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Bucfan, these are two interesting cases.
CMKG had a non-cash charge that would have added about 0.03 to fd, ft eps in the quarter, but they still missed their guidance of 0.04 - 0.06. They appeared to just break even in Q4. Minority interest expense and tax expense were higher than I anticipated, but pretax margins were a disappointment for me. Backlog is way up y/y however:
"At March 31, 2005, our sales backlog, exclusive of
reimbursable costs and expenses, amounted to approximately $22,602,000 compared
to a sales backlog of approximately $15,809,000 at March 31, 2004."
The stock has been falling ever since the Q3 eps, so the seasonally weak quarter was difficult to overcome for the company. They still have some savings coming next year from consolidating operations, and easier comps in the next two quarters, so perhaps the stock can rebound.....but they did disappoint.
ETEC.ob had a great quarter in terms of sales and margins and earnings. Some of that was pumped up by the sale of their geothermal investment, but it was a very strong quarter. However, they cautioned not to expect similar results going forward.....so which one do you like over the next 6 mos??
If I had to guess, ETEC.ob will open strongly and CMKG will probably drop. Note: CMKG has yet to issue a PR, so if they give an upbeat forecast and decent eps growth, perhaps the stock can recover.
wade, TGE has some pretty bullish comments in their PRs, which could bode well for the future.
Company earned a partially taxed (25%) 0.09 in Q1. Assuming they can do the same for the next quarter, plus additional revs from the fourth crew coming on-line in Q3 and Q4 could put earnings around 0.40 (not sure what the final tax rate will be).
They did have some weather related problems last year in Q2, so they will have a favorable pretax comp:
"As previously reported on June 14, 2004, the Company recently deployed its third seismic crew in response to the increased level of activity in the domestic oil and gas market. The Company operated with only one seismic crew for 2003 and announced the addition of its second seismic crew on January 14, 2004.
Mr. Wayne Whitener, President and CEO of TGC Industries, Inc. stated, "We are very encouraged by the results for the first six months of 2004. Even though the Company's crews experienced inclement weather during the later part of the second quarter of 2004, management believes the Company will be able to operate at a three-crew level for the remainder of 2004 while continuing to improve its performance."
-from Q2 04
Hard for me to give this stock a 15-20x forward multiple, given the heavy cyclicality of the industry AND the weather related risk. It is trading at a 22x TTM PE, which is also inflated by lower than normal tax rates on eps.
All in all, I'd say its reasonably valued, but I don't have a good handle on what the extra seismic crew can do for revs and margins.
Wade, my guess is that EGY's Q2 earnings will be sequentially lower than Q1's fd eps of 0.12....perhaps as low as 0.06-0.07. That would also be lower vs the y/y comp in Q2 04.
Why will revs be lower? Liftings done in the quarter from their current Etame field are progressing more slowly than in Q1.
Without a production update from the Etame 6H field, there aren't any strong catalysts out there right now to push the stock higher.
Oil also falling back today...
Wade, here's a guess on THK:
A Form 144 filer, Carol Schmidt, filed to sell 200k shares on June 20.
That obviously put a cap on the rally back then, and the stock is under heavy pressure today as many of those traders who bought in the low 2s a couple of weeks ago lock in some profits (IMHO).
This stock needs some institutional support!
I checked some data on Nasdaq trader and found that as of March 31, there was only 1.1% institutional ownership. That's why the stock gets pushed around so badly on days like this!
http://www.nasdaq.com/asp/Holdings.asp?symbol=THK&selected=THK&page=holdingssummary
Another Form 144 filer, Carol Schmidt, filed to sell 200k shares on June 20.
That obviously put a cap on the rally back then, and the stock is under heavy pressure today as many of those traders who bought in the low 2s a couple of weeks ago lock in some profits.
This stock needs some institutional support!
I checked some data on Nasdaq trader and found that as of March 31, there was only 1.1% institutional ownership. That's why the stock gets pushed around so badly on days like this!
http://www.nasdaq.com/asp/Holdings.asp?symbol=THK&selected=THK&page=holdingssummary
Praetorian Offshore, LP (a hedge fund) continues to scoop up shares of DAAT. They filed an amended 13G today showing ownership of 450K shares (up from 400k 15 days ago).
