Posted by Straight Shooter on November 23, 1997 at 01:46:56:
In Reply to: question posted by flightlessbird on November 22, 1997 at 15:40:41:
I've obtained all of the standard information one
uses to conduct a DD study on any stock. There's
nothing out of the ordinary- 16 million(+-) shares
outstanding, 5 million (+-) in the float, a current
positive cash flow, no defaulted payments to any
creditors that I could find, a vested interest in
the company by some of it's directors, etc...
Nothing unusually good or bad here. All of the
regular fundamentals of a decent going concern
seem to be present. These are the basics.
Now, you asked me what part of my DD convinced me this is
a worthwile play. Obviously, its not these basics-
there is nothing extraordinary here. For me, there
is one simple reason. It is not technical, complicated,
convoluted, or hard to figure out. Here it is.
As of Friday, November 21, 1997, this company has a signed,
done deal, not an initial offer, not a letter of intent,
not an option to purchase,
but a bona-fide contract with a major retailer with 53
locations to take over their automotive division. There
is no purchase of real estate involved so the price is
much less than most people are thinking. That's why
the company is not going to have any problem completing
the transaction. They're going to do a private placement
to raise the remainder of the funds. Pretty basic stuff.
So, what we have is this. We have MIS International now positioned
to conduct an automotive business as
"Wheel to Wheel" in a high traffic retail giant with 53 locations.
Let's do some simple math. If the company nets a modest $3000/month
(initially in sales revenues and subsequently in franchise fees)
from each of these 53 locations, that makes a total revenue of
$1,908,000/year. That computes to a $0.12 EPS ($1,908,000/15,000,000
total outstanding shares =.12 earnings/share.) This stock should
trade at 10 times earnings. How much does our $.60 stock become worth
at this point? $0.12 EPS X 10= $1.20. Is this specific enough for you?
You may notice that I have forgotten something in the above equation-
the pretzel deal. Within 30 days from now MIS is going to
complete this transaction. Over night MIS will grow by 25 locations. I
neglected to add this to the equation above on purpose- I didn't need
to. The stock is already going to be worth double what it is currently
trading for just based on the automotive aquisition. That's good enough
for me. The pretzel deal is just icing on the cake.
I'm not here to tell people to buy this stock. People should make up
their own minds, do their own DD not just on this stock but on any
they are thinking of buying. I have done my DD objectively and independently as should
everyone.
My DD study has lead me to conclude that this is an undervalued stock that will fit nicely in
my portforlio. |
