Posts tagged europe banks
The market took a breather today from its run up last week that was driven by misinterpreted news, false hope, and probably a bunch of fat fingers. Today, the big fear is that the Euro bank stress tests were not as stringent as they should have been, a fact so obvious at the time that even your humble dick joke writer and market analyzer Money McBags told you so (and when Money McBags accepts his Pulitzer, he will be sure to thank all of you in addition to the lovely Sara Varone for the inspiration, though probably not in that order). Only about a month and change too late, the Wall Street Journal (showing why newspapers have jumped the shark) is reporting today what we all knew back then (well, that is all of us who don’t accept headlines at face value, even if they are as heartfelt as this one). As Money McBags said many weeks ago:
“The stress tests failed to analyze whether banks could withstand a debt default by any European country and neglected to look at the entirety of banks’ balance sheets (which is a bit like asking a female out on date but forgetting to check for an Adam’s Apple) including completely leaving out any government bonds being held to maturity which is only the fucking majority of the sovereign debt held, so that makes as much sense as trying to diagnose rectal cancer with a broken thermometer and a loving touch.”
And sure enough, investors all have their panties in a bunch today (which would be fine if investors looked like this, instead of this) because of exactly that problem (though why it is just surfacing now is more of a mystery to Money McBags than dark matter or that Hannah Montana thing). Per the WSJ, during the Euro bank stress tests, banks reporting of sovereign debt holdings varied by the nebulous definition from the Committee of European Banking Supervisors (known more familiarly as CEBS pronounced “See BS”) with some banks not reporting holdings of subsidiaries, some banks not reporting trading portfolios, and some banks simply slapping their holdings on the tables and exclaiming “stress test this.”
There were differences in such simple things as gross and net (and really, how fucked up is any kind of measurement where “gross” has different interpretations? Other than however you may interpret “gross” if you dare to google “blue waffle.” How about instead of “gross”, the CEBS just says “put every fucking liability you could possibly have down, including off balance sheet conduits, CDS exposure, and drinking problems), whether to include short positions or not, and if Greek debt counted as sovereign since Greece is not likely to remain a sovereign nation for long. The point is, there is a lot of murky shit and inter-EU exposure on EU bank balance sheets and it will only take one credit default (2 to 1 odds on Greece, 8 to 1 on Spain, and 12 to 1 on this Wayne Rooney guy who may already be morally bankrupt, of which Money McBags highly approves) for shit to fall like dominoes or any TV show Ted McGinley touches and if it does, look out below.
Other than European banks fibbing on their stress tests, there wasn’t much macro news today except for rumors of more stimulus for the US economy, this time including a $200B business tax break for new investment, $50B for infrastructure spend, and a roll of $20s to help support college education. The proposed write-off for capital investment, will allow businesses to deduct from their taxes through 2011 the full value of new equipment purchased, such as computers, utility generators, and office equipment. The hope is that this will spur spending on capital goods and serve as an incentive for businesses to start spending the cash they have been hoarding (though if the government really wanted to get companies to spend on capital goods, they would have Jennifer Pershing in charge of deliveries, especially if businesses require all deliveries to be in the rear).
In the market, financials led the way down as if they had been hit by a bale of hay while Oracle rose 5%+ on news that they had lured former HP CEO Mark Hurd to serve as Co-President after relenting to his demands to have Cinemax streamed in to his office. Of course HP is now suing Oracle for hiring the guy they fired citing that it puts HP’s trade secrets (like how to build shitty computers and shittier printers) at risk. Finally Barclay’s was down 5%+ after naming a new CEO and continuing to suck at banking.
