Here is an analysis of AWLT's projected EPS and book value based on
Araldica's own figures.
Here are their revenue *goals* for 1997 and 1998 pulled from their
press releases:
1997 Sales 1998 Sales Division
---------- ----------- -----------------------------
$ 750,000 $1,500,000 All Brands Discount Wine & Liquore
$ 400,000 $ 800,000 Super City Gourmet
$ 500,000 $1,500,000 caviar order from Simply Caviar
$ 0 $ 500,000 Club Dieta Mediterranea
$1,100,000 $1,100,000+ Gold Coast International, Connecticut
$ 0 $1,000,000 Willcox Inn (planned)
$ 150,000 $1,000,000 wine sales
$1,000,000 $1,000,000 *other (existing food sales?)
---------- ----------
$3,900,000 $8,400,000 TOTAL SALES
* It is difficult to assess their sales goals relating to the
company prior to their acquisitions, and therefore this is a guess.
However, being that the company stated a 1997 total sales goal of
$5,000,000 including the Willcox Inn, I think this guess is pretty
darn close considering the Willcox deal has not closed.
It is important to note that Araldica's expectations for their
All Brands, Super City, Club Dieta, and wine sales are substantially
(100%) higher than their 1997 figures, which in my opinion, seems
like pie in the sky until Araldica can show otherwise. Perhaps
an increase of say 20 to 30 percent would be more attainable?
With Araldica claiming a gross profit margin of 31 percent (meaning
69 percent of sales is used to cover the cost of the goods sold, as
pulled from their August 18th earnings statement):
1997 1998
$3,900,000 $8,400,000 GROSS REVENUE
x 0.31 x 0.31 gross profit margin
---------- ----------
$1,209,000 $2,604,000 NET REVENUE
From the net revenue we must subtract advertising, sales expenses,
general, and administrative (SG&A). The 7 month figures for 1997
was $373,663 leading us to extrapolate a 12 month estimate of
$640,565 minimum for SG&A. The actual SG&A will be substantially
higher due to the fact that their revenue base has increased as a
result of the acquisitions. In fact, if we count the $5,000,000
which Araldica paid in 1997 for advertising (which we must count
even though it hasn't materialized because Araldica paid it in 1997),
the 1997 SG&A figure must be close to $6 million!!
Therefore:
$1,209,000 1997 NET REVENUE
($6,000,000) 1997 SG&A
------------
($4,791,000) NET PROFIT (LOSS)
When you consider an estimated 15 million shares outstanding,
this yields a 1997 earnings per share of (0.32). That's a 32 cent
per share loss for 1997.
If we ignore the $5,000,000 advertising expense, and use instead
a generic 10% net profit margin rather than estimate SG&A:
1997 1998
$3,900,000 $8,400,000 GROSS REVENUE
x 0.10 x 0.10 net profit margin
---------- ----------
$ 390,000 $ 840,000 NET PROFIT
0.026 0.056 earnings per share
Note that a 10% net profit margin is higher than the 4% net profit
margin which the company was operating during the first 7 months
of this year. If we use the 4% figure, the EPS drops to 0.01 and
0.02 for 1997 and 1998 respectively.
Now with regard to book value...
If we use the assets and liabilities figures from their August 18th
statement of $941,200 and ($646,696) respectively and shares
outstanding of 8,610,072, we have a book value of 3.4 cents per share.
Note that I excluded the $5 million prepaid advertising, the
2 million shares used to pay for that advertising, and all
acquisitions subsequent to the July 31st date used in the statement.
Although Araldica itself placed a value of $2.50 a share in the
advertising transaction, I feel the exclusion is reasonable because:
a. the share market price in early August was less than $0.40
b. the company's book value prior to the transaction was only 3.4
cents a share
In light of the fact that the company has yet to receive any value
for the 2 million shares paid, it might be reasonable to exclude
the $5 million from assets but increase the share base by 2 million
because the shares were in fact issued. For those who believe the
transaction was a sham, book value would fall to 2.77 cents a share.
In summary, I give this stock a book value between 2.5 cents and
3.5 cents a share. I estimate 1997 earnings per share anywhere
between (0.32) and 0.026, depending on SG&A and how the $5 million
in advertising is accounted for.
All estimates are based upon the available press releases. |
