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Post# of 173804
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mandjb

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mandjb

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Re: None

Friday, 09/07/2007 12:59:01 PM

Friday, September 07, 2007 12:59:01 PM

Post# of 173804
PLUS looks undervalued

ePlus (PLUS.PK) stopped filing with the SEC when they decided they needed to go back and look at serveral years' worth of stock option grants. They just recently issued their 10-K for 2006:

http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001022408-07-000037&Type=HTML

The restatements for 2002-2006 for options totaled $5.2 million before tax and $3.6 million after-tax. I bet they spent way more than that figuring the amounts out.

In 2006, they showed a loss of about 1 million before tax. They took a $10 million hit for a litigation settlment, though, so pre-tax from recurring operations was +$9 million. Assuming a 40% tax rate, that would be about .65/share.

They have about $11/sh of tangible book and the stock trades at $7.75.

Here's where it gets interesting: When they released the K for 2006, they mentioned that revenue for fiscal 2007, now complete, came in at $798 million vs. $583 million in 2006. Nice increase. They also mentioned that included in the revenue number was a $17.5 million receipt from a litigation settlement. I think the settlement resulted from ePlus suing SAP for patent infringement.

http://biz.yahoo.com/bw/070816/20070816005226.html?.v=1

So, we might see improved operating results for 2007 and a nice one-time inflow as well. All in all, they may well show over $2 after-tax for 2007.

A big unknown is what profitability they may have realized from the higher 2007 revenue. I talked to Kleyton Parkhurst, a Director and the Treasurer, to see if I could learn anything more. Mr. Parkhurst did his job very well which means he told me practically nothing. When I asked about margins, he couldn't say anything about ePlus' results but did say that I should look at competitors like ZONS to see how the industry had done. That would seem to indicate that margins had held up.

I noticed that 2 large investors named Hovde had been buying aggressively for years but stopped last November. I asked whether they were allowed to buy any more if they wanted to and was told that all insiders are precluded from buying at this time. I also noticed that Parkhurst and a few others in management exercised scads of options and sold the stock on a regular basis in the first half of 2006.

I asked about the timing of catching up on the SEC filings. I was told no specific dates but that reports subsequent to the 2006 10-K would appear much faster than it took to get that out since the option restatement work was the main driver in the holdup. Since then, ePlus amended their credit agreement to say that they would be caught up by 11/30.

http://biz.yahoo.com/e/070829/plus.pk8-k.html

Of course, they could always amend it again.

Anyhoo, this looks like a Ben Graham stock - profitable and trading below book....










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