Potential Valuation for Newbies:
I will repost this frequently throughout the weekend for people to quickly get up to speed with what is going on, I hope this helps.
Here is a revised attempt at a valuation for WINR using some information from previous PRs instead of my previous assumptions (see post 2588 Message 6712245 ). Again, keep in mind that I do realize that this is a BB stock that has not announced that they have any realized revenues yet so take this valuation attempt as one of millions of possible outcomes that could actually happen. I will take another stab at this when more information is made available (hopefully next week).
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Information from previous PRs
TISS Contract
- "TISS currently has in operation and has provided sublicensing to approximately 30 Sports Wagering and Casino sites." (11/24/97 PR)
- "WINR values this agreement over the next 12 months at 10 to 15 million dollars." (11/24/97 PR)
Access World Marketing Agreement
- "With this contract ACCESS will sell a minimum of 21 Licenses per year. With the License price of $100,000 each, this will generate 2.1 million dollars in licensing revenue yearly. Along with the License revenues, it is believed that this contract will generate between 6-8 million dollars per annum in processing fees for WINR." (5/14/98 PR)
Interbet Contract
- "With a player base that Interbet already has registered and the expanding growth of the Internet gaming industry, WINR estimates that becoming fully operational with Interbet will generate net revenues of approximately 2.2 million in its first year of operation." ( 9/11/98 PR)
Vaudeville Holding Contract
- "This agreement specifies that Vaudeville will bring in a minimum of 10 licensees during the first 12 months of operation and it also includes performance clauses for subsequent years." (11/30/98 PR)
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Assumptions
- 13,000,000 shares outstanding per Columbia Financial Group
- 80% profit margin (my guess based on interview with Skinner at http:\\www.stock-line.com)
- 35% corporate tax rate (standard and assumes no tax loss carryforwards of which there may be a significant amount)
- Average 1st year processing revenue per TISS site = (12,500,000)/30 = $416,666 (extrapolation from PR)
- Average 1st year processing revenue per Access World site = (7,000,000)/21 = $333,333 (extrapolation from PR)
- Assume average 1st year processing revenue from Vaudeville contract is identical to the # stated above for TISS
- Estimated 1st year licensing revenue = (# of Access + # of TISS + # of Vaudeville)(100,000) =
(21 + 30 + 10)(100,000) = (61)(100,000) = $6,100,000
- Estimated 1st year total revenue from Interbet = $2,200,000
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1st Year Projections
+ Licensing Revenues = $6,100,000
+ Processing Revenues = (21 + 10)(333,333) + (30)(416,333) + 2,200,000 = 25,023,313
= Total Revenue = 31,123,313
- Operating Costs = (31,123,313)(.20) = 6,224,662
= Operating Income = 24,898,650
- Taxes = 8,714,527
= Net Income = 16,184,122
EPS = 16,184,122/13,000,000 = 1.24
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For you P/E valuation buffs
Price at various P/Es
5x = 6.20
10x = 12.40
20x = 24.80
50x = 62.00
100x = 124.00
I prefer the discounted cash flow method better, P/E is just a meaningless accounting artifact, but I will save that for the next time.
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Things to keep in mind
- I have probably double counted a few items. For example, I did not find any information as to whether the TISS licensees themselves paid licensing fees to WINR or whether TISS paid only 1 licensing fee itself, if that is the case, then my numbers are overstated
- I assume that all of the possible TISS, ACCESS, and Vaudeville sites will be generating revenue for the entire 1st year, realistically the sites will be added gradually so that on average, half of the sites will be generating revenues the entire year so just cut the stock price in half for all of the P/E scenarios
Comments and especially criticisms are welcomed. These projections are not meant as hype, only my attempt to extrapolate from what information has already been disseminated by WINR and CFG.
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