*******Trader's Paradise******** Volume 1, No. 3, June 19, 1998
MEDICAL INDUSTRIES OF AMERICA INC (NASDAQ: MIOA)
Recent Price: $1.65625-1.6875/share
Daily Average Volume: 118.3 K
97 EPS: -$0.21/share (Loss)
Estimated 1998 EPS:$0.21/share
Forward PE: 7.67
Industry Average PE: 40.03
Div/Shr: None
Yield: None
52-week Range: $1.125-2.56/share
Outstanding Shares: 17.63 M
Floating Shares: 5.87 M
Market Cap: $29.69M
1997 revenues: $ 4.53 M
Estimated 1998 revenues: $25 M
Net profit margin: 15%
Institutions holding: 14.7%
Management holding: 18.6%
Shorting positions (1998): 101.248 K
BUSINESS SUMMARY AND CORPORATION BACKGROUND: The Company's subsidiaries include: Heart Labs of
America, Inc., Florida Physicians Internet, Inc., PRN of North Carolina, Inc., Care America Integrated Health Services, Inc.,
Global Air Charter, Inc., Global Air Rescue, Inc., a 51% ownership in Clearwater Jet Center, Inc., and an 81% ownership in
Ivanhoe Medical Systems, Inc.
The Company is in the business of developing integrated medical delivery services by operating and managing physician practices
and the providing of diversified medical technologies including ancillary services, high tech infusion, international air ambulance
services, pain management and diagnostic testing. The Company also provides diagnostic and therapeutic healthcare services to
the surgical and medical community through its mobile cardiac catheterization services to hospitals and physician practices
primarily in the State of Florida. The Company operates medical ancillary services businesses, multi-specialty medical group
practices, and is rapidly expanding in the areas of physician practice management and in the delivery of diversified medical
technologies, products and services. The company also provides diagnostic and therapeutic healthcare services to the surgical and
medical community through its mobile cardiac catheterization services to hospitals and physician practices primarily in the State of
Florida, as well as air ambulance services, pain rehabilitation and sleep centers, and comprehensive pharmaceutical and high tech
infusion services.
On April 24, MIOA announced that it has entered into a formal letter of intent to merge with Atlanta-based Physician Health
Corp. (PHC), a privately held, fully integrated, physician ancillary services company which partners with over 170 physicians,
manages networks composed of over 4000 physicians in PHC's key markets, and operates medical ancillary companies in
partnership with physicians. The terms and conditions of the merger provide for Medical Industries to issue sufficient common
shares to PHC to give it an approximate 70% controlling interest in the combined corporate entity. PHC's Chief Executive Officer
Sarah C. Garvin will be appointed the CEO of the company and Tom M. Rodgers, chief financial officer of PHC, will be
appointed as CFO. Medical Industries' Chairman and Chief Executive Officer Michael F. Morrell and President and Chief
Operating Officer Paul Pershes will remain on the company's board of directors and will maintain executive roles within the
company. The company will likely pursue a listing on the Nasdaq National Market System following the merger.
PHC, with its physician partners located primarily in Orlando, Fla.; Cincinnati; Arlington, Texas; Atlanta and St. Louis, owns and
manages a bone marrow transplant center, out-patient surgery centers, oncology and cardio-vascular centers, a sleep lab, and is in
the process of developing other ancillaries including birthing centers. The company intends to continue growing its medical services
business through strategic partnerships with physicians as well as with physician ancillary services groups.
RECENT DEVELOPMENTS AND ANALYSIS: PHC was planning to IPO at $14.50/share early this year, and then they
changed their mind and decided to merge with MIOA. PHC filed S- 1/A for its IPO, which can be viewed at
freeedgar.com. Combination of MIOA and PHC businesses is expected to generate $125
million revenues in 1998. Under the terms of the agreement, MIOA shareholders will receive all of the capital stock of PHC and
own approximately 30 percent of the combined entity's common stock. The merger has already been approved by the boards of
both companies.
Now we need to know how the Street will value MIOA shares after the merger. According to the agreement, outstanding shares
will be 58.7 M after the merger. EPS is projected $0.32/share with net income of $18.8M in 1998. Since MIOA has NOL of
more than $10 M, the combined entity won't need to pay income tax for several years. With industry average of PE at 40.03,
MIOA should be worth about $12.80/share. After the merger, the book value will be $1.56/share. With industry average ratio
of price/book at 7.38. MIOA should be worth about $11.51/share. With annual revenues at $125 M, MIOA should be worth about
$6.39/share ($125 M x 3= market cap).
We learned that both sides have finalized the deal on the merger and announcement will be made as early as today
or sometime next week. Further, PHC and MIOA have obtained support from several major securities and financial institutions,
we believe $4-5/share is doable after the news hits the wire. It can be an investment as well. The target price is $10 in the short
term (6 to 12 months). Entry price under $2.25/share should be safe.
Again, do not forget to spread words. This is more important than picks sometimes. But do not hype the stock.
No matter how good a stock is, nobody will invest if they do not know.
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This could be very interesting. Good Luck to all.
Blessed
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