Research done in 2014. You can look it up on FRCN website.
• Firemans Contractors, Inc. (OTCQB: FRCN) is a development-stage company. It is a Franchisor and full-service General Contractor providing professional services for commercial and government clients, focused on developing Business to Business Franchise Opportunities throughout the United States. The Company is headquartered in Texas.
• The Company specializes in roadway, highway and parking lot striping maintenance which includes a host of services such as new striping, re-striping, stripe removal, roadway markers, handicap logo painting, stenciling, fire-lane striping, speed bumps, wheel stops, signage, crack filling, seal coating, asphalt & concrete repair, asphalt overlay and power washing. FRCN’s target clientele include individual customers, contractors, vendors, communities and commercial entities.
• The Company intends to increase its market share in a fragmented industry. Management believes that the franchise model should help it increase market share and get brand recognition. The Company had 2 franchises in 2012 and in January 2014 opened its 3rd franchisee in Texas.
• The Company is a part of the International Franchise Association (IFA) and The Veteran Transition Franchise Initiative (VetFran). The association with IFA and VetFran also brings tremendous credibility for the Company’s brand and its image in the minds of the customers.
• While the Company does not own any patents currently, it does have 3 Marks relating to the use of the name, logo, and the tagline. Also there is no pending litigation against the use of any of these 3 Marks. The Company also owns a proprietary software ‘FirebaseTM’ that is given to franchisee during training.
• In order to gain acceptance among customers and grow at a pace faster than the industry, the Company intends to increase awareness of the Firemans Contractors brand by aggressively marketing the Company and what it stands for. It is conducting advertising campaigns, building networks with contractors through PR events and using social media as a marketing tool.
• FRCN services are in three industries: the road and highways maintenance industry, road and highways services industry and the painting and decorating industry. All three have experienced a slowdown due to the economic recession. However, the outlook over a period of five years for all three is positive. The road and highways industries are largely fragmented. The painting and decoration industry is relatively small and concentrated. The franchise model should help the Company get the best returns from all three industries.
• Management of FRCN has shown insight to use the Franchise model to expand the market share. It understands the need to make Firemans Contractors stand out in a fragmented market and has successfully employed marketing activities geared towards increasing brand awareness.
• Key Risks: As a small company functioning in multiple industries, FRCN has to mitigate the threat of not being able to successfully manage different businesses. Its franchise model requires disclosure of confidential information and if the selected franchisee is not up to standards expected, the Company can lose goodwill. As a relatively new entrant to the market the Company will require a large influx of capital for attaining stability.
Financial Forecasts and Valuation
• Based on management guidance, we project revenues of approximately $1.59 million in 2014 and $10.3 million by 2019. Margins are likely to expand with the Company increasing its franchise network and reach. The Company will have to raise additional capital during our forecast period to meet our estimates.
• The Cohen Price Target is calculated using market-based multiple valuation, Discounted Cash Flow (DCF) and by applying the Cohen Price Performance Index approach. The multiple based valuation approach uses the expected 2016 Price-to-Earnings and Price-to-Capital Employed ratio. We also include the Cohen Price Performance Index, which is representative of the past coverage performance of all stocks evaluated by us. The last component in calculating the Cohen Price Target is the value derived using the long-term Cohen Discounted Cash Flow (DCF) valuation approach.
• Based on an average of these methods, Firemans Contractors, Inc. common stock is valued at $0.007, 320.9% higher than the current stock price of $0.0013. We recommend purchase for short term traders and long term risk-averse investors.
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