since you are sooooooo concern about the financing and dilution
consequences for us RDIM shareholders...let me reassure you that
MR. Folger knows the issues involved so I am confident he will do
what will be beneficial to the company. Below is from their website
so enjoy it...
------------------------------------------------------------------
OTC BB: RDIM - $ 0.437 Shares Outstanding: 16.5 million
52-Week Range $ 1.74 $0.093 Market Value: $7.2 million
Proforma Sales: $12.5 million ** Market Value/Sales: 0.576
With the use of the Internet surging, and e-commerce still in its
infancy, HouseHold Direct has targeted the fragmented but lucrative
network of private wholesale consumer buying clubs as its
springboard to becoming the dominant factor in an $8 billion industry
which is ripe for consolidation.
** Assumes completion of acquisition of Personal Consumer Services and
Unimart Gp.
Management has carefully conceived of a multi-faceted strategy for
dynamically growing its company . By acquiring established and
strategically positioned consumer buying clubs, HouseHold Direct is
capturing a membership base that is already wed to the concept of buying
household staples, leisure and luxury items at unparalleled savings.
As it grows that base internally and through additional acquisitions,
HouseHold Direct will employ the enormous leverage of e-commerce to
maximize the appeal of the club benefits, to expand its membership base,
and even attract business from non-members who, while not enjoying the
same benefits and attractive prices as members, nevertheless find the
access to merchandise more attractive than other sources. For obvious
reasons, this category becomes a huge reservoir for attracting new
members, and at no added cost!
Highlights
HouseHold Direct will introduce the dynamics of the e-commerce to
the $8 billion private consumer buying club industry for the first time.
It will use the membership base of the private consumer buying clubs
it acquires as the foundation for its e-commerce thrust.
Will leverage the appeal of its huge merchandise selection and low
prices with the long reach of the Internet to become the dominant
factor in its industry.
Undiscovered as an emerging e-commerce entity.
Unlike the "public" wholesale buying clubs like Costco(NASDAQ:
COST) , Sam's Club(NYSE:WMT), and BJ's Wholesale Club(NYSE: BJ)
(combined sales of $50 billion), HouseHold Direct offers its members
a greater selection of merchandise and at a greater savings, to boot.
It can do this because its members buy direct from the manufacturer at a
price that is lower than wholesale and considerably lower than retail. What
is more, by dealing directly with more than three thousand manufacturers,
HouseHold Direct can offer its members a vast selection of merchandise,
not the non-current, overstocked and close-out items often offered by the
public clubs.
For these attractive benefits, members of HouseHold Direct buying
clubs will pay an initial fee to join (currently estimated at $400), plus
a monthly fee of $29.95, a transaction fee of 10% or less, and shipping
and handling costs. While Costco has the overhead of 200 large
warehouses, HouseHold Direct will only have to retain the smaller
showrooms owned by the clubs it is acquiring, ones which are strategically
located for members who prefer to see and touch the sample items on
display, ask questions and shop either from a catalog or electronically.
Members also have the convenience of shopping via a toll free telephone
number and shortly will be able to visit the company's Web site. Whatever
method of shopping they feel comfortable with is available to them.
It's a win-win concept for the member and HouseHold Direct. The
member benefits from four key features which have been incorporated for
shopping – a huge selection of "current" merchandise, convenience,
shopper friendly buying, and unbeatable prices. HouseHold Direct benefits
from the dynamics of combining an established base of consumers who are
already committed to the buying club concept with the open-ended potential
of e-commerce. McGraw-Hill's U.S.Industry & Trade Outlook estimates that
on-line consumer retail business could exceed $35 billion by the year 2000,
and reach $115 billion within 5 to 8 years if mail order sales are used as an
indication. The latter makes sense since e-commerce offers a greater
assortment of merchandise, more information, more interactivity and better
prices.
Management has been astute enough to seek to acquire
technological expertise as part of its strategy. Its acquisition of
Thunderstick Software, LLC would not only bring Alfred Werner on board,
but it paves the way for developing additional sources of revenues. Werner's
credentials are impeccable, having made significant software contributions
to PC Flowers.com and the Intranets for CompuCard (Cendant –
(NYSE:CD)) and Saatchi & Saatchi(NYSE: SSA). In the future Thunderstick
will be able to provide software support for manufacturers and organizations
that want to link with HouseHold Direct.
Recent Developments
On March 10, HouseHold Direct announced a letter of intent to
explore cross marketing and funding opportunities with Universal
Express, Inc. (OTC BB: USXP), whereby USXP's trade association of
7,000 local packagers and shippers (APAC) will, with HHD's assistance,
provide thousands of shipping and receiving points, ultimately one in every
major ZIP code in the United States.
Recently HouseHold Direct entered into a joint venture with
America's Hometown Brand Centers, which is a master distributor for
major brand name products doing business with 300 retail stores.
Having developed vast experience and contacts over the years, much of it in
association with the Sears catalog operation, the company is adept at
negotiating price and terms with manufacturing companies, and especially
with respect to brand name items.
Its recent signing of a Letter of Intent to acquire Personal Consumer
Services (PCS) with showrooms in Atlanta, Georgia and Birmingham,
Alabama was the first in a series of planned acquisitions designed to build
its membership base. PCS had $3 million in revenues and $444,487 in net
income in 1998. On March 22, 1999, it signed a Letter of Intent to acquire
Unimart Group, a Denver-based company with 7 membership clubs in
Oklahoma, Colorado, Nebraska and Kansas.
