UPDATED VALUATION ESTIMATES
FULLY DILUTED SHARE STRUCTURE POST-REVERSE SPLIT
(Courtesy of JustGoLong's Summation of 8k (page 43) and Confirmed)
New Share Structure (post R/S):
Authorized Shares (AS) = 980,000,000
Outstanding Shares (OS) = 12,137,991 (incules 801,747 in Warrants)
Restricted Shares = 8,639,651 (24 Month Lock-up)
Float = 2,696,593 (1,360,349 Current TBJK share holders & 1,336,244 Private Placement)
New Transfer Agent
Pacific Stock Transfer Company
4045 South Spencer Street, Suite 403
Las Vegas, Nevada 89119
(702) 361-3033
MOST SHARES RESTRICTED
Lock Up Agreements
All of the shares of common stock to be owned by the management of Chine Victory will be restricted from public or private sale for a period of twenty-four (24) months following the Closing.
MOST RECENT ANNUAL NET INCOME
Net Income
Net income for the year ended March 31, 2010 was $9.6 million or 26.4% of net revenue, compared to $8.1 million or 26.3% of net revenue for the year ended March 31, 2009, an increase of $1.4 million or 17.7%. The increase was primarily due to increase in net revenue from year 2009 to 2010, partially offset by increases in cost of goods sold and operating expenses as discussed above.
Some Calculations Fully Diluted:
EPS: $9.6M / 12,137,991 = 0.791 per share
P/E of 5: $3.96 share price (very conservative)
equivalent pre-R/S: $3.96 / 540 = 0.0073 per share
P/E of 10: $7.91 share price (conservative)
equivalent pre-R/S: $7.91 / 540 = 0.0146 per share
P/E of 15: $11.87 share price (slightly bullish)
equivalent pre-R/S: $11.87 / 540 = 0.022 per share
MOST RECENT QUARTERLY NET INCOME
Net Income
Net income for the three months ended June 30, 2010 was $3.4 million or 24.5% of net revenue, compared to $2.5 million or 24.4% of net revenue for the three months ended June 30, 2009, an increase of $.9 million or 26.5%. The increase was primarily due to increase in net revenue from three months 2009 to 2010, partially offset by increases in cost of goods sold and operating expenses as discussed above.
Some Calculations Fully Diluted:
Assume $3.4M X 4 quarters = $13.6M net income (realistic TODAY!)
EPS: $13.6M / 12,137,991 = 1.12 per share
P/E of 5: $5.60 share price (very conservative)
equivalent pre-R/S: $5.60 / 540 = 0.01 per share
P/E of 10: $11.20 share price (conservative)
equivalent pre-R/S: $11.20 / 540 = 0.021 per share
P/E of 15: $16.80 share price (slightly bullish)
equivalent pre-R/S: $11.87 / 540 = 0.031 per share
NO NEED TO DILUTE FOR 12 MONTHS
We believe that our current levels of cash, cash flows from operations, and bank/related party borrowings, will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If we ever determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain a credit facility. Any future issuance of equity securities could cause dilution for our shareholders. Any incurrence of indebtedness could increase our debt service obligations and cause us to be subject to restrictive operating and financial covenants. It is possible that, when we need additional cash resources, financing will only be available to us in amounts or on terms that would not be acceptable to us, if at all.
ALREADY THINKING OF DIVIDENDS
Common Stock
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at times and in amounts as our board of directors may determine. Each shareholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of the shareholders. Cumulative voting is not provided for in our amended articles of incorporation, which means that the majority of the shares voted can elect all of the directors then standing for election. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Upon the occurrence of a liquidation, dissolution or winding-up, the holders of shares of common stock are entitled to share ratably in all assets remaining after payment of liabilities and satisfaction of preferential rights of any outstanding preferred stock. There are no sinking fund provisions applicable to the common stock. The outstanding shares of common stock are, and the shares of common stock to be issued upon exercise of the Warrants will be, fully paid and non-assessable.
Shooting For Some High Growth
Share Escrow Agreement
We also entered into a securities escrow agreement with the Investors, pursuant to which, we delivered into an escrow account 72,239.6836200773 shares of the Series M Preferred Stock convertible into 1,336,244 shares of our common stock to be used as Escrow Shares for the benefit of the Investors if the make good targets are not met. The Escrow Shares will be replaced with an equal number of shares of common stock upon the effectiveness of the Reverse Split. With respect to the fiscal year ending March 31, 2011, if we do not achieve $13.0 million in net income, then one-half of the Escrow Shares will be distributed to the Investors on a pro rata basis. With respect to the fiscal year ending March 31, 2012, if we do not achieve $20.0 million in net income, then the other one-half of the Escrow Shares will be distributed to the Investors on a pro rata basis.
Some Calculations Fully Diluted:
EPS: $20M / 12,137,991 = 1.65 per share
P/E of 5: $8.25 share price (very conservative)
equivalent pre-R/S: $8.25 / 540 = 0.0153 per share
P/E of 10: $16.50 share price (conservative)
equivalent pre-R/S: $16.50 / 540 = 0.031 per share
P/E of 15: $24.75 share price (slightly bullish)
equivalent pre-R/S: $24.75 / 540 = 0.046 per share
BOTTOM LINE IN MY OPINION
Bullish Outlook
This did not work out exactly as many of us had planned as the dilution diminished potential gains here, BUT based on current net income, conservative P/E estimates, and a fully diluted post-R/S share structure, our current valuation should be a PPS of 0.021 pre-R/S or $11.20 post-R/S. We are now trading under a penny (no-brainer). This is based on the most recent quarter net income and is likely out of date as the company is GROWING quarter over quarter and year over year pretty rapidly.
Additionally, judging by the growth rate of what appears to be 30-50% each year (note this even in a down/declining plywood market!), and with the plywood market coming back to life, and their goal of $20M+ net income by 2012, these valuation estimates rise dramatically; furthermore, with the float so low, and most shares on restriction for two years, who knows where this can go short-term here. The company plans no further dilution for the next 12 months (they just do not need it as cash-flows take care of any monetary needs for the time being, even with expansions; plus they just raised funds through the private placement for expansion).
Anything under a penny right now is a dreeeeeaaaaammmmmmm.....
