Here's MY Estimated 12-MONTH PROJECTION of INCOME for FAMH...
Notes:
Firamada expects a growth rate for their existing offices of between 23-30%. So I have taken an average growth rate of 25%.
Firamada expects to have gross margins slightly higher than the industry averages (around 28% for FAMH vs about 22% for Industry Average) with pre-tax profits of about 20% of gross margin.
However, Myriad revenues will probably be in line with industry averages (around 22% gross margin). And the IT Division in Phoenix should have a considerably higher gross margin (about 95% or more) with pre-tax profits of about 70% of gross margin.
FIRAMADA'S ORIGINAL 5 OFFICES:
SPECIAL NOTE:
For the sake of "argument," I am presenting a conservative profit margin of ONLY 5.6% (even though other staffing companies profit margins run as high as 7.2%). So I have "chopped down" FAMH profit margin numbers to place them well within the range of other companies in the industry. I figure if FAMH has higher margins, that's just "gravy.")
12-Month Revenue = $10.625 million
$10.625 million x 28% = $2.975 million
$2.975 million x 20% =
Annual Pre-Tax Profit of $595,000
MYRIAD:
(The number of leased employees have increased 30% to 6500, and more are expected. But I have just used the 6500 figure along with normal growth for this calculation. For Myriad I am using a profit margin of ONLY 4.4%)
12-Month Revenue = $69.75 million
$69.75 million x 22% = $15.345 million
$15.345 million x 20% =
Annual Pre-Tax Profit of $3,069,000
NEW OFFICES & 3 SMALL ACQUISITIONS:
12-Month Revenue = $8 million
$8 million x 28% = $2,240,000
$2,240,000 x 20% =
Annual Pre-Tax Profit of $448,000
IT DIVISION PHOENIX:
Average 100 annual placements (2 per week) at $50,000 each.
12-Month Revenue = $5 million
$5 million x 95% = $4.75 million
$4.75 million x 70% =
Annual Pre-Tax Profit of $3,325,000
WORKMAN'S COMP INS PROCESSING:
Firamada has over $100 million in workman's comp billings to put thru their offshore captive and make $2-3 per $100. That amounts to...
$100,000,000 divided by $100 x $2.5 = $2,500,000
$2.5 million x 70% profit margin =
Annual Pre-Tax Profit of $1,750,000.
MORTON DOWNEY JR TALK SHOW:
This is based on this TV Show running 5 days per week. FAMH has indicated that the revenue to Firamada ALONE will be about $100,000 - $125,000 per show. I have used the lower figure of $100,000.
12-Month Revenue = 50 weeks x 5 days x $100,000 = $25 million
$25 million x 50% profit margin =
Annual Pre-Tax Profit of $12,500,000
SELL OFF of ATXI ASSETS:
Revenue (Non-recurring) = $3 million
This =
Annual Pre-Tax Profit of $3,000,000
PAYROLL FINANCING DIVISION:
This division had Net Profits of $374,000 for the 1Q 98.
12-Months = $374,000 x 4 Qtrs =
Annual NET PROFIT of $1,496,000
ONE-TIME EXPENSE ITEM:
$1 Million Cash Payment to IRS for Myriad
Non-recurring Expense Item = $1,000,000
SUMMARY of PRE-TAX PROFITS:
$ 595,000..................FIRAMADA'S ORIGINAL 5 OFFICES
$3,069,000................MYRIAD
$ 448,000..................NEW OFFICES & 3 SMALL ACQUISITIONS
$3,325,000................IT DIVISION PHOENIX
$1,750,000................WORKMAN'S COMP INS PROCESSING
$12,500,000..............MORTON DOWNEY JR TALK SHOW
$3,000,000................SELL OFF of ATXI ASSETS
TOTAL $ 24,687,000 in Pre-Tax Profits
Less Estimated Tax (apx 40%) $ 9,874,800
TOTAL NET PROFIT for this BUSINESS GROUP
(Projected)............. $14,812,200
SUMMARY of NET PROFITS:
$14,812,200................TOTAL of BUSINESS GROUP ABOVE
$ 1,496,000................PAYROLL FINANCING DIVISION
($1,000,000)..............One-Time Payment to IRS
12-MONTH NET PROFIT (Projected)................... $ 15,308,200
EPS CALCULATION:
Assuming 12 Million Shares Outstanding (Post-Merger)....... $1.275 EPS
Now, again, for the sake of "argument," let's even assume that warrants for the $12 million line of credit could account for additional shares. Let's figure as many as 20 million (pre-merger) additional shares (accounted for by figuring 20 million shares at .60 per share = $12 million).
Keep in mind, I have NOT reduced the outstanding shares even thought FAMH is "Buying-Back," NOR have I reduced anything for shares that will be cancelled because they will not have to be used for the Myriad deal.
At the 4:1 share exchange ratio (this ratio could actually be even better than originally thought), this would translate into 5 million additional shares POST-Merger. So the EPS calculation could look like this...
Assuming 17 Million Shares Outstanding (Post-Merger).......
$0.90 EPS
12-MONTH PROJECTED PRICE PER SHARE:
The "cost basis" for this calculation takes the current price of around .60 x 4 = $2.40
EPS of $1.275 x 30 =
$38.25 price per share 12 Months from now.
(This would be almost 1600% increase over the current price)
EPS of $0.90 x 30 =
$27.00 price per share 12 Months from now.
(This would be over 1100% increase over the current price)
These are MY ESTIMATES based on the situation as I SEE IT. I am NOT an investment advisor and I am NOT associated with any company anywhere. Everyone is encouraged to do their own research and do only what fits their own comfort level.
Best wishes,
Brad |
