FOH

[DragonAMG]

Yes, I gave it a rating of 6 out of 10 and expected it to rise about 7% per year, but it seems a new product of the company had very nice sales in April and the stock rose a lot in the two days subsequent to the news. Revenue growth is now expected to be higher than I estimated. Fundamentals change.

ASY is such a small cap, just $26 M, it can fly a lot when news hits the wires. But beware of dilution going forward, because balance sheet is weak.

I can't predict the future or if positive news will be released or when. Much less so for companies where I looked just about 1 hour or 2.

But MSI is up 20% today and this is its thread, so let me enjoy the moment

Absolutely.... let's all enjoy MSI today!!! 

I was not at all complaining... I respect and follow your stock analysis and that is why I sold ASY... I don't expect anyone to be able to predict the future  I was simply just pointing out similiar insider trading between ASY and IEAM.

[buddjas1]

Almost hit my sell-out ask at $3.  Maybe (hopefully) tomorrow.

[DragonAMG]

Almost hit my sell-out ask at $3.  Maybe (hopefully) tomorrow.

What is the trading plan with MSI?  Obviously buddjas1 is going to sell at $3. 

[buddjas1]

[Yeah, I didn't saw that $802 K tax benefit at first glance.

I just realized that I was wrong.  The $802 k was a tax obligation not a benefit.  So, the $1,870mm for the six months ending Jan. 27, 07  is legitimate.  I am re-analyzing the new MSI based on that info.

[David Randolph]

[Yeah, I didn't saw that $802 K tax benefit at first glance.

I just realized that I was wrong.  The $802 k was a tax obligation not a benefit.  So, the $1,870mm for the six months ending Jan. 27, 07  is legitimate.  I am re-analyzing the new MSI based on that info.

This is one of the reasons why I never change the trading plan on an intraday basis, one needs to analyze things calmly and with time. 

Jesus, now we know why MSI took so long to file the appropriate material with the SEC, I've been reading the papers for hours and still read just about 10% of them.

So far I'm not enjoying it, I see many new shares on the pipe, shares that we didn't knew before, like 7 million shares for directors and employees, 10 million preferred shares in exchange of $7.5 M of FOH's indebtedness, a reverse stock split "because the stock needs to be above $2" to comply with AMEX rules, etc.

Gee, I'm sleepy and hungry, I'll complete this update and share my hold/sell decision tomorrow.

[David Randolph]

With such large amount of information concerning MSI and FOH released yesterday, what I need to do is to focus on my valuation model.

1) The initial share price is $2.55

2) The initial share count, after the merger, will be:

- 16,423,326 MSI shares
- 23,700,000 new shares issued to FOH's shareholders
- About $20,000,000/$2.17 = 9,216,590 from the rights offering

But, if we consider the share count on a fully diluted basis, which is the one that counts for the diluted EPS, we need to put more:

- 7,000,000 new shares from the new stock option incentive plan. Previously the stock option incentive plan was for just 750,000 and there were just about 200,000 still outstanding;
- 10 million preferred shares, convertible to about 3,000,000 common shares, considering yesterday's closing price of $2.55, since they're being issued in exchange of a $7.5 M debt. But,  they also have a 20% conversion premium, so let's put 3.6 million shares.

So, the initial share count on a fully diluted basis after the merger will be about 16,423,326 + 23,700,000 + 9,216,590 + 7,000,000 + 3,600,000 = 59.94 million shares.

3) Dilution factor

FOH has negative working capital, with $29.019 M in current assets and $30.265 M in current liabilities. MSI has just $82 K in cash.

So I'll have to assume at least a 5% dilution factor.

4) Final Share Count

Given a 5% dilution factor the combined company will have about 69.4 million shares outstanding three years from now.

5) Initial Revenue

The last four quarters revenue of the combined company were $61.94 M from MSI plus about $160 M from FOH, gives me $221.94 M in annual revenues.

6) Revenue CAGR

Both, MSI and FOH's sales grew roughly 15% in Q1 2007 from Q1 2006. I'll consider this growth rate for the future.

7) Final Revenue

According to the above estimates, 2009 revenue will be $338 M.

8 ) Initial Net Profit Margin

In the 9 months through March 2007, MSI had net profit margin of 1.02%. In the six months ended January 27th, 2007, FOH had net profit margin of 2.37%. The initial net profit margin is about 1.9%.

9) Net Profit Margin Estimate

Let's be somewhat optimistic and think this merger is being done for good reason and will result in a more profitable business, and expect net profit margin to expand to 4% of sales in 2009.

10) Final Net Income Estimate

This gives me $13.5 M in net income

11) EPS estimate

A $0.19 EPS estimate.

12) EPS Multiple Estimate

Here I put the Textile - Apparel Clothing industry average earnings multiple which is 20.15.

13) Final Estimated Share Price

The model says MSI will be at $3.92 in early 2010.

14) Share Price CAGR

The stock is expected to rise about 15.4% a year for the next three years.

15) Optimal Selling Price

The optimal selling price today is $2.51.



What a pity. The trading plan for MSI is SELL. Perhaps not right at the open, but between $2.60 and $2.70.

[buddjas1]

Well, no mad selloff this morning, after people had time to digest the merger details.  The late buying yesterday with volume tells me perhaps I can get out of this without a loss.  So, I will keep holding for now. 

[Amarens]

Hi David,

You'll sell no matter what? even if it does not reach $ 2,60 today?

Amarens

[buddjas1]

Hi David,

You'll sell no matter what? even if it does not reach $ 2,60 today?

Amarens

Looks like he's out at $2.45.   I think MSI will trade above that this week.

[Amarens]

Looks like he's out at $2.45.   I think MSI will trade above that this week.

Just noticed  .

What do you base that on Buddjas 

Amarens

[buddjas1]

What do you base that on Buddjas 

There was signficant buying yesterday, both early and late.  There is no strong selling today.  There are also a ton of shares that were bought two months ago in the $3.0 range.  There is more room to the upside here.

[rickjust]

this will drift lower,
no real interest in it . low volume , the spike yesterday tells the rejection of hgher prices.
market is overall weak so money isn't being thrown around .
just my opinion.
if you are holding i hope i am wrong,
maxi

[David Randolph]

Looks like he's out at $2.45.   I think MSI will trade above that this week.

Just noticed  .

What do you base that on Buddjas 

Amarens

Sorry, I wasn't near a computer today, Ramsburg did the selling for me, at $2.45. Good luck if you'll keep holding

[buddjas1]

Bullish breakout of the B-Band sqeeze is confirmed.  I think MSI will see at least 3 by the end of the month.

[jorgegr]

Yep, Think I will be able to get out without a loss  (bought @ 2.99)