Valuation
The questions regarding how to value an Internet company have not
yet been answered. The industry is too new and current valuations far
exceed any parameters attached to more mature industries. What is more,
there are no other companies in the exact same business as HouseHold
Direct. Any attempt to place a value on HouseHold Direct as a company is
conjectural, because it has only begun to pursue acquisitions which will
serve as its foundation to grow its e-commerce business.
However, in an effort to supply some insight into arriving at a rough idea of
the potential value of the company, I'm going to outline two approaches
herein. Again, they are conjectural. These assumptions can be high or low
and are certainly subject to abrupt change. More acquisitions are planned,
and acquisitions that are sought can fall through. Most important, the
assumption here is that two acquisitions, currently in the Letter of Intent
stage, will be consummated and that the information available at this time is
accurate. Audits of Unimart have not been completed. Management is
optimistic. The assumption here is that the two prospective acquisitions
(Letter of Intent status) have combined revenues of $15 million and a
membership base of 250,000. While management believes the numbers
could be higher, to be conservative, let's cut both back by 20% which
results in potential sales of $12.5 million and 200,000 members.
Value of a Member
What value do you put on a membership base which took years for
the private buying clubs HouseHold Direct seeks to acquire to
attract? Whatever the value of these members is when they become
acquired, that value stands to increase, because HouseHold Direct is
introducing the leverage of e-commerce to the equation. For the sake
of simplicity and to be conservative, let's place a value of $559 on each
member. That takes into account their $29.95 monthly fee income and 10%
of their estimated annual purchases of $2,000 ($200) for a total $559. It
does not give any value to the cost of developing a membership base, nor
does it give any value to future streams of income. Thus, by multiplying
200,000 times $559 you get an estimated total membership value of $111.8
million. Assuming there would be about 34 million shares outstanding after
the PCS and Unimart are acquired (cash plus restricted stock deal), that
works out to $3.29 a share. However, in the case of Unimart, restricted
shares will be issued over a three-year period with the number of shares
issued based on the price of the stock at the time of issue. The higher the
price, the fewer shares issued. Thus, under these assumptions, the value of
a member could be higher, of course there is no assurance the price of the
stock will sell at or above this value.
Market Value/Sales
Another way to get a feel for the value of a small company that has
not yet developed earnings is to calculate a ratio of its market value
(shares x price) to sales. The market value/ sales ratio of 22 Internet
stocks surveyed recently was 100 to 1. That's much too high. Based on
that ratio, with prospective sales of $12.5 million, HouseHold Direct's stock
would sell at a market value of $1.25 billion, or $37 a share (again assuming
34 million shares outstanding). That's absurd. While reason dictates that
the 100 to 1 ratio is insane, it is really a matter of opinion what that ratio will
settle down to in time. While the dynamics of the Internet cannot be
quantified at this time, they are clearly robust and appear to deserve a
healthy premium. For arguments sake, therefore, HouseHold Direct at 25
times sales would work out to $9.19 a share; at 15 times sales - $5.50 a
share; 10 times sales - $3.68 a share, etc. Assuming its acquisitions are
consummated, that funds are raised in a timely manner, and basic
game plan is executed as planned, HouseHold Direct by the above
parameters, is undervalued.
RISKS
The concept is sound and loaded with potential. It is up to
management to deliver. It must stay its course and remain focused on its
core business, yet not be oblivious to new ideas or innovations that may
add to shareholder value. Additional capital will be required from time to time
in order to make new acquisitions, follow through on its operational plans,
and cope with unexpected delays and problems. While its timing is perfect,
it will have to execute its strategy expeditiously in order to optimize the
opportunity facing it and be competitive in terms of accommodating its
members' needs and preferences and ironing out any kinks in its system
that may arise. Risks associated with companies at this stage of
development are to be considered high and investors must assess their
tolerance for said risks and act accordingly.
Conclusion
As Wall Street becomes increasingly aware of the magnitude of the
leverage embodied in HouseHold Direct's strategy and the potential
to geometrically drive the growth of its membership and revenues,
the price of its stock stands to appreciate accordingly, thus
facilitating more acquisitions on increasingly better terms. All the
ingredients are present for a very big success story here.
The concept is sound because HouseHold Direct is acquiring a base first,
then building on it. Starting from scratch would take years, as it did for the
buying clubs that it is acquiring. The catalyst here is the timing. HouseHold
Direct's move coincides with one of the most dramatic
communications development of the 20th Century, e-commerce, and
at a time the private buying club industry is too fragmented to
capitalize on the opportunity. No other company has prepared for
this opportunity as well as HouseHold Direct.
George H. Brooks April 23, 1999
Note: This profile supersedes the profile dated April 7, 1999.
Whisper on Wall Street – Informational Profile, copyright 1999, is published
by G.H.Brooks Associates, Inc., 221 West Ave., Darien, CT 06820. The
information contained herein is supplied by the company, is not guaranteed
as to accuracy or verified by Whisper on Wall Street. This document is
intended to be an informational document and not to be construed as a
recommendation of its stock. The information contained herein is subject to
change without notice and there is no obligation on behalf of the publisher to
update it. The document may contain forward looking statements based on
assumptions of future developments which may prove inaccurate and
therefore are subject to risks and uncertainties relating to, but not limited to,
revenues, earnings, valuations, liquidity, and the ability of the company to
compete effectively or achieve its objectives. G.H.Brooks Associates, Inc.
has been retained by HouseHold Direct, Inc. to prepare this and other
informational documents relating to its company.
Top of the page
© 1999 HouseHold Direct, Inc. All Rights Reserved |