In small cap news today, NLS ran up 10% after suckering (Money McBags means convincing) their largest shareholder to buy $5MM worth of debt. You all may remember the debate Money McBags had with a loyal reader in the comments section about NLS months ago when it was trading 20%+ above where it is today and Money McBags was very skeptical at the time of it having much value (which in fact it didn’t). With incomes falling and food rationing happening, people no longer need to work out to lose weight (they especially don’t need to pay a couple grand for a Nautilus machine that just winds up as an expensive clothes hanger anyway). While Money McBags did pimp NTRI as an interesting company to dive in to (no doubt like their consumers dive in to a chocolate cake), their management has executed about as well as the Ohio state prison system so for a play on fat people you might be forced to look at MED (and something about this company makes Money McBags feel uneasier than Roman Polanaski’s kids’ babysitter) or WTW about which Money McBags has spent less time analyzing than a chubby chaser has spent analyzing an Olsen twin.
Tomorrow Money McBags will hopefully have time for a deeper dive in to a small cap name. He’s been busy lately trying to figure out how to increase traffic to the award winning When Genius Prevailed (though readership continues to grow by whatever is slightly less than exponentially but slightly more than flat) in his quest to hit 1MM readers (and as usual, he is almost there give or take 1MM). So if you’re one of Money McBags’ many readers (and if you’ve read this far, you probably are, or perhaps you’re just waiting for this), tell a friend, tell a relative, but most importantly, tell Alice Eve because Money McBags would like to devote his full attention to this and keep it free (just think about the $ you all pay the sellside, or for newsletters, or for magazines when Money McBags gives you better shit than that on a daily basis). And if you’re on the buyside, Money McBags is available for consulting on small cap names (he will even leave out the dick jokes), deciphering macro data, or performing at Bar Mitzvahs (he can do a terrific version of Hava Nagila and is known to put the “rah” in torah). If you’re on the sellside, seeing as how Money McBags fucks your business in the ass every day and actually provides real research, you’re welcome to show some initiative and buy his services or just keep sucking at your jobs while Money McBags builds a better mousetrap.
The market was quiet in the morning despite a slew of solid earnings announcements as it waited for the release of the Europe bank stress tests which were more highly anticipated than Lindsay Lohan’s jail stint, Avatar’s opening weekend, or Mel Gibson’s next career limiting phone call. Well the results came out midday and were exactly as worthless as one could have hoped. Only 7 out of 91 banks failed the stress test including Munich based Hypo Real Estate, Greek based ATE Bank (which apparently “ate” a fuckload of bad loans), some Spanish banks, and Italy’s Bank of Madoffia. Of course these stress tests were weaker than the efficient market hypothesis in the era of high frequency traders or Haiti’s infrastructure, so it’s hard to get too excited about the results.
The stress tests failed to analyze whether banks could withstand a debt default by any European country and neglected to look at the entirety of banks’ balance sheets (which is a bit like asking a female out on date but forgetting to check for an Adam’s Apple) including completely leaving out any government bonds being held to maturity which is only the fucking majority of the sovereign debt held, so that makes as much sense as trying to diagnose rectal cancer with a broken thermometer and a loving touch.
From day one it was obvious that the stress tests were more bogus than Iraq having weapons of mass destruction, MBA programs teaching anything useful, or Ricky Martin being interested in any female who bangs. There was no way the EU was going to have the test results come out and show that a fucklaod of banks had failed and yet they also wanted to try to have some credibility and not have every bank pass because that would have been less believable than the US bank stress tests or GS’ non-admission of guilt in the Abacus CDO manipulations. So the Committee of European Banking Supervisors managed to find some BS Goldilocks scenario where 7 banks would fail in a number deemed to be just right in not causing more fear but also just right in showing that there are some problems. So jolly good show, hope no one in the CEBS tore their black jeans in their rigorous assessment of the data.
The point is, the banks may be healthy or they may not be healthy, but don’t piss on Money McBags and tell him that it’s raining (unless you are Kelly Brook and just downed a case 1787 Chateau Lafite, and in that case, piss away) by claiming the tests that were run give any kind of conclusive evidence about the health of the EU’s banking system. So excuse Money McBags while he yawns this one out while the market rallies on the news.
