"RNTK has a subsidiary that makes money." Not really.
RNTK has Ontek and ITN. With $2 million revenues a year, at a generous EBIT margin of 30%, Ontek is contributing $600,000 a year. Let's say that goes up to $4 million; that's a contribution of $1.2 million a year. Ok, so no RNTK only has a loss of $2.8 million. Lets go to ITN. That operation has not even started up yet. It's been delayed twice already. Even so, RNTK interest in that is only 10% (plus royalties of other undisclosed products). Let's say ITN has $5 million in sales at an EBIT margin of 30%. That's $1.5 million. 10% of $1.5 mil is $150,000. Ok, so now RNKT only has a loss of $2.65 million. Don't forget about the 350 bpd plant in India, which has yet to start up and has been delayed a number of times. Say a one time licensing fee of $350,000, and roughly $60,000 per year in royalties. Ok, so now RNTK only has a loss of $2.3 million.
Now we have a wildcard situation with TX. Anything else above $2.3 million, like a TX deal, would be a plus. Best case situation: a 20,000 bpd plant built by TX using RNTK tecnology. That's $20 million one-time licensing fee and $5 million a year in royalties. Worse case situation: nothing. Mid case, a 5,000 bpd plant, $5 million one-time licensing fee and $1.25 million a year in royalties. RNTK WON'T SEE THE LICENSING FEE AND ROYALTIES UNTIL AT THE EARLIEST YEAR 2002. It will take that long just to draw plans, find a site, construct, etc. It would likely take longer considering that a GTL plant has never been built on a large scale before. Meanwhile, between now and the year 2002 RNTK is still losing money. Meanwhile, hopefully, TX or somebody else props it up with cash, the way larger biotech firms support smaller partners. In my opinion, right now EPS is irrelvant because RNTK is a development company that won't see earnings for some time.
Of course, we cannot discount the possibility that RNTK generates as much excitement as Netscape did and makes a secondary offering raising lots of cash. If we are lucky this could happen in two-three years. But that's a little like playing lotto at this point.
All the economics of this business will be explained at this conference. Hopefully I'm totally wrong. Perhaps our industry expert s on this list can provide more insight at this time. Anyone, please prove to me this is garbage, and you will have done me and others on this list a great service. Talk garbage, and you are wasting everyone's time.
Schopenhauer |
