Here is a post from yesterday on fundlib.com that scares me a lot. Hopefully, this logic is flawed and there is still hope.. any comments?
fundlib.com
Subject: RE: IBIC #5
From: Reality Check
Date: 29-Jul-97-09:56 PM
Back when Ryan started this thread in December he said that for every
million acres of trees that IBIC and Noranda harvest in Guyana, it
would result in $500,000,000.00 profit. IBIC's take would be 40% or
$200,000,000.00.
Wade has continued quoting these figures and says that
$200,000,000.00 profit divided by 140,000,000 shares equals
earnings per share of $1.42. With a price to earnings ratio of say 10
(conservative) you would be looking at a stock worth $14.20 on this
deal alone.
Pretty good story...but has anyone done due diligence on the profit
picture?
Noranda Forest last year harvested approx. 200,000 acres TOTAL
from all their logging operations right across Canada in FY 1996.
These operations produced a profit of $20,000,000.00.
For IBIC to have EPS of $1.42, they would have to realize that profit
in one fiscal year. Noranda has many logging operations in Canada
and as stated, logged 200,000 acres last year. Can we really expect
them to harvest 1,000,000 acres in Guyana in one year. I doubt
it...think about it 1,000,000 acres?? Lets try a more realistic figure
of 10,000 acres (that's still a hell of alot of trees...30 acres a day).
Last year Noranda had a net profit of $100.00 per acre of trees
harvested. Lets use that figure as a benchmark (Noranda is their
potential partner). If they harvest 10,000 acres in Guyana in one
year...$1,000,000.00 profit...IBIC's take, $400,000.00. Or EPS of
1/3 a cent. Try a P/E ratio of 30...yep, a 10 cent stock.
Not considering infrastructure and related startup costs that would
hamper initial profits...that is of course, they get the deal signed. |
