Sycamore Entertainment Group Inc (SEGI)

[RyGuy]

As an investor in SEGI it doesn't really matter what the film investors made, it matters what the distributors take is.

Every distribution deal is in effect a business of its own. But you can use base percentages and get a decent estimation of what a company like SEGI could earn from distribution. They also will make more money from managing the P&A fund.

Now every deal is different, but P&A (Print & Advertising) funding gets paid back first after the theatrical 50/50 split. Then distributors make anywhere from 15% to 40% of gross revenues.

So just as an example. Using the film discussed "Insidious", pretending that Sycamore acquired the distribution of that film. Again this is just pretending that Sycamore Entertainment released "Insidious"

SEGI would have successfully released the film domestically to the tune of $54 Million. Also lets assume a $10 Million P&A fund was used for the film which is probably a bit high. Cause Film prints and delivery cost on average approximately $1000 for each theater location, and then associated advertising for a few weeks prior. I'm assuming P&A was probably around $5 to $7.5 Million. But $10 Million should be a safe barometer.

http://www.boxofficemojo.com/movies/?id=insidious.htm

We subtract the $10 Million P/A and we'll say a $2.5 Million fee to pay the fund investors for a total of $12.5 Million.

We now have a total of $14.5 Million gross from which distributors are allowed to take any incurred expenses as well as their agreed upon distribution fee which can be anywhere from 15% to 40% but we will use 15% on the low end which is essentially the equivalence of a "service deal".

So say there were $2 Million in expenses negotiated in management fees with the films distribution such as distribution management, marketing plans, and marketing consultants that Sycamore could take off the top to pay off those expenses leaving $12.5 Million. Then there is the 15% SEGI could potentially bring in as their distribution fee which could net them $1,875,000 from the remaining $12,500,000 in this instance plus say a P&A managment fee of $500K, thus leaving the producers that made "Insidious" with $10,625,000 to cover their production budget of $1.5 Million and making the producers a $9,125,000 Million profit.

Take into account the monies made by SEGI in Distribution Fees of $2,000,000 and their 15% take of 1,875,000 and their P&A management of $500,000 then there is potential for $4,375,000.

If just $1,000,000 of this is profit (low end) and they can replicate this business across 5-8 films a year then a significant return could be foreseen. Use 5 films and $5 Million in profit annually from those films spread across an O/S of 157 Million give and EPS of $.03

Use a low end P/E ratio of 10 and you have a $.30 stock. Use a 20 P/E and you have a $.60 stock.

Get a couple of blockbuster movies and Sycamore becomes the next Lionsgate or Summit on the distribution depth chart and your looking a moon shot of the share price.

Keep in mind, that I did not mention anything about the monies received from Home and Video distribution.