In other european news, Britain had a 1.1% increase in GDP which was double what economists had guessed but is still nowhere near pre-recession levels. The country hopes their newly introduced dental sector can help spur GDP higher. In Germany, business confidence rose the most since reunification and to its highest level in three years as the whole country celebrates schadenfreude at the downfall of their fellow EU members. Finally, Hungary’s credit rating may be falling to junk after their talks with the IMF went worse than Sarah Palin‘s talks with Bristol about abstinence. A lower credit rating could leave investors in Hungary starving and will cause it to be more difficult for the country to raise money which it won’t likely to be able to pay back anyway. That said, the threat of credit ratings downgrades are coming from S&P and Moody’s who, as always, suck at their jobs worse than a closterphobic magician’s assistant, so take it for what it is worth.
And in China, worries are getting out that banks may not be able to collect on nearly a quarter of the loans they made to local governments for the building of airports, highways, and lunch delivery of the nation’s favorite soup, cream of Sum Yung Gai. Banking regulators haven’t addressed this potential shortfall but Money McBags is sure they will successfully manipulate their way out of it.
In market news, earnings are powering US companies like spinach powers Popeye or herpes powers Britney Spears (she does run on herpes, right? It’s the only logical conclusion with which Money McBags can come up for regarding the affair du Federline). Ford reported a profit again and said they expect next year to be even better thanks to their new vibrating seats functionality. The company was strongly cash flow positive with $2.6B of cash brought in and they say they will be in a net cash position by the end of next year (and net cash is Money McBags’ third favorite position, right behind lowering taxes and reverse cowboy). Ford’s sales were up 28% in the first half which is twice the industry average as consumers move down market and no longer care about status.
In other earnings news, MCD beat estimates yet traded down as it missed whatever the whisper number analysts made up but were to chickenshit to actually put on paper was. Money McBags will never understand the concept of a whisper number (unless it is Olivia Munn whispering Money McBags her number) because it is a bigger cop out than “it got lost in the mail,” “I was young at the time,” or running to Miami to play with Dwyane Wade. In theory, sell side analysts get paid to provide their unbiased opinions while in practice they get paid to pump up the stocks for whom their firms are trying to raise money, to write meaningless daily updates, and to anally rape sheep (ok, one of those may be made up) and the lameness of not having the nuts to put a whisper number in any of their daily drivel says all one needs to know about paid research. Anyway, MCD had a nice quarter with revenue up 5%, same store growth of 4.8%, $1.13 eps, and only 1k blocked coronary arteries in the Q. Strong international growth helped fuel the results as MCD’s cheap menu and and aspirational brand equity resonantes in countries with large poor populations such as India, China, and the United States.
Also, MSFT put up a big Q after running up yesterday in anticipation of good things happening like the resurgence of the corporate upgrade cycle, stronger sales of Windows, and Excel hardcoating goalseek to always find the lovely Sofia Vergara. EPS was up 48% to $.51 and revenue grew from $13B to $15B, both numbers handily beating analyst guesses though the numbers could contain a trojan horse virus so no one wants to get close enough to them to really dig in.
Finally, Verizon slapped their cocks on the table and yelled “can you hear me now?” as they beat guesses by $.02 per share by earning $.58 per share despite flatish revenue growth and no exposure to the iPhone thanks to better operation. And AXP beat estimates and tripled their profts as customer spend was up 16% and like all financial companies, they lowereed their provisioning, likely just in time to have to raise it again for the second dip in the upcoming recession.
Not all was lobster tails and blow jobs though as AMZN missed their earnings estimates despite growing the top and bottom lines by 40%+. Analysts had guessed the company would earn $.54 per share but instead they earned $.45 per share due to an increase in operating expenses as the company has to spend more on advertising to convince people that the Kindle wasn’t outdated two months ago with the release of the iPad or ~600 years ago with the release of the printing press. Amazon has always seemed like a nebulous investment to Money McBags given the competition, relatively low barriers to entry for specialty sites, and consistently high valuation so he is as happy to not be involved in this stock as Dan Quayle is happy not to be involved in a spelling bee (and yes, Money McBags just whipped out a 20 year old punch line because frankly, 1k-1.5k words of dick jokes a day is a blistering pace, even for a talent like Money McBags).
