quantitative analysis of mhls value

Here are some calculations I've made in regards to MHL and estimates the value of MHL's SP now, and in the event JV pulls through. Note that these are rather conservative estimates and probabilities and I am utilising a very basic pricing model -- my own advanced proprietary model is far more complicated.

* * * * * *

Assumptions:

15% annualised discount rate
~600,000,000 shares outstanding

75% chance that deal is sealed on 10 July
First leg -- $5m from Sentry
50% chance that first leg is successful, in 1 year's time
Second leg -- $8m from Sentry
50% chance first well drilled is 'successful', in 3 year's time

Current SP = ([0.75 * $5m] / [1 + 0.15/365]^60 + [0.75 * 0.5 * $8m] / (1+0.2) + [0.75 * 0.5 * 0.5 * k] / (1+0.2)^3 + L) / 600,000,000 shares outstanding

Where k is the value of oil from the first well, and L represents other opportunities/projects of MHL incl. Uranium play. Ignoring those 2 factors, we have

Current SP Estimate based on Sentry deal alone = 0.010

Hence, we can work out (0.1085k + L) / 600,000,000 to be ~ 0.009 based on current SP of 0.019. Let's assume k ~ 8L, then we have k ~ $23m. Using this model, I estimate the market to be pricing the "oil opportunity" to be around $23m. Now, in my humble opinion, I believe that this is an undervaluation of the value that may be generated from any successful oil well (just look at other such similar wells).

The above is the quantitative reasoning behind my decision to invest in MHL.

Further, assuming Sentry seals the deal, my formula becomes:

Current SP = ($5m + [0.5 * $8m] / (1+0.2) + [0.5 * 0.5 * k] / (1+0.2)^3 + L) / 600,000,000 shares outstanding

The first part, ignoring k and L, the Sentry deal is worth 0.014, 0.003 more than in my original calculation.

Hence, according to this model, we should see an upward movement of 0.003 once the deal is sealed.

Using the basic pricing model above (my own proprietary pricing model which I use to evaluate assets is a lot more complicated then the above), I predict that the SP will move to 0.022 when the JV is sealed.

Moreover, because of the inherent basic nature of my model, taking into account inconsistencies and based on results from my more advanced proprietary model, I predict the SP should most definitely move into the 0.02 range, and up to and including the mid 0.03's if and when the JV deal is signed.

Any comments much appreciated.

Disclaimer: DYOR, the above is purely my own opinion.