Fundamental truths and haiku

[naturalborninvestor]

APRO Fundamentals

PPS: 0.023...

- Good chances to see a 6-figure net earnings reported (at 86M O/S; 36M float)

- Current financials to be out any time

- Intention to up-list shortly after as per PR

- Contracts and strategic acquisitions to solidify "extensive growth in 2010"

- up to $300m in payroll revenues already under contract (was at $30m in 2008)

- Close to STTN: Same management, business and corporate locations...just a spread of 4000% in valuation

- APRO is NOT the "little brother" of STTN. APRO got into STTN as part of a "Marketing Partner Agreement". APRO affiliate (Bonar) now holds controlling ownership (65% of the O/S in STTN)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48814660

- active share-buyback program (up to 15M bound to volume - the more volume the more firm can buy back)

- no dilution since the firm restructured as APRO in 2008 (TA ungagged)

- APRO Management holds 46% of O/S

- Stated intention to grow internationally

- Several revenue streams: APRO earns management fees for taking over various HR functions plus sells insurance products and financial services to its growing employee base

- Industry accelerating rapidly due to cost-cutting potential for small and medium sized firms who benefit from outsourcing the time-consuming administration. A business that simply makes sense for a lot of customers.




Valuation by direct comparison

STTN (as per PR dated 04/12/2010):
Quarterly Projections: $545K net profit / $32m gross billings = 1.7%
Annual Projections: $2.1 net profit / $137m gross billings = 1.5%


APRO:
0,015 x 100m gross billings (DEC. 2009) = $1.5m net profit
0,015 x 150m estimated gross billings (March 2010) = $2.25m net profit (confirming the $3 million EBIT figure for APRO that leaked through the STTN article!!!)

$2.25m / 86M O/S = 2.58 cents EPS

PE x10 >> fair value 25.8 cents!
PE x15 >> fair value 38.8 cents!

STTN is currently trading at a PE multiple > 30!



Valuation by Industry Margins
To be conservative, low-end service fees, a low profit margin and a low P/E multiple are assumed. Calculations are performed with the confirmed O/S share count that might not fully reflect the active share-repurchase program. Estimated values for 2010 only take into account contracts that are already known and reported.

Payroll 2009: $100m
Service Fees: 3% - 15% of total payroll http://en.wikipedia.org/wiki/Professional_employer_organization
Est. Net Profit: 1%
O/S: 86M
Gross income: 0.03*$100m = $3m
Net Profit: 0.01*$100m = $1m
EPS: $1m / 86M O/S = $0.0116

PE 10 >> $0.0116*10 = $0.116
PE 15 >> $0.0116*15 = $0.174

Payroll 2010e: $300m
Service Fees: 3% - 15% of total payroll
Est. Net Profit: 1%
O/S: 86M
Gross Income: 0.03*$300m = $9m
Net Profit: 0.01*$300m = $3m
EPS: $3m / 86M O/S = $0.0348

>> PE 10 >> $0.0348*10 = 34.8 cents
>> PE 15 >> $0.0348*10 = 52.2 cents



Valuation by leaked information
“…He established another PEO, Allegiant Professional Business, took the firm public, and grew the company to $150 million in annual sales with $3 million EBIT…. Mr. Bonar also founded AMS Outsourcing, a PEO producing annual sales in excess of $25 million, profitable and having its own workers compensation policy. The firm focuses on the transportation market and has an international staffing presence in the Czech Republic and Mexico.”

EBIT: $3m
less taxes: $3m x (0.7) = $2.1m
less interest expense provision: est. $350k (if any)

net earnings: $1.75m

EPS: $1.75m / 86M O/S = 2 cents!

>>> at 2 cents APRO is just trading at projected EPS, without a PE multiple factored into the share price

>> at PE 10: 0.02 x 10 = 20 cents!
>> at PE 15: 0.02 x 15 = 30 cents!