In small cap news, IBKR reported and managed to shit all over themselves, and Money McBags’ thesis, as if they didn’t just have Montezuma’s Revenge but had his ire, hatred, and angst as well. Their results made Money McBags sadder than he was this morning when read that the inventor of the black box had died until he realized it was this guy and not Roxy Reynolds or Vanessa Del Rio‘s mom.
Anyway, before we get to IBKR’s numbers, Money McBags wants to apologize for saying buying some options in this piece of shit company ahead of earnings would be a good strategy. He believes his logic was sound, but unfortunately he made the mistake of believing he had correctly called the bottom of one of the biggest value traps the market has seen since AIG in 2006 or Elizabeth Berkley‘s acting career pre-Showgirls, so he is sorry for that. Never again will he give a fuck about this shitty company whose market making business which is based on voaltility couldn’t profit when the market was, umm, how to put this lightly, fucking volatile.
IBKR earned $.09 per share in the Q which was down from $.31 per share in last year’s Q and continued the unpredictable nature of this company whose quarters are more up and down than Oprah’s weight (see, Money McBags could write for Leno, no problem) or Faye Reagan on a sybian (he could also write for the AVN awards, he is bi-comedial). Their internet brokerage business fared well and continued to grow increasing accounts by 20% and customer equity by 43% but all of that was irrelevant because their market making business made a mockery of themselves and only had a 5% pre-tax profit margins leading to a profit of $3.9MM which was down 97% from last year.
The stock is such a peice of shit that their CEO who is an ~80% owner has given up trying to make it seem like anything someone would want to invest in and is instead now marketing the stock as some type of hedge for anyone who wants to keep their portfolio from growing too much.
The CEO said: “increasing fluctuations in foreign exchange markets have a corresponding impact on our reported results in U.S. dollars. This makes it ever more apparent that our shares would be more appropriately considered as an investment in a global enterprise based in a diversified basket of currencies rather than in U.S. dollars.”
So any of you out there who own a global enterpirse, buy away.
On the call, CEO Peterffy claimed that the appreciation of the dollar cost them $72MM in revenue or $.16 per share because it’s always one excuse or another. Anyway, Money McBags clearly fucked up and was speculating on market volatility causing earnings to appreciate, which apparently they would have had the dollar not strengthened, but whatever. As Money McBags was speculating, he said to buy options and not the stock so your losses would be minimized, but either way, fuck this company and if any of you ever read Money McBags trying to give an opinion on IBKR other than he has no idea and they hate turning out a profit, you have permission to punch Money McBags in the nuts while forcing him to listen to the melodic stylings of Celine Dion.
Ho fucking hum. Retail sales fell again in June as stores keep trying to charge money for products and people keep not having any. Sales dropped .5% in June, though if you exclude automobiles, sales only dropped .1%, and if you go one step further and exclude anything bought in a store other than ramen noodles and despair, sales would have doubled. It wasn’t just auto sales that drove the numbers down though as furniture, building-materials, sporting goods, groceries, and especially Mel Gibson’s career, saw weakness. This is in contrast to the ICSC’s report last week where they broke out their crayolas and limited knowledge of cropping photos or using excel to put out an eyesore-ingly bad table showing that chain store sales were up 3% for the month. To Money McBags, that means people are skimping on more discretionary items and shifting their spend to staples and to stores with lower overheads that can offer deep discounts, of course, all of the data is made up anyway like leprechauns, unicorns, and Larry Craig’s wife, so who really fucking knows.
That said, with the consumer remaining hesitant to spend on anything but lottery tickets and something called jeggings (which Money McBags thinks are a mixture of jeans, leggings, and awesomeness), the stimulus having worked most of its way through the system, and extended unemployment benefits on the same life support as George Steinbrenner, there is little about which to be excited (unless you live next door to Sofia Vergara, and if you do, Money McBags would be happy to quickly come over).
