Updated projections for CCLWF using 2009 numbers and adjusting for the 1M warrant buyback:
Share price: $6.35
Shares o/s: 10.16M
Warrant price: $1.00
Warrant strike price: $7.50
Warrants o/s: 14.55M(will raise $109.13M when converted, or $4.42/share in cash))
The projections include the cash and use 24.7M o/s(includes the warrants) and are based on 2009 numbers:
2009 Net Income = $26.20M($1.06 eps using 24.7M o/s)
Adjusted PE = Current Share Price - Cash/Adjusted EPS(using fully diluted 24.7M o/s)
$6.35(share price) - $4.42(cash) = $1.93 adjusted share price.
$1.93/$1.06(2009 eps) = PE of 1.82
Projections(using 2009 eps of $1.06):
PE of 4 = $8.86 (intrinsic value of warrants = $1.36)
PE of 5 = $9.92(intrinsic value of warrants = $2.42)
PE of 6 = $10.98(intrinsic value of warrants = $3.48)
PE of 7 = $12.04(intrinsic value of warrants = $4.54)
PE of 9.27 = $14.25(intrinsic value of warrants = $6.75)
Warrant potential:
PE of 4: value of warrants = $1.36 (36% upside)
PE of 5: value of warrants = $2.42 (142% upside)
PE of 6: value of warrants = $3.48 (248% upside)
PE of 7: value of warrants = $4.54 (354% upside)
PE of 9.27: value of warrants = $6.75 (575% upside)
Summary:
The warrants at $1.00 are a worthy investment, especially with a management team with the wherewithal to do a warrant repurchase when the opportunity presents itself and at such a bargain price. The repurchase was made at $1.00, so it provides a floor for the warrants going forward. Helps eliminate future downside risk.
Using the cash method for the warrants it only requires a trailing PE of 6 to provide a 250% upside in potential warrant appreciation. It currently has a PE of 1.82 on a trailing 2009 basis once you subtract out all the cash the warrant redemption will generate. The common is also a compelling value at current levels since a PE of 7.81 will create a 100% appreciation from the current level of $6.35/share.
Note:
I use the P-C/EPS to determine value when accounting for warrants, whereas many others use the treasury method. Valuation calculations will differ when using the treasury method. For example, if the share price is $10, the treasury method would have the outstanding share count at 13.8M, 2009 EPS at $1.90, and PE at 5.26. If the share price was $14.25, the o/s count would be 17.05M, EPS $1.54, and PE 9.25.
-Adam
"Talking heads usefulness is the equivalent of the human appendix" Professor Mumbo Jumbo
