Unintendo: in answer to your question, I do not own any Uwink at this time. I still kind of follow it, but I got rid of it shortly after they announced the reverse split. It has been my experience that those things almost never work out. Uwink actually had a good chance of it working in that they were/are a growing entity. Most reverse splits are because a company has tanked and the stock price went so low they are risking delisting. That wasn’t the case with Uwink, but I have just been burned twice on r/s.
I don’t know if raw will let me answer the rest of your question as this is a Uwink board, but I think the numbers are a good analysis of how Uwink could be valued in the future. I like Spicy Pickle because it is one of those pure internal growth companies that you rarely find in the OTC.
Spicy Pickle’s restaurants do nearly 50-70% more revenue per square foot than other same sized/type eateries. My sister lives in Denver, and says the food is unique, not just standard sub shop fare. More like something you would find at Panera.
In early 2006, there were a dozen operating locations and they were looking to expand. Now there are twenty five locations and, from what I can tell, about 15 more that are in various phases of construction. Next year, there should be 50 locations that are operating. And they have sold about 50 additional franchises that are in various phases of development. So somewhere between now and the end of 2008, there will be 100+ operating locations. From what I can gather, 80% or more will be franchisees that pay a 7% royalty weekly. With an average location doing $700k, they will have cash flow of $35k per year per location (2% of royalty is for a cooperative advertising play, so used 5%). So, minimum of $3,500,000 per year on royalties from 100 stores. Plus “rebates” from national suppliers (beverage, meats, etc). Probably adds another $5k per year per store. In order to cover their corporate costs, they should break even at 50 operating stores, maybe a few less. They also get an initial franchise fee of $35k for the first store, $17,500 each additional store. The company is led by Marc Geman, who is the same CEO that built Pretzel Maker from 7 stores to 250 stores and sold it to Mrs. Fields. Think he doesn’t know what he’s doing?
Unlike Uwink, there is no debt, no convertible securities, no warrants, no insider loans, and few options issued to employees. This structure is as clean as it gets. The original shareholders are long term players, and they are looking to see this company grow to 300+ stores. I value the company at about 2.5 cents per operating location. So it is priced right at $1 per share now, however at the end of 2008, should be about $2.50 per share. If they do hit 300 locations in the future, it will be $7.50. And I’m looking for a 30% buyout premium. So I expect it to be $10 by the end of 2010.