Nice to see a big buyer showing up and continuing to add at current levels.....
tbone, the other thing to consider with LMIA is that the company operates in a very cyclical industry, and their own guidance beyond the current FY is very conservative:
"Based upon existing contracts with our customers and anticipated production rates, we expect sales of current products to increase by an additional 5 to 10 percent in 2006."
-from Q1 05 pr
Perhaps the company can earn 0.50 - 0.55, if you assume that the Q1 was hurt by one-time expenses. That also assumes some healthy increases in margins if the company can hit the top end of its guidance.
The key question is what do you think the market will value that FY05 numbers based upon a dramatically slower growth rate in FY06? Of course, that could change at any moment, but I think investors are guessing that a 10x PE is probably appropriate right now.....
Its not a stretch to say that the FV here is in the low 5s. Of course, you could play the earnings pump game and hope that if the results are good (they have an easy y/y comp of 0.02 coming up) that daytraders will bid up the stock to high levels....but it does have a bit of overhead resistance.
I do think its undervalued here, but not dramatically so.
Greenspan comes out strongly AGAINST using tariffs to punish China:
Greenspan trashes yuan consensus
Barry Sergeant
Posted: Thu, 23 Jun 2005 17:11 / © Moneyweb Holdings Limited, 1997-2005
Alan Greenspan, chairman of the Federal Reserve, the US central bank, has thrown cold water on the huge school of thought insisting that China revalue its currency, the renminbi.
On Thursday, Greenspan told the committee on finance of the US Senate that he was aware of “no credible evidence” that a revaluation of the renminbi would “significantly increase manufacturing activity and jobs” in the US.
Greenspan’s observations stand in savage contrast to the conclusions of a US Treasury report published on May 18, which lashed out at China, with a key focus the decade-long peg of the yuan, the underlying unit of China’s renminbi currency, to the dollar. The report stated that “current Chinese policies are highly distortionary and pose a risk to China’s economy, its trading partners, and global economic growth.”
In a statement accompanying the report, US Treasury secretary John W Snow reinforced the accusations, charging that “China's rigid currency regime has become highly distortionary. It poses risks to the health of the Chinese economy, such as sowing the seeds for excess liquidity creation, asset price inflation, large speculative capital flows, and over-investment.”
When the yuan was pegged to the dollar a decade ago, at 8.277 yuan to the dollar, the greenback entered a bull market that fizzled out with a vengeance early in 2002. A weak currency tends to enhance the competitiveness of exporters, and with the yuan peg to the dollar, traditional analysis has argued that Chinese exports became ever more keenly priced in world markets as the dollar started its protracted, broad bear market just over three years ago.
Speaking out on Thursday against protectionism, Greenspan argued that in order to maintain a rising standard of living, “a dynamic economy” such as seen in the US required “a continual shifting of resources toward the most up-to-date technologies, financed not only by savings but also importantly by the depreciation of increasingly obsolescent facilities.”
This highly dynamic process, Greenspan explained, was mirrored in US labour markets, where jobs are “constantly being created and destroyed at a rapid pace.” New jobs in the US currently average more than a million a week - half resulting from voluntary job changes. At the same time, during a typical recent week, about 150 000 workers are temporarily laid off and another 225 000 are subject to permanent job loss.
“Any effect of trade with China on US employment,” stated Greenspan, “is likely to be very small relative to the scale of job creation and job loss in our economy.” According to Greenspan’s analysis, an increase in the exchange rate of the renminbi, relative to the dollar, would likely redirect trade within Asia, reversing to some extent the patterns that have emerged during the past half-decade. However, Greenspan added that a revaluation of the renminbi would have limited consequences for overall US imports, as well as for US exports that compete with Chinese products in third markets.
