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Strategies & Market Trends : Value Investing

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To: Kathleen capps who wrote (4511)	7/28/1998 4:10:00 AM
From: Roger Thrash	Read Replies (2) of 78686

I think this is a promising strategy. FLYT has good upside in my opinion. The reverse split is obviously not good. But lets look at what we have here.... A company with roughly $40 million in CASH. Net book value (net CASH) of about $1.90 per share. A whole heckuva lot of tax loss carryforwards to shield future income. Dry cleaning is a highly fragmented industry. Similar high growth fragmented situations in the past include the funeral home, pawn shop & video rental industries. One that DIDNT work out well was the buy here/pay here used car business. (Urcarco) Anyway, Dry cleaners are typically available for LESS than 4 times EBITDA meaning the potential for a good return is apparent especially when one considers that income will accumulate tax-free for a long time. The downside from a book value perspective is there will be a good bit on goodwill on the balance sheet since Dry cleaners dont have much in the way of tangible assets. Obviously their biggest asset is their EBITDA. So....I think the strategy has good if not exceptional long-term growth potential. Indeed, the concept would seem to have investment merit even if there were NO tax assets and if it were trading at net cash. Our margin of safety is the HUGE discount to cash that the stock trades at. (Currently 75 cents bid) One could make a case for this stock increasing 5-10 times in value over the next 3-5 years. At the current price the downside is minimal. Comments from value investors please ! I'm interested in ALL comments on the potential of the strategy as well as the margin of safety the current price offers. Does anyone know anything about the dry cleanin business ? The Yahoo thread has a been somewhat active.

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