End of '99 estimate $96
Assumptions
1-Additional financing will occur with dilution to about 35 million shares.
2-The financing is for the purposes of rapid expansion.
3-They have it right now and it's time to increase the scale of operations.
4-There will be larger contracts, $100 million or higher.
5-There will be multi shift production on a minimum of 5 production lines in NI by late '99.
6-Valence's role in supplying batteries for the Army's OICW will be officially announced.
7-Valence's role in supplying batteries for other government applications will be announced.
50% profits on 1mln cellphone batteries/mo from Hanil JV
---$20mln/35mln sh = ----------------------------$0.57/sh
100% profits on 1mln cellphone batt/mo by Valence on identical
Arcotronics line-----$40mln/35mln sh----------$1.14/sh
50% profits of additional production line from Hanil JV
-----------------------------------------------------$0.22/sh
90% profits on the army's $15,000 OICW (objective individual combat weapon) that an Alliant Tech spokesman stated that Valence will build batteries for, to replace the now-standard M16 rifle. No telling when govt will announce.
Est 300,000 rifles x $200/batt x 33% profit = $19.8 mln/35mln
-----------------------------------------------------$0.43/sh
50% of other Alliant/Valence JV profits on Seal propulsion, combat vest batteries etc.
very rough estimate 50% of $30mln--------------------------------------------$0.45/sh
Possible laminate sales to GM Delphi automotive and royalties for SLI (starting lights ignition) batteries replacing conventional lead-acid batteries on certain GM models-----$0.27sh
Laminate sales to GM Dephi for Vehicle propulsion batteries------------------------------------------$0.30/sh
2.5 mln laptop batteries from line 1 at $75 each x 33% profit/35mln--------------------------------------$1.78/sh
10 mln unnamed application batt at $6 each x 33% profit/35mln ----------------------------------------------------$0.57/sh
25,000 unnamed application batt at $1000 each x 33% 35mln
----------------------------------------------------$0.22/sh
Estimated total (max) at 35 mln sh ------$6.00/sh
Since these are maximum figures, I will assume reaching 80% of this capacity by yearend. Although production has started, I will assume a straight line ramp up from zero to 80% capacity, resulting in an earnings forecast of $6 x .8 x 0.5 or $2.40 per share.
Possible license agreements were not included. I have heard estimates that revenue from license agreements could exceed earnings from Valence's own production. If so, add at least another $2 per share, but we would have to wait for licensee plants to be built etc.
With a fast-track growth rate I would use a PE of 40 and therefore predict a $96 share price before splits, for yearend 1999.
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