“Such a revaluation,” argued Greenspan, “would affect Chinese value added but not the dollar cost of intermediate goods imported into China from the rest of Asia, which represents a significant share of the gross value of Chinese exports to the US and elsewhere. (To the extent that exporters to China revalued as well, of course, the impact on overall Asian exports would be somewhat greater.)”
Greenspan added that more generally, any significant elevation of tariffs that substantially reduces overall US imports, by keeping out competitively priced goods, would materially lower US standards of living. A return to protectionism would threaten the continuation of much of the “extraordinary growth in living standards worldwide,” Greenspan argued, but especially in the US, that is due importantly to the post-World War II opening of global markets.
The US Treasury report stopped short of charging China with manipulation of its currency. However, Snow said “it would be a mistake to interpret this conclusion as acquiescence with the foreign exchange policies of many of America's trading partners.”
http://www.moneyweb.co.za/news/eco_trends/454237.htm
Bob,
Question about EGY. Do you know where to find the latest data on liftings for the current quarter?
Thanks....
Bob, I was under the impression that stocks that had been formerly listed on the Nasdaq, Amex or NYSE could be reinstated without a price restriction.
TGA, RATE, and MDF were all listed at one time on the Nasdaq SC or national market before being de-listed and demoted to the OTC.
To my knowledge, AOBO.ob has never been listed, so it has a higher price threshold as a "first timer".
I wonder if anyone out there is a corporate attorney familiar with the listing rules for the exchanges?
Please correct me if I'm wrong....
Bob, based upon the JM Dutton research and listening to the CC today, I'm inclined to agree that this is undervalued. You asked about the source of the selling. There have been quite a few Form 4 and 144 filings lately, but most are for under 20k-50k shares. There are a couple of bigger ones of 100k or more, but not enough to create this much supply.
I think there might be some hedging going on prior to the SB-2 filing being declared effective.....but who knows?
Barrons Partners is also a major holder here.....and we know that they take profits when they have them. I don't see any recent Form 144 or Form 4's from them, FWIW.
worthy, here are the listing requirements, as I understand them:
http://www.venturelawcorp.com/listing_requirements_amex.html
Were TGA and MDF previously listed before going on the OTC:BB?
I don't see how AOBO can avoid the $3 limit using the 3 standards. Under standard 3, there is no price floor, but they must have >50MM pretax, and they aren't close to that mark.
Worthy, the big volume spike on May 2 came after the PIPE shares were declared effective by the SEC. (The company filed a Form 424B3 on May 5).
Recently, the stock has moved up as the amount of buyers has overcome the ST sellers from the PIPE. The quick flippers are gone, and now there are more long term holders in the stock. The stock is no longer on the Reg SHO list, which shows that the shorts think that hedging is no longer needed, or that the risks of being short are outweighed by the risk of being long a speculative play.
The company is closer to getting registered on the AMEX, but they still have to get over $3.00/share. Of course, they could remedy that tomorrow by doing a reverse split like IPII.
Bo, I had been thinking that some of the recent selling was caused by short selling, or hedging in anticipation of the SB-2 filing being declared effective.
After looking at the latest short interest figures, I no longer believe in that theory.
It looks like there were some aggressive *natural* sellers in the first week of June, either margin induced or from remnants of the Form 144 notices.
Someone did very well buying those sub $2 shares....that was probably the bottom. I think we need to consolidate the latest up move, so some selling back down to the 2.90 range would be "healthy" for the stock, IMHO.
IPII moving higher today, most likely on this news from ELK:
http://biz.yahoo.com/bw/050622/225589.html?.v=1
"The company stated it also expects double digit earnings growth for fiscal 2006 fueled by longer than anticipated hurricane demand in Florida, price increases to assist in offsetting rising raw material and transportation costs, the increased utilization of added capacity at the composite lumber facility, solidified relationships with a distrib utor and a major OEM in the transportation industry and new composite leadership.
wade, re: ZONS and LMIA. I think both are undervalued, but not substantially so. Recently, ZONS had a fairly large insider purchase (50k shares), so that might bode well for the near future:
http://www.nasdaq.com/asp/Holdings.asp?symbol=ZONS&selected=ZONS&page=holdingssummary
Other than a surprisingly good Q1, when they earned 0.08 ft, fd, I think most investors in the stock right now aren't sure what to expect for Q2. All I could glean from the last quarter is that it tends to be lower due to seasonality. The company has said very little about its outlook, and the software reselling biz is cutthroat, as I believe you've mentioned. Margins could swing either way due to product mix.
