Heres some DD from a non SI member that emailed me :
saw your posting on siliconinvestor (i am not a member and cannot post
there).
I have heard that the company has INDEED transformed itself into an internet
company. The company has indicated that it will be increasing its ownership
of PlayCo and that it is in serious discussions with offshore potential
financial partners to provide significant capital to the continued buildout
of SPNT's (and PlayCo's) web presence. The e-commerce potential on the toy
side is incredible and the European investor market would appear to be
hungry for investments of this type (keep in mind that the original capital
behind this came from offshore).
With only 5MM shares outstanding and a stockprice of $2/share, this company
has a market equity capitalization of just over $10MM....Not only is this
cheap, but this is insane!! Let me tell you why!...and I have slashed my
assumptions to be conservative:
a) Film business - Give them ZERO value for this, although there is likely
some serious upside option value here. Keep in mind that this gives them
ZERO value for www.videonostalgia.com and www.videosoncall.com. (This entity
alone ould be worth $1/share)
b) Breaking Waves - Give them ZERO value for this, although this is
ridiculous given the steady-state business and new e-commerce sites that the
company is building up. (This should be worth $1/share alone)
c) PlayCo "Bricks and Mortar" Stores - This company presently operates 25
stores, going to 33 stores by the end of the year. With $32MM in sales as of
12/98, the company does over $1.28MM in sales per store. For 33 stores this
means $42.4 in revenue run rate. Based on a 1.2x revenue multiple for
"bricks and mortar" stores (i have lots of comparables if you want), this
implies a market value of PlayCo "bricks and mortar" stores of $50.88 (1.2 x
$42.4). Since SPNT owns 25% of this, the SPNT value is over $12.5MM. (This
valuation alone supports a $2.50 share price for SPNT)
d) PlayCo web presence - The value of the web sites created through PlayCo
include www.toyswhypayreteil.com and www.playco.com. Further web sites are
to be developed in the near future. the company has pointed out that the
4-7MM per annum in its stores will provide a solid startfor new web
customers. Based on what I can piece together, the company did not enter
this business unless it could have $20MM in sales within 2 years. Using a
conservative 2x revenue multiple (comparable e-commerce companies trade
anywhere from 5-200x revenues), I value this VERY CONSERVATIVELY at $40MM or
$10MM for SPNT's 25% ownership (This is another $2/share value).
e) The company last reported over $1MM cash on the balance sheet, or 20
cents per share.
No matter how you look at it, the retail store business is worth $2/share
minimum, the web presence through PlayCo is worth a minimum of $2/share,
even if you give them NOTHING for their cash, their video sites, and their
bathing suit business....notto mention the fact that they will be likely be
taking ownership of much more of PlayCo in a private transaction. |
