Danier Leather, Inc.(TSE:DL)

Web Site
Google Finance
SEDAR Filing

Aug 20, 2012
2012 Data
Year end June. 30th
Check list:
1.Major Business.
Business sectors. Sales geographic allocation. Business seasonality.

2.Balance sheet.
Recent Price: $10.75, Tangible book value:$13.67, Share outstanding: 4.62m, Market Cap: $50m
Current asset:$61m, Current liability: $11.7, Debt: $0, Inventory: $25m, Cash: $34m.
Total liability: $13.1m.  Current assets-Total liabitity =$48m Very close to net-nets.

3.Credit facility.
not important

4.Financial data by years.

	2012	2011	2010	2009	2008	2007	2006	2005	2004	2003	AVE
Revenue	148	158	164	162	164	158	148	166	175	173
EBITDA	9.1	14.7	15.2	4.3	3.8	8.8	(1.2)	12.5	14.5	18.7
Income/s	0.83	1.55	1.28	(0.37)*	2.03	0.25	(0.84)	(0.03)**	(1.03)***	0.76
CF-WC	7.9	11.9	11.7	3.6	1.0	8.0	1.9	10.2	13.3	11.7	8.1
CAPX	4.0	2.4	2.7	3.6	3.9	2.9	9.0	2.6	2.8	9.7	4.4
Cash	34.3	28.7	26.6	24.6	19.9	20.6	11.8	21.2	22.6	7.1
Shares	4.65	4.68	4.57	5.91	6.28	6.43	6.55	6.55	6.94	6.92

*after 18m litigation recovery
**after 2.6m litigation reserve
**after 14.3m litigation reserve

5.Cost structure
Leasing obligations. Flexible cost structure or fixed cost structure? Cost controls.

6.Insider holding, options, Insider trading info, share buy back.
Jeffrey Wortsman(CEO): 1,224,329 shares(x10 in voting). 26% of total shares. Control 78% to total voting.
Chou RRSP: 2005: 550k, 2006: 770k, 2007:970k, 2009-present: 680k. Avg Cost is around $9.50.

7.Management compensation.
Top 5: 2011: $3m. 2010: $2.5m.. 2009: $1.9m.

8.Employee numbers. Revenue/Employee. Compensation/Employee.
Whether employees are unionized, etc.

9.Industry comparison.
Major competitors in the same industry. Whether the business is competitive?

10.Auditor
Better be among the big four.

11.Major events.
Business acquisition, law suit etc.

12.Comments.
(1) At first it appears cheap, but when exam 10 years data, the ave FCF-WC is just around 8.1-4.4=3.7m.
(2) Although the cash is build up, based on conference calls, they are very unlikely to declare dividend.

13.Links.
http://www.oddballstocks.com/2012/02/branding-this-canadian-leather-retailer.html

http://www.barelkarsan.com/2011/04/danier-leather-cheap-and-accretive.html

http://www.theglobeandmail.com/globe-investor/investment-ideas/behind-the-numbers/share-buybacks-put-a-shine-on-danier/article1750647/


Updates:
Dec. 06, 2012
(1) Recent price $12.25. Now the company completed $10m share buy back at $12.70. So now it has 3.85m share with book value around $13.50(after Q1 2013 losses which is normal for the business). Current market cap is around 47m.

(2) From its annual meetings conference call, it seems their main building worth more than the booked value. Need to check.

RRSat Global Communications Network Ltd.(NASDAQ:RRST)

Web Site
Google Finance
SEC Filing

Aug 09, 2012
2012 Q2 Data
Check list:
1.Major Business.
Satellite services: TV content distribution(95%) and MMS(5%).
IPO at 2006 at $12.

2.Balance sheet.
Recent Price: $5.24, Tangible book value: $4.62, Share outstanding: 17.35m, