Facts and Valuation Guesstimate!!!
(1) SPNG announced they will be purchasing Dicon, which according to the company supplied them with roughly half of their products. By purchasing their supplier, not only have they gained control of important patented technology, but they will be able to reduce their cost structure by being the supplier of their own goods.
Assuming SPNG was previously purchasing half of their products from Dicon and their projected revenues are $190 Million in FY 2010 and assuming a 54% gross margin, they would have paid roughly $44 Million to Dicon in CGS. Assuming Dicon operates at 50% Gross Margins, this means SPNG will save $22 Million in CGS.
However, we need to also add in plant and overhead costs from Dicon, which I estimate to be $18 Million. The net result is an increase in net income of $4 Million through the purchase of Dicon.
(2) Mgmt intends to buy back stock such that o/s shares drops to 500 Million.
As a result of these two events, here are my updates using the same projected revenues of $190 Million:
Revenues: $190 Million
CGS: $65 Million
Gross Profit: $125 Million
EXPENSES:
Salaries: $27 Million
Advertising: $27 Million
Other (Dicon Overhead): $18 Million
Total Exp: $72 Million
Net Income: $53 Million
Income Tax Exp: $18 Million
Net Income: $35 Million
Shares Outstanding: 500 Million
Diluted EPS: $0.07/share
Assuming a valuation of 12 to 18 times earnings: PPS Ranage is $0.84 to $1.26
Shares Outstanding: 722 Million (As of April 2009)
Diluted EPS: $0.048/share
Assuming a valuation of 12 to 18 times earnings: PPS Ranage is $0.57 to $0.86
Shares Outstanding: 1.5B
Diluted EPS: $0.023/share
Assuming a valuation of 12 to 18 times earnings: PPS Ranage is $0.27 to $0.41
Shares Outstanding: 2B
Diluted EPS: $0.0175/share
Assuming a valuation of 12 to 18 times earnings: PPS Ranage is $0.21 to $0.315
AI