LMIA had a nice quarter in Q1, earning 0.12, and projects to earning around 0.48 fd, ft for the year. Top line growth is strong now, but management has said it expects this to slow in the next fy (5-10% vs the current year). Stock is trading around 11-12x my guess for earnings, so one could argue its fully valued until management guides higher for FY06.
Of the two, I'm currently long ZONS, but its a small position.
PC, I think there are a couple of things holding back DAAT.ob for the moment.
1. Seasonality (earnings tend to be lower in Q1 and Q2, higher in Q3 with Q4 the biggest quarter)
2. Difficult net eps comps due to a) higher tax rate and b) increased shares from the PP done roughly 1 year ago
3. Concerns over Congress passing a 27.5% tariff on imported Chinese goods.
I just posted some comments on this last issue over at the DAAT.ob board:
http://www.investorshub.com/boards/read_msg.asp?message_id=6733166
StockPeeker, I spoke with David Collins, CEO of DAAT, today regarding the concern over tariffs on imported Chinese goods. He felt that the chances of a Republican President and Congress passing such an aggressive tariff against China were very remote. (We'll ignore the ill advised steel tariffs for the moment).
I think he's right that a 28% tax on Chinese goods is just too much to swallow for American consumers....who've come to rely on cheap imported goods from Asia. Plus, it goes against the free-trader mentality that good Republicans are supposed to possess, so I think this is just saber-rattling and they'll come to their senses soon. Even if it passed, Bush would most likely veto it.
The more likely scenario, according to Collins, is that the yuan will be allowed to float up by around 3-5% over the next year or so. If that happens, the price increase would be simply passed along to customers. (thus, margins wouldn't be impacted) Even if this occurs, the price increase wouldn't impact their level of price competitiveness. DAAT would still have the lowest price points vs. their competitors, according to Collins.
Meanwhile, work continues on rolling out the new products in the meat grinding and the digital game camera segments. Not very sexy, but they've been effective at increasing sales each year with greater margins.......
Hweb, what about CMKG as a low-float Nasdaq play? They earned 0.10 fd last quarter, and guided for a sequentially lower quarter of 0.04 - 0.06 (seasonality)
However, they will be getting a boost next year from cost savings (nearly 750k pretax) and they issued a bullish statement regarding pipeline of business:
"Looking forward, we continue to be encouraged by the increase in our business, both new and core.
Our pipeline of business across all of our divisions is currently approximately 30% ahead of what it was at this time last year.
We expect to report net earnings per diluted share of approximately $0.04 to $0.06 per share for our fourth quarter.
This estimate in large part reflects the seasonality of our outdoor oriented event business and fourth quarter softness in the Marketing Services Group that is anticipated to improve in fiscal 2006 as result of confirmed pipeline business.
Our Interactive, Hispanic, and Event business groups are demonstrating strength and given our pipeline and current level of activity, our outlook for fiscal 2006 remains positive."
-snip from Q3 fy 05 PR (dated Feb 7 !)
---------------
Its drifted down from lack of interest and news. Q4 results should be coming out within the next few weeks, and if they hit their numbers, they'll have earned 0.29- 0.30 ft, fd in FY05.
Not bad for a 2.90 stock with potential 15-20% rev growth next year.
LOL. Just had to jump in here to answer this question.
In this frame of reference, I'm sure Poboy meant POS to mean "piece of shit".....
Interesting reaction today to this news....which is a bit of a non-event. The market was told to expect this weeks ago back when earnings for Q1 were announced:
"Jennings commented further, "Given the level of our internal cash flow we expect to fund our pending acquisition needs through bank financing and do not anticipate the need to sell additional shares of common stock to fund these needs."
