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  • fivemilx35 fivemilx35 May 31, 2004 4:39 PM Flag

    MAGS Tomorrow!!!

    First, for those of you who think that the recent oil security threats could somehow benefit MAGS should think again. Never in a million years will Saudi Arabia or a Saudi Arabian company ever buy a security system from an Israeli company. Never.

    Second, I owned MAGS from 2002 through March of this year when the stock hit my target price of $12. The reason I sold the stock was simple, it reached a stretched valuation. Look at it this way, last year MAGS showed negative free cash flow because of significant capex to rollout several new products. If you normalize the CapEx, MAGS would have shown FCF of $.6M. The company�s current market cap is $168M. Add net debt and the enterprise value is $175M excluding dilution from 144 stock issuance and options.

    MAGS debt currently yields 10.5%. Add cost of equity and their WACC is roughly 15%. For MAGS stock to be worth the current $175M enterprise value they would have to grow FCF by 38% for the next 5 years, 20% for the following 5 years and then 10% forever thereafter. How achievable is this? Well, Israel has had security problems for a long time. MAGS earnings growth since 1998 is 0%. That's right 0%. Since 2001 it is negative 15% per annum. Not much of growth company.

    Third, to those of you who say valuation doesn't matter. I guess you never lived through 1999 - 2002. Valuation may not matter short term. Long term, it always matters. Valuation doesn't matter to short term momentum investors that don't know the difference between an income statement and a balance sheet.

    MAGS is a solid company. I totally agree or I would have never owned it in the first place. However, it is not worth $21. It may be worth $12, but probably closer to $8 after their terrible last quarter.

    rgds
    5mil

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    • Being scared must leave a bad taste in your mouth. Now try convincing yourself MAGS does not fly tomorrow

    • Being scared must leave a bad taste in your mouth. Now try convincing yourself MAGS does not fly tomorrow

    • ahahahha kiss my ass you short.

    • Everyone should read the orginal message ....
      MAGS Tomorrow!!!
      by: fivemilx35 (35/M/La Jolla)


      "First, for those of you who think that the recent oil security threats could somehow benefit MAGS should think again. Never in a million years will Saudi Arabia or a Saudi Arabian company ever buy a security system from an Israeli company. Never.

      Second, I owned MAGS from 2002 through March of this year when the stock hit my target price of $12. The reason I sold the stock was simple, it reached a stretched valuation. Look at it this way, last year MAGS showed negative free cash flow because of significant capex to rollout several new products. If you normalize the CapEx, MAGS would have shown FCF of $.6M. The company�s current market cap is $168M. Add net debt and the enterprise value is $175M excluding dilution from 144 stock issuance and options.

      MAGS debt currently yields 10.5%. Add cost of equity and their WACC is roughly 15%. For MAGS stock to be worth the current $175M enterprise value they would have to grow FCF by 38% for the next 5 years, 20% for the following 5 years and then 10% forever thereafter. How achievable is this? Well, Israel has had security problems for a long time. MAGS earnings growth since 1998 is 0%. That's right 0%. Since 2001 it is negative 15% per annum. Not much of growth company.

      Third, to those of you who say valuation doesn't matter. I guess you never lived through 1999 - 2002. Valuation may not matter short term. Long term, it always matters. Valuation doesn't matter to short term momentum investors that don't know the difference between an income statement and a balance sheet.

      MAGS is a solid company. I totally agree or I would have never owned it in the first place. However, it is not worth $21. It may be worth $12, but probably closer to $8 after their terrible last quarter.

      rgds
      5mil

    • didn't everyone tell you yesterday:

      "it's about what the overall market thinks will happen down the road."

 
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