Subject: Worst Case Scenario
Date: Thu, Jan 29, 1998 15:18 EST
From: Wesley0428
Message-id: <19980129201800.PAA20392@ladder02.news.aol.com>
Suppose Misonix lost the Lysonix revenue completely and USS decided to make the Autosonix product themselves. That's the absolute worst case, because MDA/Lysonix own the financial liability in the Mentor suit. Oh yeah, and no new products.
What would MSON be worth?
Well, they've got $1.50/ share in cash for starters (and they're cash flow positive)
The "core" businesses have been steady and are currently doing better than ever, growing at 20%+ for the year, record backlog and good prospects in the pipeline for next year. These will generate about $14.5M in revenue this year with gross margins over 50%. Let's value that conservatively at 1X revenues. That's another $2.10/ share
Even if Misonix doesn't make the USS product they earn royalties on all USS sales. Those royalties are pure profit and that business is a solidly growing business. USS has already ordered $5.3M worth of product. That has to convert into at least $10.6M in royalty-payable sales for USS. I figure that converts into $.08/share to Misonix. Put a P/E of 30 on that and that income stream alone values MSON at $2.40 / share. If you think the 30 P/E is too
aggressive, remember the $10.6M is only going up.
So $1.50 + $2.12 + $2.40 = $6
So I'd say there is VERY little downside from here. In fact anyone with even a little imagination can see lots of upside. They probably keep the Lysonix business, it keeps growing, it is a high margin business. They probably keep some of the USS mfg business. If they keep the probe mfg back up the truck. There are 3 new products in various stages of development, maybe they'll actually generate revenues next year.
Thank you Wesley for all the great analysis....I hope you dont my reposting here....the more exposure your astute analysis gets the better for MSON, IMHO..........;^) |
