Sunday, September 24, 2006

15th September (Before Dividends) Portfolio

Monday, September 11, 2006

[PCT] Quick Audit Report

Corp and Equity Structure

PCT has sold approximately 25% of the corp shares to the public raising approximately 6bn. The 75% shares that remain in corp are covered by the initial corp injection of 16bn+. Staff is paid 200m/week (approximately 870m/month) 75% of the dividends paid are fed back to corp. Total corp value is approximately 30b now translating in a base-value of a little over 1.2mil/share. When the corp would “liquidate” 25% of the value of the corp would go to the shareholders and 75% will remain in the corp and be property of the CEO.

Operational Analysis

I have determined that Proton is actually conducting business in the areas of T2 Component Building and Tech2 Modules/Ships trading. His profits seem healthy enough to cover dividends and have corporate growth at the same time. Note though that while 4bil profits seem to be paid out, the actual liability of the corp is only 1.87b (870mln Salary and 1bn public pay) One could say that instead of making 16% profits after salary PCT is really making 4% profit after salary and corp growth. Since the inception of PCT the corp value has increased with about 20-30%.

Scam Risk Assessment

The biggest 2 risks for scams in the case of an operation like PCT is “Delayed Ponzi” basically:Paying out uber dividendsMaking the Share price riceSelling the remaining 75% shares for 300%+ of the IPO pricerunning of with everything after all shares are gone.The 2 things that have to be checked in that case are 1) are all corporate shares still in possession of the corp and 2) Does the corp make profit to cover the dividend rates.In the case of PCT since it is only paying out to 25% of the shares it is quite easy to maintain 16% profitability (since it requires 4% profit after salaries and corp growth) and the activities that are audited can certainly make that besides a healthy corp growth.

I can vouch that up to the moment of the audit Proton hasn't been scamming. And if he would decide to take all and Run tomorrow he would score about 7.5bn.

It is unlikely Proton will ever run with that 7.5bn but one must note that a good scammer will sell the 18.5k shares first before he runs of. At the moment of the audit all shares were accounted for. And I would like to congratulate Proton on a succesful and profitable corp.

Profit and Share price Assessment

Proton has estimated to (at least) continue this operation for another 12months. And he has estimated the Share value to be around 2mn isk / share and @16% dividends that means that in the next 12months the effective value will be (12x160k + 2m) 3.92m / share. Any isk you pay below 3.92m will be your profit in 12months time.

Example: If I buy the share for 3m today, and sell it back to Proton in 12months time... I will receive 2M (buyback price) + 1.92M (12mo dividends) and I will have made 920k in 12months on a 3m investment (about 3%/mo).

My recommended buy-price for this share is between 1.5 and 2.5m depending on your optimism and trust.

Recommendations for Due Diligence

Even though the maximum take for Proton is only 7.5b now.. he has full possession of the 75% shares which he could sell of for about 30-40bn and scam after that. As long as those 75% shares are in his possession he has a full green light from EMFi on his operation. I would recommend an auditor with view access to those shares.. or a regular checkup with an auditor to prove they are still there. To ensure full compliance in the future.

I also would like to see a published exit strategy, what happens if Proton gets hit by a bus stuck under a bridge?

At this moment Proton is compliant and not a scam. But I can't of course guarantee this for the future.

Final Verdict: Compliant

Strong Buy @ 1.5m
Buy @ 2.5m
Hold @ 3m
Sell @ 4m
Strong Sell @ 5m+

Disclaimer: Compliancy today doesn't guarantee compliancy in the future. Everything reported in this audit is 100% based on checked and proven facts.

EMFi has purchased 1000 shares in PCT after this audit for a price of 2m/share from an existing investor