A Corporate Communications Corp. Publication ---- All Rights Reserved
Long-Term Report
February 26, 2004
52-week range $4.90-$22.24
Market Cap $1.67M
Shares Outstanding 75M
Book Value $7.84
Price/Book $2.66
Average Daily Vol. 687.8K
Target Price $29.00
Target Percentage 32%
Yesterday, Fremont General reported 4th quarter 2003 operating results. Again, the company announced significantly better then expected results of quarterly earnings of $.94 per share. These earnings were 113% higher than the comparable period in 2002. For the full year of 2003, Fremont General earned $2.98per share, which compares with the $1.55 earned in 2002.
In addition to extraordinary earnings, the company further strengthened its balance sheet. Free cash balances rose to $144 million, loan loss reserves were increased to 1.17% of loans. It should be noted that the loan loss provisions is the highest permissible, even though Fremont’s actual loan loss experience is substantially low. Write-offs during the past year were only .001% of outstanding loans.
Over the past year, the management has successfully streamlined operations and strengthened its dealer organization.
The stock of Fremont General has been a very successful investment since our recommendation last February 2003 at $4.50 per share, which represents a gain of 500% for the past year.
Given the strong operating environment for Fremont General, we estimate the company will earn about $3.65 per share for 2004. Accordingly, we are raising our target price from $23 to $29 per share. At $29 per share, the stock would be selling at a modest 8 times of estimated earnings, which are quite conservative.
UPGRADE; Target Price: $29.00



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