Double or nothing: EYII

[David Randolph]

I was looking for an opportunity like this for a couple of weeks now. An opportunity where the impact of some confirmed news was so big that the stock couldn't react to it in just one day.

This situation happened with EYII, making it a sure fast bagger I believe.

The company had $6,229,029 in revenues in 2004, and expect something like the same in 2005. But due to a big order from a company that belongs to the chinese government, revenues will explode higher in 2006 and 2007:

EYI Industries Enters Letter of Intent Worth an Estimated US$210 Million

Revenues from this agreement will be $42M in 2006 and $168M in 2007, so just due to this deal revenues will grow 27 times between now and 2007.

We all know the chinese have problems with their water supply. The water there isn't good to drink, they don't have enough drinkable water for their 1.4 billion population. So they're buying this Code Blue water filter product from this small US company (curiously they have their website translated into Mandarin and Cantonese languages - maybe that's why they got the contract !).

The market cap of the company is just $26.35M at Friday's closing price. For it to have a very conservative price to sales ratio of 1 by 2007 (of course it should be higher, with this kind of growth - remember, CHINA's economy is growing 9% a year and they will always need to drink water) the stock must rise 537% 

If we attach a still conservative price to sales ratio of 3, the stocks needs to rise 20 fold just to reflect this agreement with the Chinese.

So, I consider this a no brainer and a sure thing. I bought 5800 shares at $0.16 and will sell 100% higher, turning my initial $1,000 into $2,000.

Wish me luck 

[Sandman]

From what I read, HYRF is the company actually supplying the filters for this contract (letter of intent).  HYRF might be the better play. 

[nextmove]

Current status:
HYRF up 38%, trading at 0.23 now
EYII down 30% trading @ 0.11 now

Does that mean the market is figuring out what Sandman did?

[TRUNK]

Liked the dip.. just picked up 8700 shares at .12 

already in the green 

[David Randolph]

Current status:
HYRF up 38%, trading at 0.23 now
EYII down 30% trading @ 0.11 now

Does that mean the market is figuring out what Sandman did?

Yes, I believe you're right nextmove. Anyway, off course EYII wouldn't produce the filters itself, EYII is basically a distributer, a retailer of products. They will buy the product from HYRF and sell it to the Chinese.

It would be good to know the quantities involved. I heard each filter costs less than a bottle of water. But at what price will they be sold to the Chinese? EYII made the deal, HYRF is just the company that will produce the product.

So, this finding from Sandman (thanks) doesn't change the outlook for EYII. They always had to produce the filters, I know now they will be produced by HYRF, doesn't change anything long term.

Well, today the stock is down 19%, but I don't care, I will sell only at $0.32, doesn't matter when, if ever.

[David Randolph]

Since the product will be sold to the Chinese company by EYII, all my thoughts about the revenue and revenue multiples are still valid.

The price EYII will pay HYRF for the filters and the price they will sell them to the Chinese gives us the gross margin and the profits from this deal/letter of intent.

But I never considered the earnings (off course there will be plenty for the two company's, the producer and the retailer), I was just thinking about the revenues.

Well, I have nothing to weigh or consider anyway, those are the rules of the game.

[tommyt]

David,
Couldn't resist joining you at such a discount. In 6000 @ .110. I glad you're feeling better.

[Igaryok]

So what happens if you don't reach the 100%, do you have some sort of a back-up exit strategy?  You're already down $362, but I wish you luck and I'll join  you in this quest.

[kennyg]

  ELITEG  HEARD TODAY FROM ANOTHER BOARD YOU PICKED SQUM AS A G-SPOT PLAY. GREAT CALL UP 50% FOR THE DAY. COULD YOU PLEASE TELL ME WHERE WE COULD HAVE FOUND THAT MENTIONED ON 3SOF BOARD. THANX SO MUCH!!!!!!

[David Randolph]

David,
Couldn't resist joining you at such a discount. In 6000 @ .110. I glad you're feeling better.

Nice entry point tommyt 

So what happens if you don't reach the 100%, do you have some sort of a back-up exit strategy? You're already down $362, but I wish you luck and I'll join you in this quest.

No, I have this stock in a cash account, I'll never have to sell it by force of a margin call, so I won't be worried. It's like these $1,000 never existed. I will only sell at $0.32.

I'm down 5800*($0.16-$0.11)=$290, not $362, at this point.

ELITEG HEARD TODAY FROM ANOTHER BOARD YOU PICKED SQUM AS A G-SPOT PLAY. GREAT CALL UP 50% FOR THE DAY. COULD YOU PLEASE TELL ME WHERE WE COULD HAVE FOUND THAT MENTIONED ON 3SOF BOARD. THANX SO MUCH!!!!!!

I guess eliteG already answered you on this link http://www.3stocksonfire.org/trading/index.php?topic=1722.msg16169#msg16169

Please pay attention to caps lock, thanks.

Now, moving back to EYII, my reasoning is simple:

1) The company's market cap is $18.35M
2) The letter of intention signed with the Chinese gives the company $42M in revenues in 2006 and $168M in revenues in 2007.
3) EYII will buy the product from HYRF to sell to the Chinese, but this doesn't change the revenues considerations.
4) The stock's advance stopped at a long term resistance level, so traders sold off yesterday.
5) Longer term it's impossible a company with revenues of $42M in 2006 and little debt to be worth just $18.35M.
6) This is a sure thing (unless the LOI is false or doesn't turn into a real business) and the strategy is to sell 100% higher than the buying price, turning the initial $1,000 into $2,000.
7) Whatever happens, I'll never sell below the $0.32 price, those are the rules of the game. If necessary, I'll need to put anther $1,000 in the chamber to shoot another double or nothing bullet, but I don't think that will be the case.

Good luck to all 

[Igaryok]

My bad I thought you started it with exactly 1000

[TRUNK]

just now picked up 7200 more at .112 so now hold 15900 at avg .116-

[listener]

Has anybody determined what the net earnings to EYII are from the sale of HYRF MARTI product ?

Gross revs mean nothing if the producer (HYRF) is making more than the reseller (EYII) off this deal.

Perhaps we need clarification here ?

[eggman11]

David,

EYII sounds like a wonderful opportunity. If believe it has potential to double so quickly, how come you don't recommend it for pennies on fire portfolio.

[ehos]

I'm on the other side of the fence, but I agree with David.  I bought HYRF and will hold it for a long time (2007).

The only way I will sell if the Letter of Intent is a lie or false.  Otherwise, in the vault till 2007


(Seriously!)