Hello everybody. I am new to this company and board. I have been reading through SEC Edgar reports and all company literature for the past 6 weeks. I visited Rick Andlinger in NY, Lou Knickerbocker in LA, Dr Paul in Princeton, John Harvey (oil analyst at DLJ), Scott Dunlop of Pure Energy in LA, BUD Paxson in West Palm Beach.
My impressions:
(A) The alternative fuel which will be marketed with the name "PURE"
The alternative fuel is REAL!!! No competition exists since all other alternative fuels currently in use have major drawbacks. PURE is far superior to:compressed natural gas, propane, ethanol, methanol, gasahol, solar and electric. And most importantly, it will compete and blow away gasoline as the fuel of choice. Here's why, production costs (gasoline $.80/gallon(industry average) VS. PURE $.50/gallon. Fuel taxes - gasoline average $.35-.45 VS PURE--- 0-$.10, therefore Pure Energy will have huge margins while still making the PURE fuel available $.15-.20/gallon cheaper that Reg. unleaded gasoline. FORD has developed a fuel device that costs $50 to produce and can be placed on all make and model cars built before 1992. All cars after 1992 have computer sensors built in that allow the engine to accept the fuel. So the auto industry's cost to changeover to accept PURE is at most $50-100 per car. Compare this with other alternative fuels where vehicle changeovers can cost as little as $1,500 to as much as $6,000 per car. Electric cars cost $35,000 and higher, changeovers cost about $30,000 per car. FORD has patented its own "PURE" device and will make it available for sale to other auto manufactures and to consumers. NEXT are the the oil companies, 3 major oils will be the first to license PURE and will carry PURE in its gas stations along with their own gasoline. Pure Energy's licensing strategy will be to make very attrative margins for the licensor, sometimes even rivaling their own gasolines. No special tanks or pumps or nozzles are need to distribute the fuel whereas other alternative fuels need special tanks, pumps and nozzles costing gas station owners upwards of $50,000 for each gas station owned. I could go on forever and tell you how they are able to bring production costs down, but I will save this for another writing. One hint though, the fuel is made of 4 main waste products, all of which will be easily and cheapily available, because of JV with those companies. I will explain later.
(B) Core Knickerbocker business
Only one word describes it "Explosive".
Marie Osmond collectibles did $5m is sales in 1995, $11M in 1996 and will do $30M in 1997(QVC-already committed to $15M, Georgetown direct ads $10M, retail store sales $5M).
Georgetown collection & Magic Attic did $35M in 1996, will do $75M in 1997. In Georgetown's business of direct ads, sales are dependent on advertising expenditures, since they were small and privately held, bank financing was limited, now that they are part of Knickerbocker and Knickerbockers sizable cash flow and credit lines, they have planned to spend upwards of $25M in 1997( they spent $10.7M in 1996)and since their advertising to sales ratio is 1 to 3.5 then expect at least $87M in sales(I use $75M to be conservative). Their after tax margins were averaging 20% as a private firm, probably going to 21-22% as part of KNIC.
Jewelry business had combined sales of 30M in 1996 with low margins of 8% after tax. Problem was Krasner and Harlyn had to sub-contract out the high cost stone cutting function. Since Knickerbocker acquired SLS trading the stone cutting will now be done in-house at 35% cost savings thus allowing Krasner, Harlyn and Grant King to raise prices(since the were too low vis-a-vi its competitors) and now higher margins to boot. Lou Knickerbocker will develop several celebraty lines of jewelry( Barbara Mandrell, Farrah Fawcett and possibly others) which will add value to the existing jewelry sales at even higher margins because celebraty endorsed jewelry can be sold at higher prices and margins. So its very conceivable that the jewelry business could double it sales in 1997 and provide the company with 12-15% after tax margins.
The facial steam system which was launched last week with an initial shipment to QVC could have the potential to be a blockbuster product in 1997. But only if the company can produce the informercial in a timely manner and begin to utilize Bud Paxson's InTV network in a big way. The FLO JO product could contribute another $3-5M in sales in 1997. Richard Simmons products should also do multi millions in sales, but hard to project right now.
One other product that may be a major sleeper is the Insta-Heat. Knickerbocker owns 25% of Insta-heat and all indications show that it will be one of the hottest IPOs of 1997(It was awarded "Invention of the year for 1995"). The applications of a can that just requires the push of a botton to heat the contents to 150 degrees in 90 seconds could be immense.
Also, Bud Paxson, Lou Knickerbocker's good friend and Knic director, has plans to start a third major home shopping channel, within 12 months. He has been busy buying major TV stations thoughout the country for the purpose of converting them into a 24 hour home shopping channel. His wholly owned stations now reach 58M households, thats 150M+ people in the U.S. Compare that to QVC's reach of 61M households and Home Shopping Channel's 67M households. I think the stage is set for a third major 24 hour home shopping channel and all of Knickerbocker's products will have daily exposure in this new channel vis-a-vi the current exposure of 8/year for Marie Osmond and 10 /year for the jewelry.
In my opinion, its current price will quickly adjust upwards in January and will be one of the Nasdaq's top % gainers in 1997. The stock is here only because the private placement holders have greedy intentions, but for new investors like myself, its great because this temporary drop in price will allow me to a acquire a 6 digit position withinn the 6ish average cost. To others that still hold I will only recommend to hold or add more to your position if you have the extra cash. In my opinion this 6ish price will be a distant memory at this same time a year from now.
I will post more of my research if there is popular demand.
Ciao
Tom |