-from Q1 05 PR.
My guess is that some serious short-covering is happening today. It will be interesting to see the short interest report that will be out in a week or so. Probably won't tell us much IF there is a bit of short covering going on....
Even though there is strength today, unless there is follow through buying from longs, I would expect a retest of the 2.00 region again prior to earnings being released next month. The stock hasn't really built a good base yet.
Wade, I'm not completely sure, but it appears that Kowabunga's MYAP and DirectTrack's software products don't directly compete with each other:
http://www.revenews.com/peterfigueredo/archives/000683.html
Check out the comments section.
Perhaps Kowabunga is working on software that could power PrimaryAds in the future, but they clearly can't help them out right now, imho.
Wade, PrimaryAds wasn't officially acquired until after the close of Q1, but if it had been, it would have added just over 900K pretax:
Gerard M. Jacobs, the Company's CEO, stated, "This important acquisition justifies the size of Think Partnership's $15.05 million private placement of common stock last December. PrimaryAds earned $921,635 pre-tax during the first quarter of 2005, and is rapidly growing. We expect THK to meet, and possibly exceed, our 2005 earnings guidance of $0.20-$0.25 per share, after taxes, on a fully diluted basis. We expect that the shareholders of PrimaryAds will earn most, if not all, of the $16 million earnout portion of the merger consideration."
http://biz.yahoo.com/bw/050425/255364.html?.v=1
This is dated April 25, so the Q2 will contain 2 months of pretax income for PrimaryAds.....so roughly 750k?
That would add roughly 0.01 to earnings in Q2 (fully taxed and diluted) before any increases in their other divisions. Going further forward, an extra 1MM pretax per quarter would add close to 0.02/share (ft, fd).
They did this part of the deal mostly in cash, so its impact on the bottom line could be substantial. That's why this lawsuit, if unsuccessfully resolved, is such an important factor.
Bob, on THK I wanted to point out a slight error in your statement:
"THK finally bounced off the bottom at $2 and is 2.27 today after announcing two more accretive purchases."
They announced a line of credit today of 15MM that will allow them to fulfill the terms of the Vintacom and Real Estate Online acquisitions announced way back on April 4, 2005:
http://biz.yahoo.com/bw/050404/45556.html?.v=1
I'm sorry if that wasn't clear when I posted about today's news on the THK thread.
Bob, re WHAI. just wanted to point out they they had a big "other income" gain during the last quarter....similar to what VPHM has. If the stock goes down, the gain goes up and vice versa. Its non-cash, and non-recurring, so my inclination is to strip it out of pretax.
What do you think?
Wade, this article may help answer some questions about the DRT vs PrimaryAds/THK lawsuit.
http://mesh.medill.northwestern.edu/mnschicago/archives/2005/05/by_meghan_chris_1.html
Here is the position of DRT in this dispute, as written by jason wolfe, owner of Direct Response:
http://affiliatetip.com/news/article00138.php
I can't decide who is more in the right here, as both sides have reasonable arguments. Direct Response is privately held and partly owned by Jupiter Media. I doubt THK has the cash to simply buy them out, so the dispute will be litigated. Any poaching of customers from DirectResponse or copying of software should be off-limits for THK. I don't know why they can't simply agree to that??
THK announces a new credit line this AM:
Press Release Source: CGI Holding Corporation
Think Partnership Signs Commitment Letter for $15 Million Line of Credit
Thursday June 16, 7:00 am ET
NORTHBROOK, Ill.--(BUSINESS WIRE)--June 16, 2005--CGI Holding Corporation d/b/a Think Partnership Inc. ("THK" or the "Company") (AMEX: THK - News) announced that it has signed a Commercial Loan Commitment Letter from Wachovia Bank, National Association that will permit the Company to borrow up to $15.0 million. The Commercial Loan Commitment Letter is subject to negotiation and signing of definitive agreements and contemplates the following principal terms of the line of credit:
Borrowings will not exceed $15 million.
