Shares out(mm):        8.15
Stock Price:              15.65
Mkt Cap (mm):       $127.6

Rationale:
Hopefully sex sells.  Rick’s is an upscale strip club and Internet adult website operator.  Company projects earnings of $1.25-130 for 2008 and $1.55-1.60 for 2009.  At current prices that’s a PE of about 10 for a hopefully high-growth company.  Will their acquisition strategy make them the McDonald’s of gentleman’s clubs?

Caveats
High debt and negative net worth.  Should be ok if cash flow continues strong.

Some say that sin businesses are immune from economic downturns, but I would think people on a stretched budget will think food and gas before strippers.  Recent articles on Las Vegas downturn not encouraging.

References:
2008-2009 Guidance

Shares out(mm): 14.7
Stock Price: 3.83
Mkt Cap (mm): $56.15

Rationale:
According to the companies 4Q08 conference call, they expect to have margins of 18-20% and SGA of about 8% when they hit scale of about $100 million in revenues. This year they expect to exceed $50 million in revenue (in the CC they said $50 this year NOT including up to 10 new clients of $3-5 million each). 2010 is probably a good guess as to when they hit $100 million. At that level of revenue and 18% margins that would give:

Pre-tax profit:   10 million
After-tax profit:   7 million
EPS:                       .68

Assuming a multiple of 12 gives a price of 8.19 (9.82 if assume 20% margins). Assuming 15% share dilution by then and a PE of 10 still gives 5.93 or an annualized return of 25% over two years. A price of 9.82 gives an annualized return of 60%.

Risk Factors: not really sure. They seem to be in a growth business and have good relations with their customers. Talks with the previous CEO indicated it would be hard to replicate their network but its difficult to verify this.

References:
a link to the conference call is on this page.

Shares out(mm):         47
Stock Price:             11.09
Mkt Cap (mm):       $521

Rationale:
This is a high-growth company with a recognized product, protection from competition (patents and network effects), and hard to understand accounting.

LoJack for Laptops is a subscription service like virus protection.  According to company reports, most subscription-related expenses occur upon initiation.  Although customers pay in advance, revenue is deferred to the period when the service is provided.  Since subscription expenses are greater than revenue in the initial period, the better the company does, the worse net income is going to look.  There have been a couple of quarters where net has been more negative than expected because subscription growth was greater than expected.  The stock has fallen, which indicates to me misunderstanding by the market and a profit opportunity.   Subscription growth and operating cash flow(OCF) are probably better indicators of company performance than net.

The company has a goal of 4 million subscribers by June 2009, which RBC thinks is conservative.  Split adjusted OCF was .19 in 1Q08 (July – Sep. 2007) and RBC is forecasting .63 for 2008 or OCF/earnings of 17.  This is versus OCF growth forecasts of 66% and 30% for this and the next fiscal years (RBC).

References:
Company Reports

Shares out(mm):         28.9     (23.9 reported in 2Q10Q and est’d 5 from Abax deal)
Mkt Cap (mm):         $123      ($4.25/share on 10/16/07)

Highlights:
- expects to have 30 CNG stations in 2008 and at least 40 in 2009 (70 eventually)
- operate in Wuhan, Pingdingshan and Xuancheng

According to company press release on 8/16, management estimates:

2008:  45-47 mm rev; 13-15 net
2009: 70% revenue growth (implies net of 23.8mm if margins stay constant)

These imply PEs in 2008 of 8.8 and 2009 of 5.2.

I bought this stock thru Fidelity, but was unable to purchase thru TD Ameritrade, and I believe is restricted by other brokerages as well.  They expect to list on the Nasdaq National Market at some point which should increase potential demand.

References:
Westminster Securities report
10/07 private placement
8/16/07 guidance
2007/2Q 10Q

Shares out(mm): 29.5 (24.2 as of 2Q07 and about 5.3 in 8/07 private placement)
Mkt Cap (mm): $392 ($13.30/share on 10/16/07)

Highlights:
- 20 CNG stations as of 3Q07. Expect 23 by end of 2007 and 42 by end of 2008
- building a diversified natural gas project, which when completed will enable China Natural Gas to produce various natural gas products, including liquefied natural gas (“LNG”), liquefied petroleum gas, dry ice, and sulfur
- talking with Thai government company about CNG stations in Thailand as well as consulting services (not reflected in guidance)
- net positive cash

According to 2Q results press release, management estimates:

2007: 32mm; 9.3mm net
2008: 70+% revenue and income growth (implies revenue of 54mm and net 15.8mm)

These imply PEs in 2007 of 42 and 2008 of 23.

Conclusion: potentially a great growth story, but huge run-up in price and a fairly rich valuation. SNEN may be a better value story though they are in an earlier stage of development.

References:
2Q07 Results
Natural Gas Project
August 2007 private placement

Notes:
- bjorkdal mine in sweden
- target 75K oz gold per year by 2008 (37.5mm@500/oz, 52.5@700/oz)
- $5mm in cash €“ no debt
- 79mm share out
- sold 12mm units at $0.56 w/ 1 share, ½ wt at 1.00 per unit early 2007
- research
- latest quarterly
- assuming 75mm prod, net 300/oz, discount 0.1 => NPV $118mm
- mkt cap of $75mm on 10/12 (c$1.02, .93/sh)

Positions:
Long: JEQ NXG HBMFF ALSWF FFHL AOB XSI NTLRF EXDUF ETEL GREXF MLKKF TRA QADMF SHERF OKOFF.
Short: LEN GCI HBI HLS MNI AMZN YHOO TOL.
Options:
Cash: 30.1%
Short Pct: 18.6%
Trades: Sold JAGNF@6.60; reduced MLKKF@6.78
Read:

Stocks Researched:

Hours spent on market: 1.0
Positions most worried about: FFHL, reporting seems suspicious. Metals, continue to drop. How close are we to a bottom?
Positions most sanguine about:
Biggest market worries: rate rise induced meltdown
Thinking about: shorting more.

Outlook ( up-flat-down surety rating: 1-5 reasoning):
US: down, 2.0; rates are rising
Tech: ??
Japan: down, 1.0; strong GDP, but weak international markets
China: ??; price action, but getting bubbly.
Silver: flat-down s/t, 2.0, price action; l/t up, 1.0, industrial demand.
Gold: flat-down s/t, 2.0, price action; l/t up, 1.0, industrial demand, GFMS study.
Copper: flat-up, 1.0. Strikes on the horizon.
Zinc: up, 2.0. Declining stocks.
Real life: Working on summer schedule.
Previous night sleep and exercise: 7.0 hrs; biked Fri, soccer Sat, biked Sunday and crashed – arm a bit bruised.
Mood: calm.