A Scenario – getting there without R/S
Assumption
1. EVFL will not sell their authorized shares to raise capital. They will do it from private investors and from the Gov’t. Thus, the O/S count will stay as is (say, 20 billion). Out of 20 billion shares, EVFL will gradually spend appx. $5 million to buy back 18 billion shares. So the eventual O/S at the end of 2012 will be 2 billion.
2. EVFL has several million dollars of cash on hand. The cash is from some private investors like the one who got angry and dumped about nine billion shares.
3. EVFL has applied for Gov’t stimulus money for some amount between $20~50 million and expects to receive it by the end of the third quarter, 2009.
4. $40 million working capital on hand by the end of the third quarter will enable them to upgrade and operate the Durant facility by the end of Apr, 2010. They also will be able to acquire several service stations every year and provide bio-fuels to the stations.
5. EVFL will sign a contract to distribute bio-fuel, which will force them to purchase bio-fuel from other vendors other than Durant facility due to the lack of amount of fuel it produce. Considering the maximum bio-fuel consumption per station may be one million gallons per year, distributing bio-fuels to 500 gas stations means 500 million gallons of bio fuels. And this leads to sales revenue of one billion dollars (EVFL may not actually purchase and sell the fuels. Instead, they may receive commissions for the amount of fuels they distribute. Although this can significantly affect the sales revenue, let’s assume that the net income will not change)
6. Durant facility will be ready and produce bio-fuel at its maximum capacity of 100 million gallons per year
7. Growth rate: 12%
8. Required return: 15%
Net Income calculation (for the year 2012)
1. Durant facility: $10*1.12*1.12 = $12,544,000
2. Service Stations: 0.15*8 = $1,200,000
3. Commission from distributing bio-fuels: 500 mln *2*1% = $10,000,000
4. Total expected net income for the year 2012: $23,744,000
PPS calculation
1. Total Dividends (100% of net income): $23,744,000
2. Dividends per share = 0.01187
3. PPS calculation = 0.01187/(0.15-0.12) = $0.40
4. P/E ratio = 33.7
Variables
1. Net Income
2. O/S
3. Dividends
4. Required Return
5. Expected Growth
The assumptions may be too tight to be converted into a real plan, but it's highly probable (IMO)!. Wouldn't you buy this stock if they showed you their plans as above and the pps were 0.0001~0.0002??? SHOW US YOUR PLANS DENNIS!!
GO EVFL GO!!!