Borrowings will not exceed 1.75 times THK's 12-months trailing EBITDA, which THK currently anticipates will permit THK to borrow up to the maximum of $15 million available under the line of credit.
Borrowings will be used solely for working capital purposes and for acquisitions that are materially in the same line of business as THK and are cash flow accretive.
The line of credit facility will have a term of 36 months.
The interest rate will be 1-monthLIBOR plus 2.10 percent.
Payments will be interest only until the maturity date of the line of credit.
Borrowings under the line of credit will be secured by a first lien security interest in all of THK's assets.
T. Benjamin Jennings, the Company's Chairman, stated, "We are excited to have Wachovia Bank as our financial partner as we continue to build Think Partnership into one of the true leaders in our industry: online search, marketing and advertising, which we believe is the fastest growing and most profitable segment of the internet. While we are focusing on the integration of our existing businesses, this line of credit will allow us the flexibility to fund the cash portions of the purchase prices of our near-term acquisitions and our organic growth while maintaining an accretive capital structure."
C. Douglass Riddle, Senior Vice President of Wachovia Bank, added, "Think Partnership is becoming a leader in the search engine marketing and advertising space, and we are pleased to help fund the growth of this dynamic company."
---------
I was wondering when this LOC would finally happen. They used up all their remaining cash with the PrimaryAds deal plus had to use 500k in operations last quarter.....so they were facing a minor cash crunch. They had two deals still on the table, not completed yet. (Vintacom and Real Estate School Online)
CGI Holding Corporation Signs Letters of Intent to Acquire Vintacom, a Leading Online Dating Company, and Real Estate School Online, a Leading Provider of Online Education
Monday April 4, 8:45 am ET
Accretive acquisitions will broaden company's existing online dating and affiliate marketing presence, plus launch CGI's entry into online education
NORTHBROOK, Ill.--(BUSINESS WIRE)--April 4, 2005-- CGI Holding Corporation, which plans to seek shareholder approval to change its name to Think Partnership Inc. (AMEX: THK - News; "Company"), today announced that the Company has entered into two letters of intent to merge, through two wholly owned subsidiaries, with privately held Vintacom Media Group Inc. ("Vintacom") and Real Estate School Online Inc. ("Real Estate School Online"). The Company expects to pay an aggregate of $4.95 million in cash and $4.95 million in stock to acquire the two companies. The shareholders of Vintacom and Real Estate School Online will also be entitled to certain earnout/lookback payments if the pre-tax earnings of the companies exceed specified targets during the first twelve full calendar quarters following the closings. The Company expects the two acquisitions to add a total of $3.2 million dollars to its pre-tax income annually, and to be immediately accretive to earnings.
Bob, (and Wade and Researcher)
There's a THK board on Ihub that I've posted a theory as to why the stock started to fall so heavily after it reached 6 earlier in the year...
http://www.investorshub.com/boards/read_msg.asp?message_id=6686009
Here's the board:
http://www.investorshub.com/boards/board.asp?board_id=3627
Another person to direct some questions to over there is a poster named Bohemianclubman. He seems to have some in-depth knowledge of the company and was an early believer and investor in the stock.
Bo, I've been doing some more digging around the PrimaryAds acquisition, and think I found several of the reasons behind the slide in THK.
First, there was a sharply critical article by a blogger who saw adware/spyware in PrimaryAds sales:
http://www.revenews.com/jeffmolander/archives/000495.html
Then, this view was picked up by another influential internet stock blog:
http://www.internetstockblog.com/2005/04/the_danger_list.html
"THK seems to face particular risk. It acquired an affilate network company called PrimaryAds this month, and according to Jeff Molander, " PrimaryAds is well known to be partnered with [Adware provider] MetricsDirect / 180Solutions".
--------
Now, IMHO that is factually not true. I confirmed with PrimaryAds today that they terminated their relationship with 180solutions over a year ago. This is backed up by Kowabunga's CTO Jeff Doak:
http://www.internetstockblog.com/2005/05/cto_of_kowabung.html
Note that Jeff Molander tempered his original comments about PA's relationship with 180solutions:
"While not all CPA and/or affiliate networks are alike, I stand on my original comments - that PrimaryAds has been well known (among my respected sources) to have, in the past, been partnered with MetricsDirect / 180Solutions. This may no longer be the case and you are a far better judge of that than I am.
italics added for emphasis.
