These are points to consider, which I have, so point by point I will give my take:
<XINMAO had sales of about 1.4M for the year ending 3/31/99. This was about $500k or nearly 30% less than 1998. Since LGOV owns 2/3 of XINMAO, LGOV's sales/revenues were around $900k. Costs of sales were very close to sales, so there was a gross profit to LGOV of around $75k. Now the management of LGOV has stated that they are fully staffed with two employees and two "outside service providers". ( I wonder if the hypester is one of the two? ) These four people burn about $513k annually, even after the reductions in salary the hypester previously gloated about. Just in salary. $513k in salary for $75k in gross profit?>
The revenue sucks. Their explanation sucks. I don't care which I'll elaborate on later. Who said the outside service providers were individuals, or that they didn't provide multiple services? I would clarify that point more before jumping on it.
<Don't forget about office rent. $4k per month for two people. No wonder Dan is available to answer the phones at almost any time, he is most likely lost in the office and looking for his desk.>
This doesn't seem like either a large sum or a relatively large rental sum to me. Not worth examination.
<Now we get to XINMAO. The people that generate the money for LGOV. There are reportedly 84 employees that make $46,000 annually. ALL OF THEM - INCLUSIVE Anyone that doesn't see a problem here?>
I would have expected this to be a little higher too, but a billion Chinese willing to work for slave wages isn't news. That's their entry ticket into the world economy. Cheap goods produced by cheap labor. Another company CEO once told me he could hire at least three fully qualified engineers in Malaysia for the price of one in New York State. You complain about high salaries in one paragraph and low salaries in the next one. How's that work?
< Now for the good news. In 1997/98 they lost $2,732,268. Last year they only lost $1,095,991. They only lost half as much in 1998/99 as 1997/98. They only sold half as much also. Does that mean if they quadruple sales, they will quadruple losses?>
You show revenue and earnings tracking in exact proportion to each other. Your conclusion is ass backward from your supporting data. You might want to rethink this one.
<One more minor point. Outstanding shares increased from 179,635,655 in 1997/98 to 182,878,257 in 1998/99. No one has a problem with the additional dilution?>
This is not the direction you want share count to go. My calculation shows this to be an increase of .001805099221791 which in English is less than two one thousanths, or two tenths of one percent. The statistical significance of this is so far out there as to be truly meaningless. It's the statistical equivalant of tipping my paper boy two cents for 5 weeks of newspaper.
<Okay, one last point. Total current liabilities: $5,237,826>
This is ugly too, but brings me to my global conclusion. The pipelines are carried on the books at whatever their depreciated cost is. The nightmare process of replicating this endeavor, even for a huge company, is not reflected in this number. It is and was my belief that what these guys have is potentially extremely valuable to even a major corporation. Like Mobil oil size. The entire current market cap of LGOV is probably less than what Mobil pays for office space. That liability is probably less than what they spend on corporate professional subscriptions. 5 years of groundwork and good will, not to mention the actual physical structures in place could worth a premium over the existing share price. Current operating results haven't diminished the size of the potential market. The other licenses may possibly be unbundled and resold further reducing the acquisition costs.
<Have fun>
Expect to, but without molesting any farm animals.
Disclaimer: I don't own enough to really care what happens. It's a fun lottery ticket that keeps having new drawings. |
