I think that the street is not going to like the CEO collecting "commissions" on sales at the rate of between 8% to 17% or so (I am not even sure if some of these are additive, the language is not clear). Roix' bonus plan calls for the company to have sales of $62.4 MM (hopefully), 36 months hence, with gross profit margins (EBITA) of 20%, ai not sure if this is before or after the CEO getting his cut in form of commissions. What is clear, ROIX is going to do fine, the company, maybe. Justifying a current market cap of $60 MM? I am not sure, we will have to see how the performance goes, and what are those commissions (if the "commission bearing" sales are a very small part of the business, there might be some profits left for stock holders). If one assumes in three years that Croix meets his bonus objectives, then we are talking about $13 MM EBITDA, if we then take off the commissions future taxes (though they will probably not pay taxes for some time) and debt interest, we may end up with, generously half that much, thus, maybe there is (slight) visibility of $6 MM in future profitability. I doubt there is any need to rush and buy this "new company", it would be best to see how the plan weathers the next slow down before making a commitment. Furthermore, I could not find in the 8-k (not the right place, probably) any signs of where the money is coming from to fund the sales growth.
Zeev |
