3SOF

FYI, didnt see this on Yahoo yet, not big news.
 

SOURCE: Form 144

ISSUER: COMMERCEPLANET INC
SYMBOL: CPNE


FILER: HOLLOWAY CLIFFORD M
TITLE: Shareholder
BROKER: PENSON FINANCIAL SERVICES INC
RESTRICTED SHARES TO SELL: 100,000        DATE REGISTERED: 2/20/2007
APPROXIMATE DATE OF SALE: 2/21/2007

  The Form 144 is filed with the Securities and Exchange Commission to
  reflect the intention of any holder of restricted stock to sell those
  shares.  After the 144 is mailed to the S.E.C., the filer is permitted
  to sell the shares, or any fraction of them, within 90 days.

Form 144 Data Source: The Washington Service
                      ([email protected] or 301-913-5100)


  (END) Dow Jones Newswires

  02-22-07 2318ET

23:18 022207

tokyopua; I lost you.

How is Clifford Holloway the brother of CPNE CEO Michael Hill?

Quote from: webby67 on February 23, 2007, 10:58:12 AM
tokyopua; I lost you.

How is Clifford Holloway the brother of CPNE CEO Michael Hill?

I lost myself, lol.  Will edit that post. 

Here's a good outlook:

http://www.smallcapnetwork.com/scb/index.php?s=cpne

Nice, quiet, steady uptrend day for CPNE.

And we again held the 20 day MA line nicely (now at 2.79).

We got rid of a lot of "fast money" momo types yesterday (and yes that includes dear ol' David's 3stox fast portfolio holdings!!  )

and now the stock is in stronger hands who understand the story better and are patient to see the growth unfold (and that includes David's Main Portfolio holdings too  .

Pretty soon, I'll betcha David will wish he'd kept the CPNE in the 3 stocks portfolio too... 

Hey everybody!!! What would have CPNE have earned in net income if not for the expense of retiring that 5 million in debt?  Now thats worth talking about!!!!!

Quote from: webby67 on February 23, 2007, 04:39:56 PM
Nice, quiet, steady uptrend day for CPNE.

And we again held the 20 day MA line nicely (now at 2.79).

We got rid of a lot of "fast money" momo types yesterday (and yes that includes dear ol' David's 3stox fast portfolio holdings!!  )

and now the stock is in stronger hands who understand the story better and are patient to see the growth unfold (and that includes David's Main Portfolio holdings too  .

Pretty soon, I'll betcha David will wish he'd kept the CPNE in the 3 stocks portfolio too... 

CPNE is still trading above 20 day MA, so we still see the sign of the bullish trend. But the MACD indicate weak bearish signal. And for the current trading volume, I don't think CPNE will be on fire againt shortly, but David just like David said, there should be no worries for long term.

It is time to look at our model again.

Any model is only as good as its predictive power and the Q4 results deviated quite significant from our forecast. The revenue forecast was in particular lower than expected (8.7 million against a forecast of 11.8 million).

With the benefit of hindsight it is quite clear what went wrong. My assumption about churn from their existing base going into Q4 was way off base. They already announced that they had 125,000 gross connections in Q2 06 and even though gross connections probably was lower in Q3 (as they made no announcement) you would expect above 100,000 gross connections in Q3 as well and unfortunately some of these new subscribers did as expected churn in Q4

To get a better feel for their business I have tried to estimate the average subscriber base for the last 2 years based on the reported revenue figures:



Based on their different press releases we know approximately how many gross subscriptions they made in the second and fourth quarter of 2006 so we can now do some reverse engineering

Basically the target is to find a churn pattern that gives an average subscriber lifetime of approximately 3 months and can explain the historical revenue and subscriber development. After a lot of trial and errors I found that the best assumption is that 60% of gross additions churn in the quarter they subscribe and the rest churn in the next quarter.

In the table below I have estimated the subscriber development historically and going forward. I increase gross connections with 5% per month going forward except for February 07 when it drops 5% (February has 10% less days so you would expect that gross connections would be lower):



As said before:

Quote from: Michael on February 17, 2007, 07:53:22 AM
The long term profitability can therefore be condensed to two factors:

• The company's ability to reduce churn
• The company's ability to replace churned customers

So it is not surprising that when we make changes to these; the result on the forecast is dramatic:



EPS for 2007 is now expected to be around 57 cents. The sharp drop compared to previous forecast is mainly due to the lower subscriber base going out of Q4, which again is due to the churn from the subscribers added in Q3.

With 57 cents the forward PE is 5.12. I still think it is very cheap especially with the top and bottom line growth:



Sorry for the probably pretty borrowing write up and especially the erroneous forecast for Q4.

For every adjustment I make to the model I feel better about its predictive power. The next crucial time is the earnings for Q1. There are beers for everybody in the Fish Market in Maputo if I am more than 2 cents of the mark 

Michael,

Thanks again for another in depth analysis!

Brad

great analysis Michael

I sold it at 3.43 and got in again at 2.95  I hope I'm not too greedy 

QuoteNow a minor question: when you say you apply a fixed 6.66%, is it the 6.66% of your initial investment? or 6.66% of the current equity? Looking at that you have 12 positions and only 14.97% cash available, I guess it is the later?

