MDCE: Undervalued Dog, Volume 3, No. 15, April 29 , 1998
Part II: A Follow-up for MDCE
MediaConcepts,ÿ Inc. (OTC BB, MDCE)
Recent Price: $0.135-0.145/share
Daily Average Volume: 250 K
97 EPS: $0.03/share
97 PE: 5
Estimated 1998 EPS:$0.47/share
Trailing PE: 0.32
Book Value:$3.15/share
Price/Book Value: 0.048
Div/Shr: None
Yield: None
52-week Range: $0.06-1.00/share
Outstanding Shares: 22 M
Floating Shares: 8 M*
Market cap: $ 3.1M
Profit Margin: 25-30%
1997 revenues: $ 3.5 M
Estimated 1998 revenues: $ 50 M
SEC filing: soon
* Total floating shares are 11.3 M, but 3.3 M shares, held by the previous management, can not be traded in the market, because of the ongoing litigations.ÿ These shares are not registered with SEC and the previous management members are being sued by the current management for the illegal issuance of these shares.ÿ
We recommended MDCE on March 23, 1998.ÿ Since then, the company has been performing businesses well, though the stock has not performed as expected.ÿ Many readers told us MDCE is too good to be true when we recommended it last time.ÿ We want to emphasize that MDCE is as good as we have reported before.ÿ Maybe even it is better than what we reported about MDCE.ÿ Next is an in-depth follow-up.
Before October 1997, MDCE is a shell company without any major revenues, though it owns a library of historical and stock film footage, whose assets were valued by an independent appraiser and determined to have an asset value of $16 million.ÿ Last October, new management took over the company.ÿ First thing they did was to have an audited 10-K for 1996.ÿ In January, 1997, they released it.ÿ When they did something that the previous management has never done in the past decade for the company, it is unusual.ÿ Why did they want to do that?ÿ We believe they are serious about the accountability as a public company for its shareholders
According to 96' 10-K, they had $0.163 M revenues with $0.173 M loss (0.03/share, 5M outstanding shares) in 1996.ÿ In 1997, we estimated that they had $3.5 M revenues, an increase of 2000% compared to 96' revenues,ÿ with $0.66 M net earnings (0.03/share, 22M outstanding shares).ÿ In 1997, most revenues were generated after the new management took over the company.ÿ In 1996, the book value was $6.43/share (5M outstanding shares), we estimated the book value was about $3.25/share (22 M outstanding shares) in 1997.ÿ We project that the net earnings for 1998 will be $0.47/share and the book value will be about $5.00-$7.00/share due to several acquisitions.ÿ We project that the net earnings for 1999 and 2000 will be $0.67/share and $1.00/share, respectively.
From Pasadena acquisition, we would find how the new management aggressively and wisely pursues its businesses by expanding in its effort to increase assets, and earnings per share to build shareholder values.ÿ Pasadena,ÿ a Canadian cosmetic company, is projecting revenues of $10 to 12 million dollars over the next twelve months.ÿ The terms of the sale announced were that MDCE will give 1.2 million shares of restricted stock in exchange for a service contract with the present management, which in turn agrees to stay on for a five year term with a five year extension.ÿ Any additional financing needed for expansion of Pasadena International will be provided by Finova Capital Corporation.ÿÿ 1.2 million shares were worth about $180,000 (1.2 M x $0.15/share = $180,000) in the market.ÿ How did MDCE get this so good deal?ÿ We learned that Pasadena had a problem getting financing from their lender in Canada.ÿ As a US owned company, MDCE arranged financing for them through Finova Capit!
al Corporation against Pasadena's inventory and receivables.ÿ This allows Pasadena to continue operations with financing in place without losing contracts and businesses from an inability to obtain inventory to move.ÿ In addition, when Pasadena management looked into 96' 10-K of MDCE and its business plan, they strongly felt the stock will be indeed worth more than $5.00 by the year of 1999, the year right before they can trade their shares.ÿ If so, the company sale price is $6.0 million.ÿ Further, Pasadena management also receives salary for up to 10 years and 10% of the net profits.ÿ The acquisition of Pasadena will generate EPS 0.25/share with more than $25 million revenues in 1998.ÿ It is a perfect marriage for both sides.ÿ Pasadena continuously conducts and expands its business and the management gets paid for what they are doing.ÿ MDCE adds significant earnings and stock equity.
According to our source from New York, MDCE is acquiring a Sand and Gravel Pit plus a Transit Mix Company, both located in West Hampton, New York.ÿ The pit consists of 1.7 million cubic yards on 33 acres.ÿ The businesses combined have 15 million dollars assets (add stock equity at $0.68/share), including real estate.ÿ These projects represent approximately $5 million in annual revenues and $450 million dollars in lifetime revenues.ÿ This revenues will add another EPS $0.05/share in 1998.ÿ The acquisition was made through the U.S. Bankruptcy Court, Eastern District of New York, before Judge Conrad.ÿ MDCE has filed a reorganization plan reflecting MDCE as the sole owner.ÿ There will be a confirmation hearing on June 6, 1998.ÿ MDCE will take control of the facility immediately and is in negotiations with a management company to handle the day to day operations.ÿ Purchase price is 250,000 restricted shares of MDCE stock plus $150,000 in cash.ÿ Again the management team shows us to!
have a unique talent for grabbing some valuable properties at an incredible price even the stock is worth $10 by year of 2000 (250,000 x $5.00/share = $1.25M).ÿ Basically, these properties are worth 12 times what MDCE has paid.ÿ In the other hand, the owner of the Sand and Gravel Pit and its management may know something that we don't know about how much MDCE will be appreciated by the year of 2000.
