I just today received the Proxy Statement and, frankly, I don't see anything in there to give us a clue as to which way LUNN will go post-merger. The key will be whether TPG hits or even approximates the earnings target of approx. $4 million. If it does, we'll get a high P/E stock; if it doesn't, look out below. Assuming ATPX hits 90 cents a share in EPS, with the TPG part performing roughly as expected, I reckon that we're looking at a post-merger price not too far in the future of $18-22.50 (that is, 20-25 earnings). Given the 1:10 merger adjustment, each share should upon merger approval be worth at least $14.50 a share (10 times current market price). Thus, upside is approx. 25-50%. My downside analysis is that both companies double what they did in the first half, giving us about $3 million in net income on 4 millon shares (I get this from the charts on pages 9 and 16-17 of the Proxy), resulting in 75 cents per share EPS. The disaapointment of this would, IMHO, give us a 12-15 EPS multiple, and a price of $9-11.25.
I don't know how we can predict which scenario is more likely. Anyhow, I thought I'd throw these numbers out as some food for thought. |
