Summery
This is the stock I bought at $1.50 quite a while ago. It is a Canadian company produces Recreation Vehicle and Electric Circuits. Because it is net net working capital situation, I didn't spend much time on it. Now I feel it is better to put some time on it.
Facts:
1. Share outstanding 12.5m. Recent price $1.50. Sales around 120m in 2007. Sales are 13% lower than 2006.
2. Current asset 52.4m. Total asset excluding goodwill 70.5m. Total debt 32.5m. Current asset(52.4m) - Total debt(32.5m) >Market Value(12.5mx1.50). It is a net net working capital situation.
Analysis:
1. It has 17.5m in cash, which counts $1.4 pre share. Basically I am using $1.50 to exchange for $1.40 in cash + $1.64 in other net assets. Not too bad.
2. It suffer 2.5m lost in 2007. Around 0.20 pre share. Those numbers seems scary. After exam it carefully, it doesn't looks that bad.
(1) In Q4 2007. It wrote off 1.1m SR&ED tax credit for 2006 and also 0.7m for current year.
(2) In Q4 2007. It wrote off 3m tax asset recorded in previous acquisition of CWC.
According to above. It should add back 3m+1.1m for 2007. Which make it earn 1.6m instead of lost of 2.5m.
3. Its sales suffered from strong Canadian currency. Its cost saved a little bit from strong Canadian dollar. As time goes, I believe they will be OK.
4. It spent more than 4m to acquire new facility in electric devision in 2007. It has good potential to improve a lot in this devision.
5. In Dec. 2007, it lent 4.5m to its insider to buy back its share from a third party. I view this is a good sign.
Conclusion:
Now I feel quite comfortable with this company. It at least worths its book value which is around 3.00 a share.
Updated:
May 6, 2008
Obviously my previous analysis contains some mistakes. The company has 43.6% of Electric Circuits devision which is separate company Firan Technology Group Corporation (TSE:FTG). Previous I didn't really know 'minority interest' in their financial report. Now should change the analysis and with new Q1 2008 data.
Facts:
1. Current asset: 53.3-(20.9x(1-0.436)) = 41.5m.
2. Total liabilities: 35.6-(18.9x(1-0.436)) = 24.9m
Conclusion:
Current asset - Total liabilities = 41.5-24.9 = 16.6m. It is less than their market value 18.7m. It is not a net net working capital.
Mar. 2009
2008 data
1.Lost the previous 4 quarter.
Q1 lost: $0.09 per share.
Q2 lost: $0.16 per share.
Q3 lost: $0.24 per share.
Q4 lost: $0.42 per share.
2. After a year of lost, now they only have $6.5m cash which is $0.52 a share. Book value around $2.0.
June. 2010
The company actually filed for bankruptcy Jan. 19th this year. So I incurred a total lost this investment. Two mistakes for this investment:
1. I didn't do enough homework before buying it since it is net-nets at the time when I bought it(The same as buying DLA). This mistake I will never repeat.
2. When I realize it is mistake later I was unwilling to sold it because its price is down. It may takes time to be totally disciplined on this kind of situation.
Disclosure: Author has a long position in GIN
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