The market is largely in neutral today as investors await the Fed’s decision on interest rates this afternoon.  With the lilkelihood of the Fed keeping rates at their current low levels somewhere between the likelihood of Michael Lewis droning on about his bond trading days in his new book or the likelihood of getting herpes from a night of snorkeling Paris Hilton (and that of course is a trick analogy, since the odds of both of those are 100%), investors are anxiously waiting to see if the language of the Fed will change (and as always, Money McBags votes for a change to Esperanto or perhaps even pig latin, you hear that Enbay Ernankebay?).  It is likely that the Fed will tweak the language just enough to hint that their accomodative stance (though not as wide or accomodative as a Larry Craig stance) will only last for so long, but there is unlikely to be enough detail for anyone to feel confident in a time frame.  If by now you haven’t figured out that rates are eventually going to go up, Money McBags can’t do anything for you other than to help you strap your helmet back on and buy one of your handmade potholders.  In US macro news released today, US housing starts were down in February by 5.9% to 575k, but that was slightly better than the 570k economists were guessing.  Multi-family dwelling construction was down 30% which is probably bad news for Mormons and John Edwards.  The decline in housing starts though is largely being blamed on snow storms in the South and Northeast where construction was down 15.5% and 9.6% respectively, though construction of igloos was up 58% in both geographies.  Surprisingly, the West and Midwest both showed greater than 7.5% increases in new home starts, or on an absolute level, 2 houses.

In international news, the 16 EU countries (there used to be 17 but they kicked out Grumpy) agreed to back Greece with loans if needed.  While the plan was almost as vague as a Nostradamus prophecy, the term “sexual relations” to Bill Clinton, or the US’s bank bailout plan, European markets greeted it with open arms and one of those cheek to cheek kissing things they so much love to do.  The issue could come to a head in April or May when Greece faces more than 20B euros in debt redemptions which is one hell of a night out in Athens.  For 20B Euros there should have a been a huge Greek fiesta with Daniela Eleftheraki serving up plenty of pancakes and ouzo.  Bouying this positive news in Europe was German investor sentiment which fell less than expected from “heilige Scheisse” to just a case of schadenfreude.  Apparently the Germans are slightly more confident that their weiners will produce adequate amounts of schnitzel.

In stock news, GOOG is once again rumored to be pulling out of China which would put them in the same catergory as Sean Waltman.  Money McBags will likely buy any dip caused by these rumors as China is a small part of Goog’s current earnings and even if they were to exit, it would likely only be temporary (forest through the trees my friends, forest through the trees).  GE is up on a JP Morgan analyst upgrade as well as comments from their CFO.  The analyst thinks credit losses have topped out while the CFO said GE will resume growing their dividend in 2011 (if we still have a global financial market) and will use excess cash for buybacks and acquistions (as opposed to hookers and blow I guess).  As long as they aren’t acquiring a crappy network TV station or AIDS, Money McBags is all for them trying to grow the business again.

In small cap news KITD is beginning to run (and remember Money McBags told you all to buy and bought in himself in the low 10s the other week) as they presented at a Roth small cap conference yesterday and also announced a new acquisition and that they are buying back 4MM of their outstanding in-the-money warrants.  They are buying a firm called Multicast Media Technologies for $18MM of cash and stock ($4.9MM cash, 1.3MM shares) and post deal will have $15MM in cash and 17.7MM shares outstanding.  Now Multicast said they earn around $12MM a year in revenues from annualized recurring licensing fees for its IP video management software and KITD expects the acquisition to be immediately accretive.  Now remember, KITD guided to at least 60% revenue growth to more than $75MM and EBITDA margin exceeding 17.5%.  They’re now adding $12MM to that revenue and should be able to hit those EBITDA margins because they take out cost quickly in this business as all they really need to do is transfer the data to their platform and then fire everyone at Multicast (Sorry guys, but hey, you’ll have company).  But let’s not give KITD the benefit of the doubt and we’ll say they only get 10% EBITDA margins on this acquisition in the first year.  So now their EBITDA will go up by $1.2MM to $14.2MM.  They are currently trading at $125MM market cap with $15MM cash, so on an EV/EBITDA basis that is around 8x in a worst case scenario.  If they can get to the 17.5%+ margin on the acquisition, EBITDA will be at least $15MM and would put them at a 7x EV/EBITDA multiple.  The company is trading at 1.5x revenues (and analysts and the company maintain that their competitor Brightcove was valued at 12x revenue, though it’s unclear where that rumor started so it should be discounted by as much as one discounts Donald Rumsfeld’s war strategies or Lehman Brother’s book keeping).  The only thing holding this company back is that it just has some fundamentally weird things about it that serve as red flags to old and stuffy institutional investors. They have a promotional CEO (not to say he is bad, but he is clearly only in this business for the short run so the higher he can sell it for and the sooner, the better), they were located in Dubai and now have moved to Prague, they rely on acquisitions, and they are still almost as small as He Pingping (and as an aside, the whole editorial staff here at When Genius Prevailed poured out a thimble this morning for the passing of the great Mr. Pingping who died at the age of 21, thus he both figuratively and literally led a short life.  Even though he was only 29 inches tall, he lived life to the fullest.  So I ask you all to take a short moment of silence now for Mr. Pingping).  That said, the numbers don’t lie (well unless you’re Enron, AIG, Refco, etc.) and this company is headed in the right direction.  They could easily get their EBITDA in 2010 to $20MM (remember, their guidance says revenue of at least $75MM and EBITA margins of at least 17.5%, so if we call revenue $100MM since its already at $87 after the acquisition and call margins 20%, because it’s a nice round number, we’re at $20MM of EBITDA) and if they just trade at 8x that, there is almost 50% upside.  Plus they think the worldwide online video market is $10B and is only 4% penetrated by the cheaper than digitial video IP solution which they provide.   Money McBags may buy some more today or tomorrow as the story remains intriguing and the new acquisition will help them beat their already lowballed numbers (though probably not as low as Abe Vigoda’s balls).

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