Prince Giovanni Graham de Pallavicini (Italian Prince), Chairman of the Board, was born and educated in Europe.ÿ He started in the business world through Lloyds of London and the United Kingdom brokerage house of Hogg, Robinson, Cape-Cure Ltd.ÿ Simultaneously, he was invited to join the civil engineering and development organization of McMaus, Layton, Costain Group and assumed the directorship of that company's continental subsidiary headquarted in Lausanne, Switzerland in 1963 and of its subsidiary national corporations in Italy, France, Germany, Spain, and The Netherlands; and later in the Indian sub continent until the giant Jardine Gammon Ltd. Construction Company of Hong Kong absorbed the company.ÿ In the same year, after an investment by the de Pallavicini family trust, he became Chairman of Euro International Motion Picture Corporation of Rome, which financed the productions of Romeo & Juliet, Tarning of the Shrew, Brother Son & Sister Moon.ÿ In 1965, Prince Pallavicini!
established Phoenix Film Finance Corporation in Ireland, which acquired a controlling interest of the Ardmore Studios outside Doublin.ÿ He continued his association with the motion picture industry in Los Angeles, as partner with Daniel Selznick and Joel Glickman.ÿÿ He is the founding Director of Phoenix Film Finance Company, as well as the founder of S.P.G. Parthenon Productions.ÿ He is active as well the California Investment Banking firm of Morgan, Olmstead, Kennedy & Gardner.
David Garcia, CEO and President, has over 30 years experience in the film and entertainment industry.ÿ He is a former executive at MCA Universeral in charge of movies and mini-series, which include such successful productions as Rich Man Poor Man, Captains and The Kings and 79 Park Avenue.ÿ At NBC, he was Executive Producer in charges of James Micheners Epic Centennial; a 26-hour television production and many other well known made for television movies.ÿ He has worked on Quincy, Kojak, Barretta, the Six Million-Dollar Man and numerous documentaries.
Robert Torres, CFO, has 12 years experience in the financial arena.ÿ As a broker, he has assisted several private companies in raising capital and has taken several private companies to public.ÿ He served as a consultant for Lexington Capital advisors; a division of Piedmont Capital.ÿ
The three guys' personal wealth is well more than tens ofÿ millions of dollars, why did they want to take on this kind of little company (market cap is about $2.5M with less than $0.2M annual revenues)?ÿÿ Because they have the vision, connections and resources to take advantage of "software" that MDCE owns exclusively.ÿ Like Microsoft, MDCE has the "software" to make money for years to come.ÿ The company has over twenty theatrical screenplays, mini-series, and television series pilot scripts, as well as an exclusive movie and television option on 40 of the best selling author, Taylor Caldwell's novels which include republishing rights.ÿ Another recent addition is the television and film rights to ten Harold Robbins novels that have yet to be made into films, including his last novel.ÿ
With connections that Prince Pallavicini has, MDCE has made a corporate purchase of a 40% interest in Parthenon Productions, Inc by paying US$500,000.ÿ This acquisition will afford MDCE with a vehicle through which many envisioned motion picture and television productions can be most adequately accomplished.ÿ Parthenon Productions is in the first stage of pre-production on the Turkish epic motion picture ''Suleyman The Magnificent,'' depicting the life and times of the Sultan that took the Ottoman empire to its Zenith, and enlarged the empire to the size of the entire Roman acquisition.ÿ This movie has the sponsorship of the government of Turkey.ÿ Its budget is expected more than US$75 million.ÿ Also, Parthenon is negotiating contracts for the production of a special for television on the life of Mustafa Kemal Ataturk and several animated productions of Araturk that have been commissioned by the Turkish armed forces.ÿ Parthenon Productions has formulated detailed plans for exp!
ansion in Turkey which will produce a ''Hollywood'' system of motion picture production, capable of supplying all of Europe with facilities and distribution abilities in that continent from its Istanbul base.
We believe that MDCE is a stock you want to have some, because it is just too cheap to pass by whe when look into its revenues, earnings, and book value.ÿ Virtually it is no risk at all, because every cent invested in MDCE is backed by $0.25 assets.ÿ We target MDCE $2-3 by the end of this year and $10 to $20 by the year of 2000!ÿÿ We hate to say we find another Microsoft, but maybe we have found an opportunity that you just don't want to miss.
Contact:
Ed Broday, Corporate Communications
1555 S. Palm Canyon Dr., Suite D-201A,
Palm Springs, CA, 92264,
TEL: 760-320-9720
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STATEMENT OF DISCLAIMER:ÿ The information presented in the Undervalued Dog is not an offer to buy or sell securities referred to herein. By no means is the above company information complete.ÿ One should obtain financial statements and a full due diligence package, including chronological news releases, from this company prior to reaching any investment decision.ÿ One should also use the full battery of available technical analysis, including stock charts, moving averages, etc. and consult a licensed financial advisor for an independent opinion.ÿ The Undervalued Dog is not in the financial advisory business.ÿ The Undervalued Dog is not responsible for the outcome of anyone's investment decision.
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