mst stock trading, page-20

Humpy,

By your previous post, I'd assume that the figure required is now $21.2m ($32.4m-$11.2m).

On your other question, any number I came up with would be more than pure speculation. I don't know anything more than any of the rest of us. I have spoken with a shareholder or 2 over time and numbers get thrown around and I'll always say, "it's pure speculation".

BUT, if you think about the Force Protection Program worth $997m, should Metalstorm get just 5% of the revenue from that, there's $50m and a HUGE foot in a VERY BIG DOOR. Could MPM be worth $50m? Could Canada be worth $50m? Could any of these be worth more?

With regard to what that makes the value of MST and a recent post by Intel http://hotcopper.com.au/post_single.asp?fid=1&tid=1784663&msgid=10369654 suggesting, if I read it right, that valuation can be done by getting profit and dividing by shares on issue. This misses a critical point. The profit (or earnings) needs to be multiplied by the PE ratio. I provided a post on this subject 21 April http://hotcopper.com.au/post_single.asp?fid=1&tid=1722447&msgid=9977394 with some detail around this matter. To summarise, assuming a PE ratio of 17 or 33 (subject to assumptions), Intel's valuation was out by a factor of 17 or 33.

Using the following assumptions:
$50m of earnings/profitability
PE ratio of 33 (conservative 17)
20b shares on issue

The value of the shares would be:
$50m X 33 (or 17) / 20b = $ 0.0825 ($0.0425 conservatively)

If earnings are 10X that figure ($500m) then you can get those values and X by 10 ($0.825).

If shares on issue is 2X (40b) then you can divide the valuation by 2 ($0.04125).

If there's a consolidation of 100:1, then you can multiply that figure by 100 ($8.25)...but you'll only have 1/100th of the number of shares you have now.

Here's the good bit. To justify a share price of 0.002 (2X the last traded price) and 20b shares on issue (which there is not yet) the company needs earnings of:
20b X 0.002 / 33 = $1.2m. That's it, $1.2m ($2.35m conservatively).

Humpy, do you think this company can land one of, Multiple Canada deals, MPM, Force Protection, or others that are in the sales pipeline? And if so, do you think they'll be worth $50m+ of profitability in the next year or so? If you answer "yes" then these shares are as cheap as. If you say "there's only a 2% chance that the company will land any of these deals" then the shares are, conservativly (17X), worth 0.00082. That's what the punters who are buying must be saying. IMO, as soon as a decent contract is announced, hold on to your chair.