Drinks Americas Holdings, Ltd. (DKAM)

[sneaky_peaky]

Nope numbers never do lie. But there is also a time when "analysis paralysis" kicks in. That time has long since passed.

Today is October 15. Let's say today the CEO comes out and announces sales will grow by $15 million over the next 6-12 months. Current sales are $4.5 million. That is more than a 300% increase in sales over the next year. Pretty freakin impressive since 99% of the beverage companies out there are struggling to sneak out 5%-10% growth metrics for their business.

Last week, our CEO announced that sales would grow by $15 million over the next 12-18 months. The CEO cannot control the exact date the products will arrive, all the media, all the surrounding parameters, how the distributor re orders will fall, all those external factors.

Now, on exactly October 15, 2009, the CEO announces they have achieved exactly 300% growth in sales. In each case, the CEO did exactly as promised. The results are the same. THE NUMBERS ARE THE NUMBERS.

Yet, we have people posting crap about 12-18 months and it really not being 300% when you go out 1 1/2 years. If we were in the 6-12 month timeframe, there would be many who would be screaming that the sales are not coming in as expected and the CEO has fed us a line of crap again, which he has never done once.

The same holds true for sales. THE NUMBERS ARE THE NUMBERS. In 2006, the company did $1.6 million in sales. In the two subsequent years, they did $6.0 and $4.5 million in sales. That is $10.5 million in sales for the two years. That is a combined 556% increase in sales over 2006. That is an AVERAGE of $5.25 million in sales each year. That is a 228% average increase in sales per year. That is a 68% increase in sales per year in the aggregate. That is a loss per share from 16 cents to 8 cents. That is a payment of 90% of outstanding debt.

Once again, those with limited capacity in many regards, much less what is in plain print because THE NUMBERS ARE THE NUMBERS, would want you to believe sales are declining; it is all smoke and mirrors; it is a clever con job. They insist on drawing you to the $6.0 mil dropping to $4.5 mil as a sign the company is failing. Yet, they say nothing about the $4.5 mil in sales from last year tracking currently to the same number for this year. They say nothing about that current number increasing dramatically on last week's call. Nope, it is all about the past.

Then it gets better. Then others come in and say that no matter what they sell, they will lose money. All previous quarters have been losses with increasing sales, so it will remain that way.

THE NUMBERS ARE THE NUMBERS. A growth in sales of $15 million as promised. Will they be higher? Probably. But in the near term, you can expect this. The growth spurt going forward will come at an average of 44% margins. The company is tracking an SG&A drawdown to $1.1 mil per quarter. On $10 mil in sales, $4.4 mil will be gross profit. Their remaining costs $4.4 mil. Depending where the Olifant annual payment falls adds another $400K to their costs. So, somewhere between $800K-$1 mil in additional sales takes them to break even to cover that payment. That is how I derived the figure a month ago. That is how the CEO derived the figure for the CC last week.

On the $9 mil beyond that break even number, the margin relationship drops to 38% because it picks up the non alcoholic. It is NOT declining margins. It isn't a sell signal. IT IS PRODUCT MIX. No additional costs to take out. Gross Profit is Net Profit on additional sales above the break even. That is $3.42 mil in Net Profit. That is 4 cents per share.

Now, you can spend the next 6-12 months arguing the fact that the numbers didn't fall right this quarter compared to last, or this quarter's growth surge won't be sustainable going forward and will repeat 2006, or the fact that 4 cents in profit does not a $20 stock make! You see, the real truth is no matter what the company does, there will be that host of front porch sofa squatters that will talk down the numbers any way they can. That is all they know. Their limited capacity with such things predecates it if not demands it.

The fact is, they are doing what they said they would. The exponential growth is what they said it would be. The company is undervalued in a peer relationship in its industry. Their per case valuation for a buyout is undervalued by 80% currently. When these numbers hit, it will be undervalued by more than 95% of its industry per case valuation.

Why? Because THE NUMBERS ARE THE NUMBERS.

On this exact same scenario, Cramer two years ago touted REDF on 1 cent in profit. He took it from $6 to $33. Sure, it came back down. Beside the point. On this identical scenario, JSDA went from 18 cents to $33. Sure, it came back down. Beside the point.

Nothing more to say here. The rest is analysis paralysis. No hype. No pump. No dog and pony show. From start up to dramatic losses to increasing sales to no debt to global expansion to declining losses to break even to profit to more expansion to shareholder equity to a higher exchange listing to analyst coverage to sshare buyback to buyout.

Why? Because THE NUMBERS ARE THE NUMBERS.




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