UPDATE: I threw together an excel sheet that illustrates my viewpoint is mutually beneficial for all parties involved.
http://glenbradford.com/files/Stocks/LPIH.xls
Hey, don’t email these guys. call them. they’ll never reply to your emails.
For more information, please contact:
At the Company:
Jim Crane, Chief Financial Officer
Tel: +1-617-209-4199 (U.S. Office)
+86-152-0120-8012 (P.R.C. Cell)
Investor Relations:
Dave Gentry
RedChip Companies, Inc.
Tel: +1-407-644-4256 x104
Email: info@redchip.com
Web: http://www.RedChip.com
anyway. let me know what you find out via email. here’s my take for the record. it’s story time.
a couple months ago (back when lpih was around 80 cents):
a redchip insider informed me that longwei had leaked to them that they intend to understate everything and say that this is going to merely double revenues and net income. I asked how they were going to finance this, i was informed around 15M shares of dilution once LPIH was above $1
so i was like, heck yes. i can handle 105M shares outstanding, putting earnings at about 80 cents based on ballpark calculations. and seemingly triple digit growth.
how has my viewpoint changed since then?
take a look at the slides, worst case scenerio outstanding shares are now 122M.
Note that their 2010 estimates are only running the new plant at 60% of capacity for half the year. LMAO. that’s chump-tastic.. because most people don’t know what that means.
in other words, you take the $200M in revenues ballpark going forward, cut it in half (half the year), and then take 60% of that (to be ultra conservative because it’s “starting up”), and add that to your baseline of 2009.
So, who cares about that crap. The bottom line is their estimates are pulling $400M in top line. and we’ve already established that these estimates are retardedly conservative. My 2011 estimates are $500M+ in revs. Tripling would have been about $600M.
ok now what, their margins are probably increasing, so i’d chalk up your net income margin at 13%
now, a quick class in “incentives” — their ceo and treasurer own 69M shares, ballparking 84% of the company. Dilute this and you have 76% o the company.
I would imagine that they don’t mind diluting if it means growing their empire as long as they continue to control the company. So now they can go up to 138M shares and still call the shots. not only that, but one of the best ways to get more shareholders is to sell them some stock. in order to uplist, you need more shareholders, with more stock. so this is in line with the company uplisting.
again, this is worst case scenerio.
anyway, 500M revenues at 13% net income margin puts them at $65M net income on what i think is probably going to be 110M shares outstanding, as they probably overstated the dilution — but who knows.
that puts normalized going forward eps at 60 cents a share.
if they full out triple, that’s 70 cents a share.
if they just double, 50 cents a share.
if they increase their o/s, double their numbers, and reverse split 5:1, they can uplist within the next year, and odds are that with all this free cash flow they will open up another station somewhere, hopefully without the additional financing help.
my absolute worst case scenerio puts earnings at 40 cents a share. at $1.50, that’s a P/E of less than 4 on a company set that just more than doubled, has strong cash flow, could uplist in the next year, and just spooked the heck out of investors by understating everything to the extreme imo.
if i had any advice for management, it would be the following.
dilute to 110 million shares outstanding using some sort of preferred/convertibles that pay 10% over the life of them and convert at $1.50; if you need access to large investors to finance this, contact redchip. actually, the best way to structure this is to back it with the CEO and treasurer’s shares. put up 5M of each of your shares to back this financing to show how strongly you feel about the company. if you do that, your net worth will more than double in the next year.
so, in that case you’d both be sitting on 30M shares still. 60M total, you could dilute to maybe 100M, back it with debt financing, and away you go. i know that in china, loans are given with respect to assets, not cash flow, and it’s pretty obvious that this is an ASSET investment.
good luck
http://www.ritholtz.com/blog/2009/09/liquiditysentiment-review/
http://oldprof.typepad.com/a_dash_of_insight/2009/09/fighting-the-fundamentals.html
vstm – ticker? – got something like this over the phone, miswrote the ticker
bstm – ticker?
cage or ctec – too expensive for me, reverse split 4:1 makes it confusing, used to be 25M shares outstanding, FP/E around 8 at $13
rner – no, not big enough
pfgy – hmmm. can’t decide. so i bought some.
rino – yeah, but it’s more of a long term. i dont own it.
hoggs – can’t invest in london. upside of 300%+
hqs – no
llfh – sure. why not, just not good enough for me anymore.
Have you looked at ETLT? Looks like a scam but do you have any insight?
ETLT – no
cnwi – no. got an email pumping it
last thoughts:
understand incentives
when it comes to operating margins:
banks are to interest rates as the US government is to inflation
banks make more money with low interest rates because their spread is higher, meaning that the lower interest rates go, the larger the difference is between the rates at which they borrow and loan. as this difference increases, their profits increase.
when it comes to the government. the lower they can state inflation, the less they have to increment the wages of their employees, as a lot of salaries are adjusted to stay in line with inflation numbers. thus, you have the incentive to understate inflation.