AI
Sunday, April 20, 2008 7:05:59 AM
According to http://www.incbiznet.com/companies/87581 Flotec had 2007 revenues of $13,410,002. I can't find the article right now (maybe somebody else can locate it), but in 2007 Tim Cook stated that they would most likely double revenue in 2008 and again in 2009. That puts estimates of $26,820,004 in revenue in 2008 and $53,640,008 in 2009. According to the press release over the 12 months ending March 31st, 2008 Flotec had revenue of $17,270,000 excluding one time gains on real estate, pretax income of $4,840,000, and EBITDA of $5,260,000. If Flotec were to keep those margins and meet Cook's statement of doubling revenue in 2008 and 2009 that would to the following estimates:
Now we will not get 12 months of Flotec revenue in 2008, but it would be possible to get 9 months depending on how long it takes to arrange financing. If we were to combine these numbers with the Dahlman Rose estimates dated January 28, 2008, the results would be as follows:
Depending on how they finance this deal these numbers will change to varying degrees. Should they choose to issued some preferred shares we will have a high interest expense and it will affect EBITDA and net income. If management decides to issue shares it will limit expenses and help to solidify the balance sheet but in turn will dilute the potential EPS a tad.
As far as placing a tangible value on the stock I am going to build in a buffer by using more shares than I think will be reflected in the purchase price. By using an OS of 130,000,000 and net income of 10,614,338 (based on 9 months of Flotec) we get an EPS of $.08 (it would be $.09 on 115M OS). At a PE of 30 that puts us at $2.40. But that really isn't forward looking. Based on 2009 net income of 22,446,467, 130M OS would yield an EPS of $.17 while a 115M OS would yield an EPS of almost $.20. Based on a PE of 30 $.17/share would put us at $5.10. And none of this factors in the synergy that will be generated by this acquisition or any other additional acquisitions either. I fully expect Dahlman Rose to upgrade their estimate to around the $4.00 range. I no longer think that it would be far fetched to see this trading on the AMEX or NYSE in 2 year above the $10 point. All IMO of course.
Now we will not get 12 months of Flotec revenue in 2008, but it would be possible to get 9 months depending on how long it takes to arrange financing. If we were to combine these numbers with the Dahlman Rose estimates dated January 28, 2008, the results would be as follows:
Depending on how they finance this deal these numbers will change to varying degrees. Should they choose to issued some preferred shares we will have a high interest expense and it will affect EBITDA and net income. If management decides to issue shares it will limit expenses and help to solidify the balance sheet but in turn will dilute the potential EPS a tad.
As far as placing a tangible value on the stock I am going to build in a buffer by using more shares than I think will be reflected in the purchase price. By using an OS of 130,000,000 and net income of 10,614,338 (based on 9 months of Flotec) we get an EPS of $.08 (it would be $.09 on 115M OS). At a PE of 30 that puts us at $2.40. But that really isn't forward looking. Based on 2009 net income of 22,446,467, 130M OS would yield an EPS of $.17 while a 115M OS would yield an EPS of almost $.20. Based on a PE of 30 $.17/share would put us at $5.10. And none of this factors in the synergy that will be generated by this acquisition or any other additional acquisitions either. I fully expect Dahlman Rose to upgrade their estimate to around the $4.00 range. I no longer think that it would be far fetched to see this trading on the AMEX or NYSE in 2 year above the $10 point. All IMO of course.
