WTEC Research Note

Warrantech, Inc (WTEC)
By: Richard W. West, CFA

SPECULATIVE BUY RECOMMENDATION REITERATED

WARRANTECH ANNOUNCES CONTRACT WITH PERUVIAN RETAILER AND RENEWS FIVE-YEAR CONTRACT WITH ULTIMATE ELECTRONICS

Warrantech announced that Warrantech Peru S.R.L. a subsidiary of Warrantech International, Inc., had signed a three-year agreement with Electrosave S.R.L. Under the agreement, Electrosave will offer point-of ñsale service contracts on all consumer electronic and appliances. Warrantech now has agreements with the majority of the largest retail chains in Peru and now services retailers in several Latin American cities. Warrantech continues to follow its strategy of penetrating new markets throughout South America.

Domestically, Warrantech announced that it had renewed a service contract sales agreement with Ultimate Electronics Inc. (NASDAQ: ULTE) for an additional five years. Ultimate Electronics currently operates 46 toes in 11 states and has plans to open 10 to 12 stores in the coming year. We view this as a positive validation of Warrantechís service to electronic retailers.

VALUATION AND RECOMMENDATION: STOCK HAS MOVED -- BUT STILL UNDERVALUED

Since our initial Research Report was published October 19, 2001, Warrantech has appreciated over 100%, from the recommended price of $0.33 to its current price of $0.70. At present levels, the market capitalization of Warrantech is $11.0 million and the stock is selling at 25% of revenues. At these levels the stock is trading at a price earnings ratio of 5.8 based on our estimates of $0.12 for the year ended March 31, 2001 and based on our estimated earnings of $0.23 for the FY 3/31/03 the stock is trading at a 3.0 P/E ratio. At these levels, we continue to believe the common stock of Warrantech offers investors an excellent speculative opportunity for long-term capital appreciation with moderate downside risk and we reiterate our Strong Speculative Buy on Warrantech Corporation. We reiterate our SPECULATIVE BUY RECOMMENDATION and maintain our price target of $1.75 for a twelve to eighteen month timeframe.

J.M.Dutton & Associates, LLC. John M. Dutton, President and Supervisory Analyst, 801 S. Figueroa, Suite 1120, Los Angeles, CA 90017 Phone (213) 929-2616, Fax (213) 896 0457 Email: [email protected] Web site: www.JMDutton.com

Information, opinions or recommendations contained in this research note are submitted solely for advisory and information purposes. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Such information and the opinions expressed are subject to change without notice. This research note is not intended as an offering or a solicitation of an offer to buy or sell the securities mentioned or discussed. Neither the Firm, its principals, nor the assigned analysts own or trade shares of any company covered. The Firm does not accept any equity compensation. Anyone may enroll a company for research coverage, which costs US $22,000 prepaid for one-year. Reports are performed on behalf of the public, and are not a service to any company. The analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests and insure independence. Please read full disclosure and other reports and notes on the Company at www.JMDutton.com.