ChyronHego generates revenues of $54,000,000 in 2014 --- 13% operating margins
creates $7,840,000 operating earnings divided by 35,000,000 shares
2014 operating EPS $.20 stock trades between $2.40 - 2.80
Assuming 18% increase in revenues 2015 14% operating margin---
$63,800,000 revenues $8,900,000 operating earnings $.25 operating
earnings per share 2015 assuming 36,000,000 shares outstanding
Stock trades between $3.00 and $3.60.
14% increase in revenues 2016 Revenues $72,700,000 15% operating margin
Operating earnings come in at $10,900,000 ---Assume company buys
back shares in 2015 and 2016 so shares outstanding in 2016 end at 34,000,000.
Operating earnings per share in 2016 $.32. -----14X PE
$4.48 price target 2016---
The share buyback would be an important part of the plan Also
a new program initiated now and going forward whereby only phantom stock
options issued----recipient would still realize benefit of stock appreciating
but paid in cash rather than new stock issued.
No further stock dilution if this approach taken.
Perhaps PE multiple I am using would be considered too low--
and hopefully this will be the case --however best IMO to be conservative--
There has been a shrinkage of multiples in recent years
in this industry---we are still talking untaxed earnings,
and "new ChyronHego" Board of Directors and Management
has to prove that the necessary discipline and focus on generating strong
growth in revenues and importantly, operating cost controls on a
sustained basis will be maintained.
Many risks inherent herein---and of course this is a
guessing exercise at this point---should know
more in August
Fine tuning---am currently thinking in terms of 14% operating margins in 2015 and 2016
Could be a stretch---company will need close controls on operating expenses---
Stock repurchase program and phantom stock option program would be helpful
in enhancing operating earnings per share----Hopefully Board of Directors
will consider this initiative.
My current guess (subject to change) on operating E.P.S in 2015 ---$.24
A 15X PE--would get us to $3.60--Perhaps around March 2015?-
Still many risks, but if attained, a 40% annualized rate of return from
Friday's $2.25 close.
If the cash flow develops as outlined above (a super big IF), then there
would be ample funds to support a major buyback of shares and to
more than absorb any dilution from recent amendment to
incentive option plan.
Very little cash on hand now to announce a stock buyback plan
Best to wait until Fall when hopefully the first of many profitable
quarters will be announced (early November)
If at that time the long term outlook appears to be very favorable I would
recommend a $16 million stock buyback program to
be carried out over four years subject to the usual caveats
This of course should only be done if the Board of Directors
has the necessary confidence and conviction to feel that the goals implicit
in the Plan outlined above are reasonable and attainable.
Could be much worse...
1.) Fire MWW
2.) Find that the "stategic alternative" scenario involves a clean execution of the merger..
3.)... The restructuring gets pushed to the back burner as MWW resists your rebellion. Some want him to stay thus no matter if you succeed or fail in your 'rule or ruin' scheme the corprate political structure becomes toxic.
4.) The stock that seemed to be in a death spiral , that has now broken it's terminal trajectory ..returns to its nose dive.... By the end of 2014...the wreckage is salvaged at $ .70 per share .
We have to get past the restructuring and integration before we can think of MWW retired across the Atlantic (Or not, if Caminocasa is right).
Do you really hate the man enough to put your money at risk?