Wade, you referred to PEIX and "revenues of $254M." Actually, looking at their news release, it's $254M in NET SALES (net revenues), but isn't that figure including all their 3rd party production as well? If so, then you can't speak of Madera adding 25% to that total, no, it's something much less. (And didn't CEO Neil just say something this week about not being sure of going forward with a 30% expansion?)
39.8 M/gals were sold from the 3 plants (now to be 4 plants)
73.0 M/gals were sold from 3rd party operations
112.8 M/gals total ethanol sold
I believe the $254M net sales was from these two segments combined, no? Please correct me if i'm wrong.
So your math would have to be adjusted accordingly for everything else you wrote in your interesting post.
If i'm right, then PEIX's own 3-plant production was somewhere around 35% of that $254M net sales-- we don't really know the exact amount they generated from their 3 plants, but 35% is 39.8M/gals divided by their total 112.8M/gals.
So, doing the math from there, PEIX's 3 plants generated $88.9M in net sales. Madera would add 25% to that, or $22.2M.
The bottom line here is that, as i've said before, given the respective histories of the two companies (e.g., PEIX's bankruptcy), and given REX's far healthier balance sheet on things like cash/debt ratio, total amount of cash/equivs., etc., right now the market won't give PEIX anything like the same valuation as REX, so one simply can't speak of "PEIX is actually selling for almost a 50% discount to REX."
In time, with another two very profitable quarters for PEIX under its belt, we could begin to talk in such terms but right now seems premature.
Value- PEIX vs REX on valution [valuation]
there is one thing we've both forgotton. That is Madera. Let me go over the true valuation for PEIX assuming a 30% rise in production from the Madera Plant going forward. Now this calculation is assuming the same margins as in the Mar qtr. PEIX posted $254M in revenues for the Mar qtr, so 30% more would be $76.2M. Margins were 15% in the Mar qtr, so that would mean $11.4M more in gross profit. Then I'm assuming another $1.2M more(33%) in S,G,& A, which brings that down to $10.2. Also I'm assuming using 20M fd shares, so another $.50 EPS from that.
Now PEIX posted $1.50 from operations for the Mar qtr, but if we figure 20M shares vs 16M shares in the Mar qtr, that would be 4/20 dilution or 20%. Therefore the $1.50 would now be $1.20 in the June qtr. So now if we add to that the $.50/qtr incrimental increase, that would mean $1.70/qtr on 20M shares in the June qtr.
However lets take that a step further, and assume 25M fd shares later in the year. 5/25 is another 25% dilution, so now the $1.70 would become $1.27. Lets in addition assume a 35% tax rate as REX has, and that would take it to $.82/qtr.
So now we have $.82/qtr for PEIX going forward, assuming the same margins as in the Mar qtr, 30% more in revenues from the Madera Plant, 25M shares, and a 35% tax rate. That would annualize to $3.20, which with the stock price at $13, would put the PE at 4 fully taxed and diluted going forward.
When we figure REX earnings $3/qtr going forward(15% higher than in the Mar qtr), we also are assuming the same margins as the Mar qtr & fully taxed(35%) and diluted. With REX, even with $3/qtr, or $12 annually, that would put the PE at 5.8 going forward.
Therefore PEIX is actually selling for almost a 50% discount to REX, using the same metrix [metrics] going forward.