In other macro news, mortgage applications sunk to a 13 year low despite record low mortgage rates, declining house prices, and buy one get free specials at foreclosure auctions. Loan requests dropped by 3% with the federal tax break now over and frictional unemployment becoming less voluntary and more permanent thus causing the supply of people moving for work to shrink more than the attendance will for Yale’s women’s basketball games once Yoyo Greenfield graduates. Finally, the minutes from the last Fed meeting were released today with the Fed lowering their growth forecast for the first time in a year citing lackluster job growth and the creeping in of common sense. The continued struggles of the economy have them contemplating ways to stimulate the market again if data continues to worsen such as buying more assets, keeping rates low until the next bubble, or having Sara Jean Underwood man the Fed’s discount window.
Internationally, word is leaking out that 11 banks may fail the european bank stress test including Germany’s Commerzbank, Italy’s Banco Popolare, and France’s Banque de la Pret Merde. But Macquarie Securities director Alessandro Roccati tells us not to despair because “only 11″ of the 46 banks will likely fail and 25% of handpicked banks failing a contrived test set up so that none of the banks would fail is only a minor problem, like the hole in the ozone layer, the oil spill in the Gulf, or John Edwards’ Q score. In other international news, Singapore raised their growth guidance from 7% to 9% for 2010 to a whopping 15% citing their burgeoning biomedical production capabilities, strong growth in their electronics cluster, and a rise in demand for helicopters. Also helping the Singaporean economy was the opening of two casinos and influx of tourism for “cane your kid at work” day.
In stock news, INTC beat analyst guesses by reporting record revenue and giving guidance way above the street’s guess for next Q. Revenue was up 43% and eps of $.51 easily beat analyst guesses of $.43 as the corporate PC upgrade cycle has finally begun since with fewer workers, companies actually need shit to work. INTC’s Q has led a rally in large tech stocks such as CSCO, VMW, and MSFT as the upgrade cycle should benefit PC makers.
In small cap news, Money McBags wants to highlight CTGX once again. Now this is one of the stocks he puked out during the “flash crash” becuase it is less liquid than a corn shit and it only takes one fund with a margin call to sink the name, but long term the company should be fine. Money McBags broke the company down for all of you way back in February, but the quick summary is that they have two businesses, one is a boring crappy staffing and solutions business whereby they supply IBM with people to help map out and install servers (which sounds about as fun as dry humping Bea Arthur while being serenaded by the Charlie Daniels Band) and a health care services business which is growing and set to capture share in the electronic medical records market.
The reason Money McBags brings this company up today is that the federal government issued new rules yesterday that will reward doctors and hospitals for the “meaningful use” of electronic health records. The previous rules were a bit too onerous, like Ted Kennedy’s designated driver or Susan Boyle‘s bikini waxer, but the new ones will allow for more hospitals and doctors to get started on EMR. The main point though is that the Department of Health and Human Services said that doctors and hospitals may receive up to $27B in funds to help install electronic medical records over the next 10 years and while Money McBags is not an accountant (though he plays one on April 15th), $27B is a lot of fucking money. Also, starting in 2015, hospitals and doctors will start facing fines and penalties under Medicare if they are not compliant and while doctors hate taking medicare patients because they can’t set exorbitant prices for their inelastic demand service (you want your arm reattached? That will be $1MM and a five minute taint tickle, but with your good arm of course), those patients are becoming an increasingly large part of the health care business. Not only will hospitals be getting money to help install EMR and facing penalties if they don’t, but as said prevously here, only 20% of doctors and 10% of hospitals already have EMR and there are only ~6 companies who can install them. So this is a big market that is being funded by the government and CTGX is one of only an Antonio Alfonseca handful of companies doing this.