PA also maintains it doesn't do business with any known adware company and would terminate its relationship immediately if uncovered. They said they would know based upon increased clicking activity as tracked by DRT's software. THK was supposedly aware of the older relationship with 180, and did its own DD to make sure there wasn't any other adware cos involved.
------------------------
In addition to the fears of adware enhanced revs, the lawsuit filed by THK against DRT to force it to continue supplying network tracking software and services for PA is a black eye for THK, imho. I think it serves to highlight the fact that THK bought what is essentially a brokerage and not the technology that serves as the backbone. Plus, it shows that Kowabunga isn't ready to assist PrimaryAds (although they could in the future). Unless Kowabunga agrees not to develop similar software, I think DRT does have a point about guarding its network technology secrets. I could be mistaken about this; I have tried to speak with Jeff Doak but he's at a conference today.
Just thought you (and others) should know all the facts.
researcher, I agree with you about THK and have added some shares on this huge volume sell-off also. Risk/reward is more compelling now than it has been in a long time, IMHO.
Not without warts, as you mention. Consistent Form 144 selling, acquisition headaches, potential for lowered guidance if they miss again for Q2.....but its been beaten down so much, perhaps discounting these concerns?.
Just wish I knew the source of the selling.
researcher, I don't think the backlog figure for PDGE includes the 7.2MM in contracts announced since the end of the quarter.
I just had to laugh at my post which remarked on the lack of selling below 2.90....here we are now at 2.29, with the low of the day at 2.24. Boy was I wrong about that!
Who knows where the bottom is right now? Its strange that the company hasn't come out with some kind of reassurance for investors; its possible that we aren't close enough to the end of the quarter to make a positive statement yet.
The stock is trading as if the quarter and outlook are being reduced dramatically....or it could be just an unfortunate long suffering from a margin call.
THK is a great value at current levels if Q2 and the rest of the year are clearly on track...or a value trap if they aren't.
Q4 and Q1 were hit by expenses (bad debt, travel, legal) that shouldn't be as bad in Q2. We know that they *could* have earned closer to 0.05 in Q4 and 0.04 in Q1 had they not incurred those expenses.
I sure wish I knew who or what was the source of all the selling down here!
Do you have a link to a PR or filing that discusses this? Or was it discussed at a conference....
I believe you, but I'd like some independent confirmation.
BTW - I listened to the CC again, and the sales increase for FY05 has fully factored in the 26% price increase. Management decided to be conservative with regards to actual organic growth via prescriptions, hence the "conservative" guidance of sales growth of 37-46% y/y. Q1 scripts were +22% over the same time frame in Q1 of last year.
Also, it appears that there was some restocking of the product by wholesalers during Q1; that was completed by the end of the quarter, according to the company.
MSGI, was any of the info you provided for VPHM not known to management before they released their guidance?
For the year 2005, ViroPharma expects the following:
-- Net product sales: $74 to $79 million, representing growth of
37% to 46% over unaudited net product sales of Vancocin in 2004;
-- Total operating expenses: $38 to $47 million;
-- Cost of sales: $12 to $13 million;
-- Cash balance: ViroPharma expects to be cash flow positive from
operating activities in 2005.
All other elements of guidance not updated above remain unchanged from the last guidance given on March 11, 2005.
Guidance provided on March 11, 2005 included $9.0 million to $10.5 million of royalties to Lilly in cost of sales. Current guidance does not include these royalties in cost of sales. We will account for the future royalty payments as contingent consideration and will record an adjustment to the carrying amount of the related intangible asset and a cumulative adjustment to the intangible amortization upon achievement of the related sales milestones.
-------------------
Does anyone (or you) know what assumptions the guidance given by management used for sales price increases? what did they model in for Vancocin growth? Thx.
