Here are the negatives that I infer from q1/98:
1) DSOs
DSO - Days sales outstanding, meaning the average amount of time it takes to get paid. Based on trailing 12 months results, I get an astounding 130 days! I base this on cash of 1 million and A/R of 13.5 million (TPRO report current assets in one big lump sum, an obvious attempt to hide information).
If I pretend Marshall-Hyman paid 3.8 million it owes TPRO, I subtract 3.8 million from A/R and add it to net revenue and start calculation over. I get 89 days DSO. Conclusion: TPRO does OK job with accounts receivable, but obviously Marshall-Hyman fiasco has caused a big big cash flow problem.
What is the problem here, what is the basis for the dispute with M-H? Is M-H claiming they got overcharged? Did TPRO do a lousy job on the fab plant? Or is M-H just plain crooked?
I am very annoyed that TPRO did not break out cash and A/R separately. This is a conscious attempt to hide something from investors, and it breaks the pattern of straight talk.
2) Flour-Daniels out of picture...
Some of you have been treating this very casually. I don't. TPRO was very gung ho about this alliance, and now it is treating it as if it's not improtant. I simply do not buy that Fluor-Daniels suddenly decided the y2k issue was not as improtant as thought earlier. There is more to this then meets the eye. If Fluor is seeing a decline in its construction business, why not ramp up for y2k services?
The current spin on this is that the departure of Keith Owens is a strong postive for TPRO. Alternative explanaitons: Flour and FLour-Daniels are corporations in trouble. They project lower than expeted eanrings because of a slowdown in engineering projects. The troubles are greatest at Fluor-Dnaiels division. Is it possible Owens was let go or fired? Or did he just jump a sinking ship? My only point is, let's not spin this into something
fantstic when reasonable alternative explanations are available.
3) Controlled growth
Jenkins does not see TPRO exceeding 400 engineers. Why is that? If Jenkins stays true to this course, TPRO cannot possibly make the rosy revenue prjecitons of Mex and Skip.
Let us assume TPRO gets top dollar for y2k stuff, $160/hour as stated by Jenkins. If all 400 engineers were assigned to y2k (doubtful, Jenkins wants core buisness to grow) and if they worked a standard 265 days per year, 8 hours per day for one year, that comes out to 135.6 million in billables in 1998. But they have a core business to attend to, so lets say only half are devoted to y2k. That's 67.84 million in revneues for 98 for y2k work. Lets
not talk about billions here, lets not even talk about 500 million.
I am not sure why Jenkins is restraining growth like this. Raytheon has thousands of engineers, Why does TPRO want to stay so small?
4) Software or engioneering consulting company?
Jenkins is quite clear that TPRO will remain a consulting services company. I was a little disappointed with this. I was hoping he would redefine TPRO as a software company, like Diana corporation going from meat/fish to the Internet <g>. Seriously folks, if Jenkins is focussing on the old fashioned engineering consulting, than the market will value TPRO like a engineering services company and will not give it the valuation that a growing software compny would get. I would love to see supply chain management software and other y2k products come out of this group, but there is not enough time or money or manpower in this company to accomplish that lofty goal.
Maybe I am missing something here. This is all IMHO. This stock is still a no brainer, it is a sure triple for 98 and a 5-6 bagger by 2000 even at the more modest growth rates I see down the road. If there is something wrong with my analysis, I would only be too happy to reject it!!
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