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BrandPartners
(OTC BB: BPTR); $50 Million in Crosshairs |
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Here's a recap if you missed the
original presentation in the September
6th edition.
BrandPartners is in the bank
service industry. They are one of three major players in a market estimated
to be about $2 billion annually.
There are 106,000 bank branches in
the US. US Banks are now building about 1,000 new branches annually. 92%
of all customers go into their branch at least once a month. Products and
services offered through the local branch have become the strongest source
of profits in the banking industry over the last several years.
Just like a hotel, bank branches
need a makeover once every three to five years. Mergers and acquisitions
also fuel the need to redesign and rebrand the interior of bank branches.
Changing product offerings require specialized point-of-purchase design.
BrandPartners provides the
service of redesigning and rebranding bank branches. Their expertise includes
creative point-of-sale design, fixture design, traffic flow analysis, and
promotional and advertising materials within branches. Up to your right
is the interior of a Flagstar Branch, designed and built by BrandPartners.
In addition to organic growth, mergers
in the banking industry are fueling BrandPartners' growth. There
have been 69 major mergers since 1994 with an estimated transaction value
of $670 billion. By the end of May this year, there had already been the
second most bank mergers in history in one calendar year.
Their customer base includes nearly
every major name you can think of including Bank of America, M&T,
Wells Fargo, Sun Trust, Regents Bank, and City Financial (subsidiary
of Citigroup). BrandPartners was awarded a substantial contract
as a result of the highly publicized merger between Bank Of America
and Fleet earlier this year.
To your left is a stand alone marketing
display BrandPartners developed for Wells Fargo. This is a point-of-purchase
display BPTR designed for a specific Wells Fargo product.
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Financial
Performance |
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In a previous edition I described
Brand
Partners as a "no brainer". If you understand anything about growth
in earnings vs. market valuation, this table explains why the stock a "no
brainer". This is one of the greatest turnaround situations of 2004.
The table below lays out BPTR's
financial
performance through the first half of 2004 as compared to the first half
of 2003. As you can see, the company has earned $.09 per share
from operations through June. Assuming business remains about the same
through the remainder of the year the company will deliver $.18 per
share in earnings. Therefore, the current PE ratio on the stock is 4.2
on 2004 earnings at $.77 per share. A more conservative estimate
of $.15 per share in earnings yields a PE of 5.1.
BrandPartners Historical Performance First
Half '03 and '04
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Q1'03
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Q1'04
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Q2'03
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Q2'04
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Growth Rate
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Revenues
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$9.5 million
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$15.6 million
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$6.88 million
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$11.3 million
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64%
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Profits (Losses)
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($1.8 million)
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$1.9 million
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($2.1 million)
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$1 million
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Earnings Per Share Excluding
One Time Gain
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($.10)
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$.06
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($.12)
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$.03
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$.09 EPS For First Half of '04
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There are currently 31.5 million
shares issued and outstanding, equating to a market capitalization of $24
million on an annual revenue run rate of over $50 million. By any measurement
this stock is absurdly undervalued.
The unknown for BPTR is the
amount of revenues and earnings they will have in the second half of '04.
September quarterly numbers will be out by mid November. We are now in
the 4th quarter.
Today, after the market closed, BPTR
announced
it had booked another $2.5 million in new business. According
to a filing with the SEC on Friday, BPTR has now achieved
$39
million in bookings in '04.
If the company is going to achieve
the milestone of $50 million in 2004 in business, another $11
million in contracts needs to be signed and delivered by year's end.
Banks often reserve part of their advertising and remodeling budget for
year end in order to adjust to changing needs, and they spend it towards
the end of the year so it doesn't carry over.
BPTR did book 30% of its yearly
revenue in the 4th quarter of '03, suggesting $50 million in
revenues is within site for '04. We would end up with about $.15
per share in earnings for the year if it all comes to fruition.
$50 million in revenues
equates to a 48% growth rate of 2003. 100% of the growth is organic- meaning
there was no acquisition during the year. Another words- the increase in
sales was earned through hard work, not purchased.
A good short term target for BPTR
remains
$1.50
despite
my belief the company could be worth $3 to $4 per share. I am taking
the liberty of assuming the company will deliver
$.15 per share
in earnings and trade at a meager 10 x earnings.
Here's a longer term picture of the
price movement of the stock. It measures the performance of the stock from
the last time it spiked over $1. As you can see, it has regained over 50%
of its loss, and is now taking a short breather.
I am publishing on BPTR today
because the stock has quieted a little and pulled back and given back some
of its recent gains. I believe the process of getting to a reasonable value
on this one is just beginning, so pullbacks are an opportunity at this
point in the game. A break above the upper blue line at about $.90 would
bring the $1 level into view. Perhaps today's news will send us above that
level.
In the high risk arena of microcap
investing, this is one of the least risky opportunities you will find.
Go
here to read today's press release from BPTR.
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