Larry, tim and others - came across your threads on FRCP and started doing my DD. I had avoided this in the past because I usually avoid micros with o/s of over 100 million and multiple classes because they are subject to abuse by management, MMs, hedge funds, pumpers and toxic lenders. However, I now see the capital needs and the potential here so I'm very interested.
As I said, I'm just beginning so forgive me if these are "stupid" questions. Would be great to get answers, if possible, in one place.
1. Competition - I've read the boilerplate in the prospectus but that doesn't say much and is typical CYA. What is the nature of current and potential competition? How tough is it to ramp up an auto company division to do this? Consumer Hummer sales are starting to drop and I read that they have excess capacity. It may be that with the huge demand, it doesn't matter, but it makes sense to determine if FRCP is ahead and what they will do to stay ahead.
How about the Israelis? Huge potential market but I would think that they have some potential competitors. I know that DFNS, which I own, does some armor work with vehicles but not on the scope of FRCP, more add on type work I believe.
How about the Asian manufacturers as potential competitors?
2. Is everything manufactured in South Africa? Is this a negative or positive? Mix? Labor costs v shipping and assembly issues?
3. Other Assembly and manufacturing issues - I take it that they take a truck type body and then put their vehicles together. Who manufactures the truck and can they work with a variety of trucks. How does this affect the ability to rapidly expand by FRCP or by others? (see issue of competition above.)
4. Capital structure and OTC BB status. As you've alluded to, this is the biggest issue in holding back share price IMO. Given the huge demand, why was it necessary to get semi-toxic financing. They have some decent credibility now and I don't understand why they were not able to get $15 million in financing at decent terms. Given the capital structure, they are unlikely to be able to simply for a year or two. Fully diluted does seem to be about 300 million shares. Even though you posted that float is about 73 million, we have the MM games and the naked shorts who will be all over this playing the games so long as they see that this will stay on the OTC BB. If they are to be as successful as the PR's tell us, then a rapid plan for refinancing, possible reverse split and Nasdaq listing may be the way to go. I usually don't like reverse splits, but this may be the only way to really get shareholder value. Either way, this will hold back the share price, with surges on PR and falls back on MM, hedgie and naked short games. Just my opinion.
5. Profit margin - I've been looking for an analysis on how much goes to the bottom line as they ramp up production. I realize that much is fixed now and that profit will be low. As capital intensive as their manufacturing must be, the numbers must change significantly as they ramp up, with variable costs being relatively small. How do those numbers play out given your projections for the next 2 years?
6. Are the vehicles aimed at protection against RPG's of the type used in Iraq? In reading the filings, it's a bit confusing with some being apparently hardened against ballistic weapons, but the scope and extent is unclear. This would seem to be a key issue given how easy RPG's appear to be obtained by terrorists and jihaddists. |
