Premier Exhibitions (PRXI)

Business

Premier Exhibitions (PRXI) owns museum quality exhibitions and showcases them in various cities around the world. The Titanic exhibit, the "Bodies Revealed" exhibit, and the "Bodies the Exhibition" exhibit have proven to be big hits with the public. The company has recently acquired two new exhibits, Dialogue in the Dark and Sports Immortals. Income is earned from ticket sales, third party licensing, sponsorship and merchandise sales.

Appraisal

prxi.pdf

Pros

According to Yahoo Finance, there are no competing companies. Any competitors that materialize would need time to establish contacts and develop exhibitions.
The company has sterling financial strength.
Only a modest amount of property and equipment are needed to operate. Free cash flow as a percentage of these fixed assets (even when treating the artifacts as fixed assets) has become generous recently.
The Titanic exhibit will likely be an even bigger hit in 2012 due to the 100-year anniversary.
The company owns the 1800 artifacts recovered in its initial 1987 expedition. This makes the company a possible asset play.
The company has salvor-in-possession rights to the 3700 artifacts recovered later, which means that the Titanic exhibition is a monopoly.
The recent blooming of free cash flow and rapid improvement in net liquidity indicate that the past investments are paying off even with the share dilution.
The company has entered a 20-year license agreement effective Feb. 28th, 2007 to receive exclusive rights to present artifacts from the Carpathia (the ship used to rescue passengers from the Titanic) in its exhibitions in exchange for funding an expedition to the ship.
On Dec. 3rd, 2007, the company acquired the license rights to three additional sets of human anatomy specimens.
CEO Arnie Geller owns over 3 million shares while earning a 2007 salary of around $586,000. Even with the money he'd earn in the event of his termination, he has a large stake in the company. Additionally, his wife and president Judith Geller owns 1.5 million shares. Thus, the CEO has a decent incentive to maximize shareholder value.
Each director gets 25,000 shares of stock upon appointment. Thus, the directors have a good incentive to maximize shareholder value.

Cons

Artifacts can only be sold as one big group.
The "Bodies the Exhibition" exhibit competes with Body Worlds.
Although competition is currently limited, that could change.
The company keeps diluting the shares.
CEO Arnie Geller stands to earn $1.65 million in the event of his involuntary termination and $1.26 million in the event of change of control with termination.
Controversy has been swirling around the "Bodies the Exhibition" exhibit. A "20/20" news report alleged that some of the bodies displayed are prisoners or torture victims. The company maintains that the allegations are false and disproven by its hired experts.

Other comments

Analysis of past financial statements is of very limited value because this is a new growth company.

Appraisal notes

(4-29-2008)

The fiscal year runs from March 1st to the last day of February.
From Feb. 28th, 2007 to Nov. 30th, 2007, total shares rose from 32,052,998 to 34,257,013. (This figure assumes that there ar 4,049,229 options and warrants outstanding, the average for the last 3 months of this period.)
From Feb. 28th, 2007 to Nov. 30th, 2007, property/plant/artifacts rose from $9.852 million (30.7 cents/share) to $13.317 million (38.9 cents/share).
From Feb. 28th, 2007 to Nov. 30th, 2007, net liquidity rose from $14.825 million (46 cents/share) to $25.973 million (76 cents/share), an encouraging sign.
Cash flow for the 9 months ending Nov. 30th, 2007 is $16.591 million. Estimated normalized capital spending for this period is $738,900. Free cash flow for this period is $15.8521 million. This is an annualized return on PPE of 214.5% (miraculous). Based on this figure, projected free cash flow for 2008 is $28.56 million (83.4 cents/share).
Based on the data for the 9 months ending Nov. 30th, 2007, the intrinsic value is $9.09/share.

Summary

4-29-2008: Premier Exhibitions is a fast growth stock and a possible asset play. The success of the Titanic and Bodies exhibitions and the expansion into other exhibitions convinces me that the company's good performance will continue. The sterling balance sheet gives it room to bounce back from unexpected setbacks. Overall, the pros outweigh the cons, and the valuation is low. Because this is both a growth stock and a value stock, I bought shares (around $5.50/share). At $5.50/share, the alternate PE is 5.7, the alternate earnings yield is 17.6%, and the alternate price/book ratio is .60. If you can handle a very bumpy ride, this stock is a buy.