Yes, the latter, 6.66% of total equity. The stocks held rose so the cash portion of the portfolio declined, so I really don't have cash available to put 6.66% of capital in three new positions now, just two or so.

QuoteI have a suggestion in terms of money management: how about selling a portion of position when it becomes too large? For example, SYX is currently 11.3% of the portfolio (it reached 12% at its height), shall we sell some SYX, say, when it becomes 15% of the entire portfolio? There are 3 justifications: for one, it can decrease the portfolio volatility; for two, when a position appreciates a lot, the upside potential becomes smaller (If the target for SYX is $60+, at $15 it was a 4-bagger but when it goes to $40, it "only" has 50% more to go ...); for three, you free up capital to buy other promising stocks.

I believe that isn't the right course of action, because, if the stock was up 100% it probably is because it has very attractive fundamentals, and it will probably rise another 100% with more certainty than a new pick (and even a $1 B market cap can rise 100 fold). If the weight of the stock on the Main rises on the stock's own merits, I can't punish that stellar performer by reducing the Main's exposure to it. Let's call it my way of averaging up.

There's a better way to reduce SYX's exposure on the Main. Other picks rise faster, catching up. MSI did just that, it helped reducing SYX weight on the Portfolio

But this is an open debate, we'll keep talking on the subject, perhaps on the Money Management discussion thread at the Member's Corner.

Quote from: tireslinger on February 23, 2007, 08:27:26 PM
Hey everybody!!! What would have CPNE have earned in net income if not for the expense of retiring that 5 million in debt?  Now thats worth talking about!!!!!

Absolutely tireslinger, you're right. Without paying that $4.31 M in long term debt, CPNE's 2006 net income would have been not $8.7 M but $13 M, and then the trailing earnings multiple would be 10.6. Now there's no more long term debt, so just by this effect probably the 2007 number will be a lot higher than the 2006 net income.

Ahhh, Michael did all the work (and much better than I would do), so I can relax a bit ... thanks a lot !

He sees $0.12 EPS for Q1 2007, give or take $0.02 (or else I will fly to Maputo to get those beers ). That should be enough to put CPNE between $5 and $6. Then we'll see what happens next.

It's a pity www.onlinesupplier.com has such a high churn rate, that will perhaps put a cap on valuation, because investors will fear that when they sell to all possible costumers, revenues will go down month after month, because the service is a pos. But I'm confident in management's ability to invent new internet business models, maybe with less churn rate.

For now, they have growing revenues, growing profits, a strong balance sheet and an attractive valuation, and that will put a floor on any dip. There can only be upside surprises at this stage in my opinion.

I'll continue holding CPNE with strong hands.

Quote from: tireslinger on February 23, 2007, 08:27:26 PM
Hey everybody!!! What would have CPNE have earned in net income if not for the expense of retiring that 5 million in debt?  Now thats worth talking about!!!!!

Quote from: David Randolph
Absolutely tireslinger, you're right. Without paying that $4.31 M in long term debt, CPNE's 2006 net income would have been not $8.7 M but $13 M, and then the trailing earnings multiple would be 10.6. Now there's no more long term debt, so just by this effect probably the 2007 number will be a lot higher than the 2006 net income.

No, paying off long term debt does not reduce net income, it is strictly a balance sheet item, much as if you issue long term debt for cash flow purposes you do not report the proceeds as net income.  They will benefit from not having any more interest expense as a result of this, so net income will be higher in the future as interest expense decreases net income, but the payment of the debt itself did not have any impact on net income. 

[/quote
No, paying off long term debt does not reduce net income, it is strictly a balance sheet item, much as if you issue long term debt for cash flow purposes you do not report the proceeds as net income.  They will benefit from not having any more interest expense as a result of this, so net income will be higher in the future as interest expense decreases net income, but the payment of the debt itself did not have any impact on net income. 
[/quote]



I'm sorry Trex but, I am going to have to disagree with you on this issue Since the company stated that they paid the debt off with cash EARNED through the business in 06. If they had not of used that Cash flow to pay off the debt it would have drifted to the bottom line.
If they had of used cash that was already in the bank to pay that debt then it would not count towards the net income.
Interest expense will be reduced to nothing unless the company decides to take on more debt, but they really don't need to at this point because the company is generating cash on its own.

I agree with Trex.  The cash that CPNE used to pay long term debt had already "drifted to the bottom line."  CPNE simply used the cash generated and accounted for as "net income" to pay the long term debt.  As a result, cash on hand decreases, liabilities decrease, but net income remains constant.  There may be some expenses incurred in retiring the debt (accelerated interest, legal fees) that alter net income, however.

Question. What would the net income have been if they had not used the cash flow that the company was generating to pay of the debt?
For instance  I pay my bills each month from the cash flow that my job generates and each month I have money left over. Thats net income. If I have an unexpected bill show up that month then my net income would be less in that month because of the extra expense that is not a part of my normal household operations.