CTGX has said their operating margins are 10%+ on an EMR project and that they last 2-3 years and bring in $2MM to $3MM per project annually so if they can do an incremental 20 projects a year (Money McBags thinks they are starting or working on ~11 right now) and get 10% margin (which may be low), that would translate to an incremental ~$.24 per share. Their guidance is for this year is ~$.50 eps so say their core business just maintains in 2011, that means they could earn ~$.75 on 50% eanrings growth, >20% top line growth, and they are currently trading at ~10x that number. There is a lot of Y2K about this business but installations should ramp up in 2011 and last for a good five to seven years so once this story hits, the stock should have some nice room to grow. Plus, their competence in installing EMR and the dearth of companies who do it combined with the oncoming demand which should be stronger than Andrew Jackson’s hatred of Henry Clay or Faye Reagan‘s breath after a full day on the set of Cock Pigs, should make CTGX an acquisition target for a bigger company like IBM who wants to increase their presence in EMR.
The things to worry about with this company are the liquidity and their core IBM business going to shit since they have less control over that than Whoopi Goldberg does over her bladder or her face. That said, the company has an ok balance sheet and when EMR hits, there is no reason they shouldn’t trade at 15x given the likely growth and that would make them an $11-$12 stock (and to be clear, management has not given any guidance on how many EMR projects they can do or what the margins will be other than at least 10%, so Money McBags is making his own estimates which could be too low or too high). You still have time on this name and as long as the core business is going to spit out ~$.50 eps annually, you have a cushion too, so take a look again and buy the dips.
And don’t forget WGP is on Facebook and Twitter and if any of you know a good cheap web designer, shoot Money McBags an email at MoneyMcBags@gmail.com because its time to make WGP look better than something the ICSC or Ray Charles would produce (and that’s not because Ray Charles was blind, but because he’s dead).
The market was up today because we are due for a brief rally until we resume our fall in to the abyss like King Midas’ son Anchurus (only without saving the Earth) or like Alan Greenspan’s reputation. The market has reached the point where some stocks have simply been oversold and with the lack of meaningful macro data and the beginning of earnings season, it should take less to get the market excited in the short term than it takes a teenage boy with a bad case of priapism to get excited. We basically have a tired market that is succumbing to VIX (not unlike a tired Gay succumbs to Dix). Today’s rally is being driven by State Street announcing they will beat earnings and by retail sales defying all logic, common sense, and income levels and being estimated to have grown at their fastest pace in 4 years.
The International Council of Shopping Centers (known more familiarly as ICSC or “Who?”) preannounced the results of the study they will release tomorrow, in affect scooping themselves in a strategic move to try to keep LeBron James’s choice of teams for free agency out of the news and to make the ICSC more of a household acronym than PETA, ROTC, and NAMBLA . The ICSC remarked that retail sales “probably” came in at 3% to 4% growth for the month and will average 4% for the first five months of the year. Of course you all might remember that the ICSC also said Teddy Ruxpin will “probably” make a huge comeback, Walmart shoppers “probably” understand that one size doesn’t fit all, and Lindsay Lohan will “probably” show up for her treatment any time now, so buyer beware.
Internationally, Europe has installed a cap on bank bonuses with bankers not allowed to take more than 30% of their bonuses in cash. The remaining 70% will now be awarded in stock, gold, or the still beating hearts of freshly clubbed baby seals. Europe bank stocks are also rallying because the rumor is that the haircuts they will have to take on Spanish bonds will be done by Ken Paves and not some dildo with a flowbee at Supercuts. It was leaked that Spanish bonds will only be written down by 3% and not the presumed 10% to 20% some people estimated while German bonds will get no haircuts and thus will go for the Chrystal Gayle look. In other international news, The Agricultural Bank of China raised $19.2B in their IPO yesterday which gives it a valuation richer than C, GS, or Christina Hendrick‘s bra.
