Here's a great writeup on DMEC. Much more than just an e-commerce play here.
Happy reading & investing. Best of luck.......Norms
Diamond Entertainment presents a unique turnaround situation with a potentially
huge internet play. Shares traded up recently to $0.50 on an e-commerce
announcement. It appears as though the fast money is finally out and the stock
has settled around $0.15.
First, the fundamentals: Diamond has four basic operating divisions: video
distribution and marketing; general merchandise; cine chrome cards; and
e-commerce.
1. Video distribution and marketing
The Company has approximately 300 titles in 3 categories; educational titles,
classic film, and instructional video. Among their videos are a learning series for
children in subjects like phonics and math; computer related instructional videos
such as how to use Windows 98; and classic videos such as Dick Van Dyke and
a World War II series. Also, over the last year, the Company has developed a
highly successful line of religious titles and is looking for acquisitions in these
categories.
Diamond has a very impressive customer list including such retailers as Best
Buy, Musicland Group, Wallgreens, Sam's Club and Osco. They are also
currently testing in Costco, are in discussions with large clearinghouse/mail order
companies, and are negotiating to have inserts in all those monthly credit card
statements we receive (Citicorp alone sends out more than 11 million statements
each month.).
Additionally, the Company has recently rebuilt its custom video duplication
business and will be doing its own duplication in house as well as contract
duplication. This will bring gross profit margin to over 40%. Damond is also
negotiating with a long time customer for a major duplication deal that could
quadruple their revenues with a 20% net profit.
2. General Merchandise
The General Merchandise Division was established to sell toy products and
sundry merchandise to large discount retailers. The Company has just given this
division a face-lift and has entered into a deal with a marketing and Infomercial
Company with guaranteed unit sales. Additionally, the Company will be adding
product lines and has serious contacts with manufacturers in China.
3. CineChrome Cards
CineChrome Cards are a patented chromium card. Diamond just completed the
first 20 cards with Norman Rockwell images licensed from Curtis Publishing.
Cards are currently placed in Hallmark Gold Crown stores and sell through is
encouraging. The Company will soon have 20 images from Universal Studios
which will be marketed in retailers like Music Land (a current customer of DMEC
that has already expressed a big interest). Diamond is also currently undergoing
talks with several large corporations about doing CineChrome Holiday cards. This
is a potentially enormous market. Imagine, if you will, Anheuser-Busch or
Coca-Cola ordering a few hundred thousand cards to send out to employees and
customers.
4. The Company's new E. Commerce Division has massive potential. The
Company is currently building a top quality web site for an E-Commerce shopping
mall and is in discussions with numerous and varied retailers about distributing
their products through DMEC's web site. The Company believes it will have over
100,000 items offered through its site within the next 6 months.
In summary, the Company was severely hampered last year due to lack of capital.
DMEC has spent the last 9 months cleaning up the balance sheet by eliminating
debt and raising capital. This in turn has enabled the Company to acquire new
video titles and other products, re-establish sales to clients they lost in 1998 and
add additional mass merchants to their client base.
The Company's Video, General Merchandise, and CineChrome Card divisions are
conservatively expected to do a combined $15 million in sales in the fiscal year
beginning April 1 and achieve a minimum $2.5 million in profits. This alone
amounts to nearly $.06 per share on the approximately 43 million shares that will
be outstanding . If the Company is able to nail down any of the major contracts
that are currently in discussion, an outcome that we consider to be highly likely,
the above numbers will increase dramatically (probably more than double). The
Company's E-Commerce site is just icing on the cake and could quickly make
the numbers obsolete. |
