Keynote Systems, Inc. (KEYN)

EdCanuck (91.78) Submitted: 8/27/06 2:07 AM : Start Price: $10.18 KEYN Score: 23.54

This is a classic value play.

1. $5.66 a share in cash (no debt) @ 6/30/2006.
2. Owns head office building in San Mateo, CA; bought in September 2002 for $85M, carried at (written down) cost of $25M, less depreciation. 60% unoccuoied @ Sept. 2005. Even with the housing bubble burst, if we assume it's worth the original $25M, that's another $1.46 per share.
3. Deferred Tax Assets of $57.5M (Valuation Allowance of $48.7M, Net $8.8M) at 9/30/2005. Potentially, another $3.38 per share.
4. Earnings negative (but improving); operating cash flow positive for last 15 quarters.
5 Share-owner friendly; O/S shares down from 27.9M at YE 2002 to 17.06M @ 8/9/2006.
6. Customer base: approximately 2,300, including over half of the Fortune 500. No customer over 10% of revenue, top 10 ( American Express, Cingular Wireless, Hewlett Packard, IBM, Microsoft, Nokia, Savvis Communications, SBC Communications, US Patent & Trademark Office, and Yahoo!) accounted for 35%.

At an enterprise value of $78M, the business is going for virtually zero. Makes a bite-sized acquisition for many companies, or private equity funds.

BTW, shares topped out at $177 during the dot.com boom in 2000.

Report this Post Replies: 1 | Reply