "VHQ" in the subject line.