Story Stoxx
...because everyone likes a good story...
pg 3 of 3
ENTERTAINMENT TECHNOLOGIES AND PROGRAMS, INC.
So what is ETPI worth? It appears revenues for the FY ending 9/30 will come in around $6-7 million and a modest gain or loss for the year is a reasonable expectation. The Company forecasts substantial revenue gains for NiteLife and Performance S-L in the coming FY and it is possible that the remaining businesses could make at least a modest profit. So, assuming $8-$9 milllion (as long as the economy remains buoyant), $0.03-$0.05 per share might be achievable. Looking further out, if the Company's recently stated objectives hold, $10-12 million in revenue and EPS of $0.05-$0.08 might be in the offing for FY '01 (ends 9/1/1). These EPS assumptions assume as many as 36 million shares outstanding, allowing for 3-4 million shares to be issued in potential financings to raise working capital, a top priority to finance growth; the Company has issued some 5 million shares for acquisitions during the past 18 months, but management is on record as saying it would not make additional purchases until its capital structure is reinforced.
Looking a bit further down the road, it is possible and would likely be desirable for the Company to effect a reverse split on its stock. In a reverse split, the Company would issue one share of stock for, say, five shares of its currently outstanding total, and the share price would concurrently multiplied by the same amount. For example, if ETPI stock was selling at $1 at the time of such a split and the Company executed a 1-for-5 reverse split, a holder of 1,000 shares at $1 would then have 200 shares at $5. While the swap would not by itself change the total value, the stock might become more attractive psychologically as many investors shy away from stocks under that price. Further, a higher price could be an important factor in the Company's ability to obtain a listing on the NASDAQ National Market System, thus possibly providing greater visibility and marketability.
All this having been said, one could substantiate a multiple of 20-30 times forecast EPS (a similar multiple to other entertainment-based companies with similar projected growth rates) and/or 4-6 times revenue, particularly given ETPI's accelerating growth. Based on the aforementioned projections, a stock price of $1.00-$1.25 in the coming six months and perhaps $1.50-$2.50 within 12-16 months is possible, presuming the Company shows consistent progress in (a) growing top line revenues at a rate of 20% per year or better, (b) showing continued increases in operating income, and (c) improving its capital base.
Happily ever after? Although no recent proxy was available at the SEC, it is estimated insiders control about half of ETPI's shares and it is unlikely they believe the current depressed share price levels represent the Company's potential, especially considering what appears to be building sales and income momentum. Thus, ETPI stock would seem to be a reasonable speculation with the potential for superior price performance over the coming 12-18 months. ETPI shares should only be considered by investors able to shoulder the substantial risk inherent in microcap companies, including expected volatility in the share price.
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authored by stockprof 9/8/99
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