MY Estimated 12-MONTH INCOME PROJECTION for FAMH (Updated 4-28-98)...
NOTES:
1) Firamada expects a growth rate for their existing offices of between 23-30%. So I have taken an average growth rate of 25%.
2)Firamada expects to have gross margins slightly higher than the industry averages (around 28% for FAMH vs about 22% for Industry Average) with pre-tax profits of about 20% of gross margin. This means Operating Expenses are about 80% of gross margin.
3) However, Myriad margins have been figured at or below industry averages because employee leasing is handled differently (around 18% gross margin).
4) The IT Division should have a considerably higher gross margin (about 95% or more) with pre-tax profits of about 70% of gross margin. That means Operating Expenses are about 30% of gross margin.
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PROJECTIONS:
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FIRAMADA'S ORIGINAL 5 OFFICES:
SPECIAL NOTE:
For the sake of "argument," I am presenting a conservative profit margin of ONLY 5.6% (even though other staffing companies profit margins run as high as 7.2%). So I have "chopped down" FAMH profit margin numbers to place them well within the range of other companies in the industry. I figure if FAMH has higher margins, that's just "gravy."
12-Month Projected Revenue = $10.625 million
$10.625 million x 28% Gross Margin = $2.975 million
Less Operating Expenses of about $2.38 million =
Annual Pre-Tax Profit of $595,000
MYRIAD:
(The number of leased employees have increased 30% to 6500, and more are expected. But I have just used the 6500 figure along with normal growth for this calculation. For Myriad I am using a profit margin of ONLY 3.6%)
12-Month Projected Revenue = $69.75 million
$69.75 million x 18% Gross Margin = $12.555 million
Less Operating Expenses of about $10.044 million =
Annual Pre-Tax Profit of $2,511,000
NEW OFFICES & 3 SMALL ACQUISITIONS:
12-Month Projected Revenue = $8 million
$8 million x 28% Gross Margin = $2,240,000
Less Operating Expenses of about $1,792,000 =
Annual Pre-Tax Profit of $448,000
IT DIVISION:
Average 100 annual placements (2 per week) at $50,000 each.
12-Month Projected Revenue = $5 million
$5 million x 95% Gross Margin = $4.75 million
Less Operating Expenses of about $1.425 million =
Annual Pre-Tax Profit of $3,325,000
WORKMAN'S COMP INS PROCESSING:
Firamada has over $100 million in workman's comp billings to put thru their offshore captive and make $2-3 per $100 processed. That amounts to...
$100,000,000 divided by $100 x $2.5 = $2,500,000
Less Operating Expenses of about $750,000 =
Annual Pre-Tax Profit of $1,750,000.
MORTON DOWNEY JR TALK SHOW:
This is based on this TV Show running 5 days per week. FAMH
has indicated that the revenue to Firamada ALONE will be about
$100,000 - $125,000 per show. I have used the lower figure of $100,000.
12-Month Revenue = 50 weeks x 5 days x $100,000 = $25 million
Less Operating Expenses of about $12.5 million =
Annual Pre-Tax Profit of $12,500,000
PAYROLL FINANCING DIVISION:
This division had Net Profits of $374,000 for the 1Q 98.
12-Months = $374,000 x 4 Qtrs =
Annual NET PROFIT of $1,496,000
ONE-TIME EXPENSE ITEM:
$1 Million Cash Payment to IRS for Myriad
Non-recurring Expense Item = $1,000,000
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SUMMARY of PRE-TAX PROFITS:
$ 595,000..................FIRAMADA'S ORIGINAL 5 OFFICES
$2,511,000................MYRIAD
$ 448,000..................NEW OFFICES & 3 SMALL ACQUISITIONS
$3,325,000................IT DIVISION PHOENIX
$1,750,000................WORKMAN'S COMP INS PROCESSING
$12,500,000..............MORTON DOWNEY JR TALK SHOW
TOTAL $ 21,129,000 in Pre-Tax Profits
Less Estimated Tax (apx 40%) $ 8,451,600
TOTAL NET PROFIT for this BUSINESS GROUP
(Projected)............. $12,677,400
SUMMARY of NET PROFITS:
$12,677,400................TOTAL of BUSINESS GROUP ABOVE
$ 1,496,000................PAYROLL FINANCING DIVISION
($1,000,000)..............One-Time Payment to IRS
12-MONTH NET PROFIT (Projected)................... $ 13,173,400
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EPS CALCULATION:
(NOTE: Now, again, for the sake of "argument," let's even assume that warrants for the $12 million line of credit could cause additional shares. Let's figure as many as 24 million additional shares (accounted for by figuring 24 million shares at .50 per share = $12 million). That means I am allowing for a generous 75 million shares outstanding. And I think this is a VERY LIBERAL Assumption for Shares Outstanding!!
$13,173,400 divided by 75MM = $0.1756 EPS
Keep in mind, I have NOT reduced the outstanding shares even thought FAMH is "Buying-Back," NOR have I reduced anything for shares that will be cancelled because they will not have to be used for the Myriad deal.
12-MONTH PROJECTED PRICE PER SHARE:
Using an EPS of $0.1756 times an industry P/E multiple of 30, I think we would see a price of $0.1756 X 30 = $5.26.
>>>FAMH at about $5.26 per share 12 Months from now.<<<
(This would be an increase of about 1100% over the current price.)
These are MY ESTIMATES based on the situation as I SEE IT. I am NOT an investment advisor and I am NOT associated with any company anywhere. Everyone is encouraged to do their own research and do only what fits their own comfort level.
Best wishes,
Brad |
