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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area

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To: PuddleGlum who wrote (3231)	1/19/2003 4:15:36 AM
From: Crossy	Read Replies (1) of 37387

re: MPOW.OB (Mpower Communications Inc.) @ $0.25 I did some calcs on MPOW and found that right now Book Value per share is around $1.65-1.70 including EVERYTHING .. gain on repurchase of debt, asset sale, EBITDA negative of $23m (very conservative assumption) for last quarter etc.. The real shame is that the "standstill agreement" between (I think ASPEN) and MPOW expires Monday and today the report was published. GRRR... Even without revenue increases (likely if they concentrate Selling activity in 3 states) I firmly think they will do better than stated. Why ? 1) MPOW projected Gross Margins of 40-45%. This is way too low IMHO. Notice that they kept colocations that were all T1 equipped vs. all the non T1 they sold plus Florida. So Gross Margins MUST BE HIGHER. My minimum is 50%. 2) MPOW shed more SG&A related personnel in the process. The asset sale brought 40% reduction in employees which were transferred to the new owners for reapplication. MPOW now has 900 emps (instead of 1500 previously) 3) Some RB posters alleged MPOW to shed additional 40% of their workforce AFTER the asset sale took place. Would bring the total down to 550 positions and would bring MPOW into the productivity ratios of Telepacific - same footprint, under 400 emps.. Let me model my P&L assumptions (in a MONTHLY fashion) 1) monthly historical base until asset sale - most pessimistic data, using Q3 figures extrapolated Revenues: $19.2m - COG Sold : -$11.5m (60%) GROSS MArgin : 7.7m (40%) - SG&A : -13.4m EBITDA : -5.7m D&A : -1.9m EBIT : -7.6m 2) New ratios after asset sale Revenues : $12m -COG % : -6.6m (55%) GM : 5.4m (45%) SG&A : -5.9m EBITDA : -0.5m D&A : -1.2m EBIT : -1.7m Now I think that Gross Margin is understated. If it would get to 50% we would be EBITDA positive. If SG&A would be reduced by further 40% we would save another $2m DIRECTLY APPLICABLE TO THE BOTTOM LINE Telepacific is almost assured as a merger partner IMHO.. best rgrds CROSSY

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