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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: moufassa7 who wrote (51926)	6/1/2001 4:03:35 PM
From: moufassa7	Read Replies (1) \| Respond to of 57584

Off to meet the carpenter. Have a great weekend and thanks for everyone's [doom & gloomers as well] input.

To: moufassa7 who wrote (51926)	6/1/2001 9:01:35 PM
From: Crossy	Respond to of 57584

-- Interesting smallcap NasdqNM:PARL -- consumer, fragrances This time it's not a telecom stock that I discovered but a consumer related company, manufacturing, taking franchises on the fragrance interests of many respected Hi-touch brands and distributing fragrances. Why ? Because CONSUMER NON-CYCLICAL stocks are screaming ahead and this looks like a good catch-up play to me: Parlux Fragrances, NasdaqNM: PARL, around $2.50. Histortically the company topped in 1996 at $15. It's biggest customer (PARL shares the CEO with it, Mr. Lekach), then called Perfumania posed the biggest problem to PARL back then, with an open A/R debt of $22m. Motley Fool had an article in 1997 ("daily trouble") commenting on this theme. Accordingly the company had to restructure, improving its product mix and trying to get its feet into other distribution entities than Perfumanie. Well those times of trouble are gone now and PARL emerged strengthened from its restructuring efforts. The E-Biz boom of 99/2000 also helped Perfumania to pay off half of the open A/R to PARL, now down to around $12m. Plus PARL de-emphasized the reliance on Perfumania. Anyway, PARL is quite profitable by now, after having turned around. Last quarter's profit was 7 cents. However a simple completed refinancing (company is currently running on shortterm borrowing) could turn this into 10 cents. I calculated a P&L "potential" model and arrived at a high-end quarerly EPS 0,20 that could be achieved by just a 10% increase in revenues. With consumer spending strong, this seems to be outright possible for the total year. Last quarter's EPS was $0,07.but with a refinancing that appears to be very close (with GREATLY REDUCED INTEREST RATES, PARL currently paid above 12% annually acc. to SEC filings!) they could easily do $0,10 per quarter even with all other parameters unchanged from last quarter. Unlike 1997, it is no longer considering itself "for sale" but the funds seemed to have noticed. Recently Dimensional fund advisors (see: www.insidertrader.com) raked up their holding from 9% to an 18% stake. Guess the CEO & major stake owner, Mr. Lekach didn't like this entirely, so he negotiated a STOCK OPTION AGREEMENT with another holder of a 10% chunk ("North Shore "), giving him access to those shares in CASE OF A TAKOVER for $4 a piece (until August, 20th 2001) (see: EDGAR filings on PARL - "stock option agreemt") To me this looks like a prelude to a battle for the CONTROL OF THE COMPANY. Valuations are very low, PSR around 0,35, revenues growing above 10% per year and PARL de-leveraged considerably over the past years. External borrowings are down to $5m, they should be debt free by next year if they just continued their course. Implicit earnings per share are around 0,30-0,40, more to the higher end because any completed refinancing should decrease their interest payment requirements materially. If my P&L model calculation turns out to be ok, they might earn 0,80 a year on just 10% of revenue growth. An implicit PE of 8 and a PE with 10% sales growth implication near 4 do not look shabbily either IMHO. As sales are growing, gross margin is growing too, surpassing the 60% level Finally they just nailed another franchise deal, this time for a truly respected national brand: JOCKEY. The only bad news about PARL might be the mere fact that it's a thinly traded stock. Anyway this didn't discourage me from taking a long position. best wishes CROSSY