Sterling Investment Services

SMALL CAP RESEARCH REPORT
October 22nd, 1999

STRONG BUY RECOMMENDATION
3rd Follow Up Report
Greg Manning Auctions, Inc. ‘GMAI’

The Company believes,  based on its knowledge of the market, that it is one of the largest  auction houses of stamps in the world  (although there is no publicly  available  data with respect to stamp auction  sales).  In addition to stamps,  stamp  collections  and stocks,  the  Company’s  expanded  product line includes items such as sports trading cards and memorabilia, movie posters, fine art, rare coins, diamonds, comic books, Hollywood and Rock and Roll Memorabilia, manuscripts and autographs.

During 1999,  the Company signed a joint  marketing  agreement with AT&T Labs to promote Greg  Manning’s  high-end  auction  services and AT&T Labs’ DjVu  technology on AT&T Worldnet  Services Home Page. The Company also signed a
definitive agreement with Butterfield & Butterfield,  a wholly-owned  subsidiary of eBay Inc.,  under which Greg Manning will be a significant  participant  in a future initiative by e-Bay to feature premier offerings of collectibles and fine art from around the world.  The  Company’s  websites  are:  WWW.GREGMANNING.COM,    WWW.TELETRADE.COM, and  www.gmai-asia.com.
Recent Events:

Growth Potential:
We believe that Greg Manning Auctions will be able to increase its revenue to approximately $100 million in the next fiscal year.  Our earnings per share estimate is $0.50/share.
Comparables:

ONSALE, Inc. ‘ONLS’ mention merger with egghead,  and widening loss.  (left off on the updating the comparrison table with Ubid)

Our Analysis:
By all measures of valuation Greg Manning Auctions is the lowest valued of the publicly traded auction companies.  Due to the lack of profits among our comparables a direct comparison of Greg Manning based upon profits is difficult.  The fact that Greg Manning is profitable is a very large positive for the stock..  The most effective direct comparison is based upon a market capitalization multiple to sales.  For accuracy, we will remove eBay from the comparables, because eBay’s absurdly high number distorts the results.  Removing eBay from the multiple of sales brings the average among the comparables to 4.97.  This means that the average auction company has a market capitalization equal to 4.97 times its annual sales.  A similar valuation for Greg Manning Auctions would produce a market capitalization of $223 million.  This would translate into a per share price of $33.85/share.

To the best of knowledge there are only six publicly traded auction companies.  Of these six companies only three of them are profitable;  Greg Manning Auctions,  eBay,  and Sotheby’s Holdings.  The extremely high and unrealistic market valuation of eBay does not make in an attractive investment in our opinion.  In our opinion eBay would need to generate in excess of $3 Billion in annual sales to justify its current market capitalization.  The main purpose of business is to generate profits,  otherwise it would be a charity or a government enterprise.   Sterling Investment Services has serious doubts as to the ability of the auction companies that specialize in used computer equipment and other commodity items to generate substantial profits.  It is one of our beliefs that when investing in a company,  the focus needs to be on their ability to produce substantial and sustainable profits.  Removing eBay from our list of three profitable auction companies leaves us with Sotheby’s and Greg Manning Auctions.  By all measures of comparison Greg Manning Auctions is significantly undervalued when compared to Sotheby’s.  We feel this creates very significant upside potential for the shares of Greg Manning Auctions.  In fact, when compared to all five of the other publicly traded  auction companies,  Greg Manning Auctions has the lowest market capitalization,  price to book,  price to sales,  and price to earnings ratios.  This in our opinion makes Greg Manning Auctions the most attractive of the companies within this industry.
Our Recommendation: Strong Buy
Sterling Investment Services is placing a “Strong Buy” recommendation on the shares of Greg Manning Auctions,  NASDAQ Ticker symbol ‘GMAI’.

Contact Information

For an investment relations package on the company please contact:  Greg Manning Auctions  (973) 882-0004

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Disclaimers:
Sterling Investment Services, Inc. is an independent research and investment management firm.  Sterling Investment Services, Inc. did not receive any compensation for the production of this research report.  Sterling Investment Services, Inc. is a shareholder in Greg Manning Auctions though its own account and accounts that it manages.  Sterling Investment Services, Inc. publishes 3 daily newsletters.  You are invited to sign up for a free trial offer to any of our services listed below.

The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc.  If you would like to receive a chart on any index or stock mentioned in this report please contact us at the below mentioned numbers.  We also offer custom research reports on any stock investment that you may desire information on.  To receive further information on these services please visit our web page at:  www.sterlinginvestments.com   If you would like to contact us our # is 800-275-6901,  fax # (404)-816-8830  Email address is: enelson@sterlinginvestments.com  Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.