Here is my speculation on EPS for 3rd quarter: 7.5 cents per share
the logic follows:
The following statements were all from Starnet's last filing:
Since the beginning of fiscal 1999, revenues from all components of the gaming business, which include licensing, casino operations and financial transactions processing, has undergone a tremendous growth. For the three months ended October 31, 1998, revenues generated from the gaming business reached $991,098 and accounted for 55.6% of the total revenues.
Revenues from licensing, which is becoming a major income source, account for 41% and 36% of the total revenues for the three months and six months ended October 31, 1998 respectively. At October 31, 1998, nine licensees are in operations and are generating over 1 million dollars a month in total revenues.
Gross margin increased from 54.8% for the quarter ended October 31, 1997 to 68.3% for the quarter ended October 31, 1998 due to the relatively higher gross margin of the gaming operations and efficiencies gained from increased number of licensees.
Operating expenses increased by 69.1% to $1,029,194 (57.8% of sales) for the three months ended October 31, 1998 from $608,746 (84.5% of sales) for the prior year quarter. The decrease in these expenses from 84.5% to 57.8% was the result of efficiencies gained as the Company handled a greater level of activity.
My research
- Total revenues = 1,781,357 from filing
- Licensing, casino, and processing revenues = 991,098 from filing
- Implied revenues from adult sites = 790,259 my calculation
- Operating expenses = 1,029,194 from filing
- Comments from CEO during west coast PR trip indicated that approx. 80-100 million had been wagered during the month of January (see siliconinvestor.com
- Comments from IR regarding October and November gross revenues have October being 18 million and November being 39 million (see siliconinvestor.com
1st problem, what is Starnet's revenue as a percentage of gross amount wagered at its licensee's sites?
I am going to make the assumption that the pattern during October, November, and December where Starnet's licensee gross revenues double each month, also held for the 3 months prior, July, August, and September. Since October was 19 million, September could have been 9.5 million, August – 4.75, and July 2.375 million. Adding these figures up gives you 16.625 million in gross wagering for the 2nd quarter in relation to 991,098 in revenues to Starnet which gives you a ratio of 6%, I believe this might still be high, so I am going to use 3% and assume that stays constant throughout the 3rd quarter.
2nd problem, what is Starnet's gross margin as a % of sales going to be? Since 2nd quarter showed a remarkable increase over 1st quarter, I will assume that trend will continue and the % will rise from 68.3% in the 2nd quarter to 80% in the 3rd quarter
3rd problem, what will Starnet's operating costs rise too? Well, I am going to assume any increase away for simplicity and say that the implied revenues from the adult sites will increase from 790,259 in the 2nd quarter to equal exactly whatever the increase in operating costs will be in the 3rd quarter, so this will be a wash. This might not be that accurate, but it is simple enough for now. So we are left with what we had in the 2nd quarter, which was about 1 million.
4th problem, how many shares are outstanding? As of the last filing, there were 22,450,000. Alan mentioned that over 1 million warrants had been exercised and everybody knows that management also exercised additional options so I will assume 24 million total outstanding on an undiluted basis.
5th problem, what is the tax rate? I don't know if they have any tax credits, I don't think so, but I will assume a 30% tax rate.
Now, to sum it all up
- Gross licensee revenues for the quarter = 19 + 39 + 90 = 148 million
- Starnet revenues = (148)(.03) = 4.44 million
- Starnet gross margin = (4.44)(.80) = 3.55 million
- Starnet operating margin = 3.55 – 1 = 2.55 million
- Starnet net income = (2.55)(.70) = 1.785 million
- EPS = (1.785)/(24,000,000) = .074
So there it is, have fun making comments and let me know your opinions or guesses on what the number will be. I have a feeling that we will see it sooner than March 17th.
Somebody please copy this to RB, I want to see those guys tear this up. |
