To the thread:
Recently I became interested in DFNL, so I made a couple of calls to the company. Just wanted to let you all know what I found and update some of the info here. I expect a double or better within the next couple of months.
I first spoke at length to Michael Dooley at IR. Especially attractive is the fact that there are a total of no more than 5MM shares outstanding. The float is a small 2.5 million shares, and I am told that many of these are closely held. If there is further dilution in the next year, I was told it would be minimal. Revenues were way down for the first half of the year as management and the company business underwent considerable reorganization. Somehow the company managed to make a small profit, although they will probably show a small loss for the full year. Fully audited financials for the year should be out in an SEC filing on Tuesday. An insider recently purchased 500K shares at the market above current prices.
I also spoke to the new CEO, Orville Baldridge. Apparently the old management ran the company into the ground, and the new management has cleaned up all the old problems and has the company clearly on track. This is why audited financials are coming out on Tuesday. He told us that as soon the audited financials came out, there were many who were holding the stock at much higher prices who would be averaging down. The audited financials will show a decline in assets which resulted from cleaning up the company.
However, new management is honest and straightforward and has big plans for the company--both in terms of its TV station and of its wholly owned subsidiary, Blue Sage Entertainment, which has purchased previously unseen films of, among other celebrities, the Beatles, the Rolling Stones, Elvis Presley and Marilyn Monroe. The company has an agreement with Handleman Distributors, who is said to be the premier distributor in this business, to market the films nationwide to various video rental and sales chains. The chains will charge $20/video and the company will receive $10/ video free and clear.
I was also told that the company was in talks with major networks and cable channels regarding these films. The company had hoped to have these films on the market already, but they are being cleaned up for distribution and they should be ready in the next month or so. Management projects $3MM in pre-tax profits for the first quarter ( or .25/share, which has been delayed a couple of months). If those projections hold, then we are looking at about 10MM in pre-tax profits from the videos alone for this year. Remember we are talking about a company with 5MM shares total and a float of about 2.5MM. The CEO also told me there would be several news releases in the next 6 weeks, each in regard to good news about the company and its prospects for revenue growth and profit. He stated unequivocally that the the company would be profitable this year.
The company also owns a TV station in Florida. This station is now pulling in advertising and other revenues of about $30K/month. However, with in the next couple of months they will be carried by a cable company, which will rapidly increase their subscriber base and their revenues to $100K/month.
The audited financials will show assets of approximately 4.5MM/share, so book value of the company is roughly .90/share. Given its earnings prospects over the next year, and with good news coming over the next 6 weeks, DFNL seems like a great value to me. I and some fellow investors took a nice position last Thursday and Friday.
I suggest those who are curious call the company themselves. The IR number in the opening post of the thread works fine. And Mr. Dooley is very informative and easy to talk to. |
