Posted by: wadirum1 Date: Sunday, December 07, 2008 8:03:08 AM
In reply to: bigtuna177 who wrote msg# 24840 Post # of 28041
Bigtuna,
Since you are looking at the fundamentals, think about some of these other key points:
1) There was concern in Sept because the accounts receivables ballooned on the 10K. Well, most of the revenue was recorded in the last quarter of fiscal 2008. In Q1 of 2009, they not only collected "every penny" of the A/R on the books from end of 2008 (according to Moskowitz), but then they REDUCED the ratio of A/R to revenues in the explosive Q1 2009. Utterly amazing performance on this key metric for a start-up.
2) Some may worry about RME dilution. However, note that SPNG holds OPTIONS to buy back the RME shares at cost. Thus, if this option is exercised, then 660M of the 800M or maybe 900M shares are essentially an interest free loan. (See recent PRs and the July 8k)
3) The company is guiding for 40M in 2009, with the SAME NET MARGINS as in 2008 (i.e., about 20 percent). But this guidance is solely based on orders shipped or signed orders as of a date prior to the Viacom/NickJr announcement -- and that is explicitly NOT factored into projections. (See PRs and the radio spots)
4) IF the company does 50M in 2009 at 20 percent margins, and if the share count is really 200M, then we are looking at EPS of 5 cents/share (twice the current share price). They are saying that 2010 will "dwarf" 2009... (quoted from PR)
5) They claim to be in talks with a major kitchen/bath company. And they claim to be in talks with 2 pharmaceutical companies. Any of these 3 ventures is apparently going to blow away the kid sponges, which are themselves supposed to blow away the car sponges. And don't rule out rumors in prior IHUB posts that they will be selling the pet sponges in PETCO.
6) Why is this gem selling at 2.5 cents? There are several reasons. First, it is not clear that they can get sufficient funding through RME (we have not seen RME's books) and it is not clear the RME shares will be bought back. Some have alleged or hypothesized that RME is dumping tons of shares into the market despite management's statements and filings suggesting this is incorrect. Second, and probably more importantly, the stock is very heavily shorted.
7) The shorting may prove to be an unbelievable gift. It enabled me to buy millions of shares at an average of 2.4 cents. Plus, it has enabled some MUCH larger positions to form. The BMAS buyer probably has 75M shares, and the Furth group is probably over 100M. The shorts may very well have been CORNERED. Indeed, they may have been cornered TWICE, so that they will need to negotiate with both groups before we find a maximum price.
All we need is a catalyst in the form of a major strategic move of some sort to light the fuse. With this board as GIDDY as it is, I suspect we might be almost there, but I frankly do not mind waiting another year or two if the return is as good as I think it will be. Maybe I got in too soon and maybe I will have to wait a lot longer, but I really think there is no point chasing other stocks when this looks so good. I have therefore put my entire trading portfolio and a good chunk of 2 IRAs into this one stock and will hold it until something very substantial makes me change my mind.
All just my honest opinion.
Wadi Rum
AI