In US stock news, STT is rallying the entire market as they expect to beat earnings guesses soundly by bringing in $.93 per share vs. guesses of $.72. They also announced a $251 injection of capital to support certain trust funds managed by State Street Global Advisors that engage in securities lending and other types of fraud, I mean portfolio maintenance. In theory, this “mitigates potential liability concerns” unless someone really wanted to sue them because there isn’t one financial services company that is not involved in shady activities. In other stock news, Family Dollar dropped ~9% after beating quarterly analyst guesses but giving below consensus guidance. Guidance was for $.46-$.51 per share next Q and guesses were for $.53 while CEO Howard Levine said “The environment remains challenging for consumers, and customers continue to buy close to need, that said, we are being conservative but think ultimately we will do well since we sell cheap shit and people can only afford cheap shit” (though the last part of that quote could have bee made up). The sell off seems overdone to Money McBags but he doesn’t follow FDO so he is not sure where comps are trading right now but at the high end their full year guidance is only $.01 below street guesses so either the whisper number on the street was much higher (and thus analysts as usual were scared to stick their necks out) or dropping 9% on guidance a Khagendra Thapa Maga nut hair below guesses is a buying opportunity.
In small cap news everything is up (well everything except for ZAGG). KITD is finally rallying after yesterday when Money McBags said “This is the time to be building a position here even though the market is totally full of shit. You wait for chances like this to buy good companies cheaply.” Look, Money McBags knows he talks about this company as if they made blow jobs and caviar, but it is one of his biggest holdings and he thinks it has great long term potential and now it is just trading so fuck cheap that if you’re going to buy it, you should have a full position. An interview with their CEO was posted yesterday by an industry follower and it is a great read for those trying to understand exactly what the company does, though it does get a bit technical. For instance you learn of their expansive definition of an enterprise customer, their deeper-in-the stack, multi screen strategy (not to be confused with Lexington Steele’s “deeper in the sack, multi-scream” strategy), and that 40%-45% of their business deals with the back end side (which is similar to Alexis Texas as 45% of her work also deals with the back end side).
From a stock perspective, the CEO once again addresses the organic growth rate by saying it has been ~55% of their growth, he mentions that they are able to keep “virtually” all of acquired companies’ clients, and he talks about some of the stresses of being a public company especially when your stock is down 40% and investors are breathing down your neck and thus need to be coddled like the lovely Emanuelle Chriqui. He also reaffirms that they will beat $75MM revenue guidance as with their last two acquisition they are near $100MM and says their goal for the next couple of years is to grow their global market share from 15%-20% to 50%. Most interestingly, he talked about their last assrammingly dilutive equity raise where shareholders were treated like Mel Gibson at a gay pride parade by saying:
“The raise was driven by an unsolicited reverse inquiry from a large institutional investor. It was a tough decision to take in the money (given the resultant dilution), but ultimately we felt it was the right thing to do in that it allows management to focus on building our business without the distraction of frequently accessing the capital markets to finance future strategic moves.”
This was all very intersting stuff and while there wasn’t a ton of new information, it was nice to hear the story again and have guidance confirmed given the assawful stock action of the past month. That said, Money McBags is calling bullshit on the $100MM revenue number. Last month Money McBags made the argument that with the declining Euro and ~70% of their business non-US, the exchange rate should make their topline unattainable. In fact, it could crush next year’s revenue as well. The company currently has 23.3MM shares so ~210MM market cap and ~$57MM in cash (Money McBags believes those are the pro-forma numbers after their last equity raise and acquisition, but the cash figure may be closer to ~$30MM), so ~$150MM in enterprise value. With the decline in the Euro, Money McBags estimated that next year’s EBITDA could be ~$20MM on the low end but in a best case scenario, he thinks they can earn ~$30MM EBITDA. So even on a worst case scenario they are cheap and in a best case scenario, they are cheaper than a Kevin Federline autographed picture as they are trading at ~5x EBITDA with plenty of cash. If you don’t have your position built yet, this is the time to get in. It may drop a bit tomorrow after today’s run up, and it may drop a bit more with the market, but this is a solid opportunity to step in to this company as a longterm holding.