Seems like this is a shot across the bow by the US towards China. I don't disagree that the yuan is artificially low, but letting it float freely isn't in the cards for quite a while. Perhaps China will start to let it rise a bit by next year, but I think this tariff proposal is really counter-productive. Doesn't anyone remember one of the primary causes of the Great Depression?
Here's a decent article in the SF Chronicle that answers some questions about what could happen next:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/06/12/BUG87D71RT1.DTL&typ...
Thanks Bob.....had a nice chuckle when I saw your "holy hell" comment (grin).
Believe me, its good to have multiple pairs of eyes looking over these stocks!
I just reviewed the latest guidance:
"For the year 2005, ViroPharma expects the following:
-- Net product sales: $74 to $79 million, representing growth of
37% to 46% over unaudited net product sales of Vancocin in 2004;
-- Total operating expenses: $38 to $47 million;
-- Cost of sales: $12 to $13 million;
-- Cash balance: ViroPharma expects to be cash flow positive from
operating activities in 2005.
All other elements of guidance not updated above remain unchanged from the last guidance given on March 11, 2005.
Guidance provided on March 11, 2005 included $9.0 million to $10.5 million of royalties to Lilly in cost of sales. Current guidance does not include these royalties in cost of sales. We will account for the future royalty payments as contingent consideration and will record an adjustment to the carrying amount of the related intangible asset and a cumulative adjustment to the intangible amortization upon achievement of the related sales milestones.
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Rev guidance doesn't include any milestone payments, and appears to show some that Q1 revs are higher than expected for other quarters during the rest of the year. (annualizing Q1 revs = 84.2MM, guidance is for 79MM at the high end).
Being generous, assume they hit the high end for revs: 79MM. Assume they hit the midpoint for total expenses: 42.5MM.
Int exp: 12MM (assumes no more int exp for sub debt, because of conversion to stock)
Ignore effect of derivative changes.
Rev: 84.2MM
Less oper exp: 42.5MM
Less int exp: 11 - 12MM
Pretax: 23.5 - 24.5MM
FD shares: 57MM (assumes additional conversion of 5MM warrants)
FD eps: 0.41 - 0.43 Untaxed
If taxed at 35%: 0.28
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Bob, I'm curious how you arrived at 1.00 pretax using the guidance the company provided? I must be missing something....
Sam, there were no taxes paid in Q1 because of losses in previous quarters that are being used to shield current taxes.
I'm very conservative on this issue. I always apply a proforma tax rate to pretax earnings to get a better picture of what net income would be had they been forced to pay taxes at close to statutory rates. Bob and I have been good naturedly sparring about this issue for some time, and I always bring it up when appropriate <grin>
I object to taking untaxed earnings per share and simply applying the usual growth rate. I think you have to discount somewhat, because if the company stays profitable for any length of time they will certainly owe taxes. Thus, I treat the untaxed nature of VPHM as temporary in nature and thus a non-recurring "benefit", although the benefit will certainly have some time to run.
To each his own....
Samnotsamuel, thanks for replying on VPHM. Can you share with us what adjustments you made to arrive at 0.15 for Q1? Thanks.
Hi Bob. Some follow up questions about your VPHM forecast:
I think they will do $1 pretax in 2005 so .65 to you.
Does that pretax number include:
a) milestone payments under the royalty arrangement?
b) derivative income (loss)?
I'm having a hard time coming up with a decent valuation target here because I'm not sure how I should treat the milestone payments. They obviously have some value, because they can be used to pay off debt, fund R&D, etc....but they will end at some point in the future. You felt that the sum of those payments for pleconaril could be as high as $65MM. Has the company discussed the timetable for potential FDA approval on this? IF approved and all milestone payments are received, then all subsequent revs would drop down to the % of sales of the drug (i.e. royalties?).
The recent insider buying is impressive...
I wonder if this is the same guy who manages Praetorian?? Must be....
http://www.thestreet.com/markets/marketfeatures/771116.html
Let's hope he's not as quick on the trigger as he used to be.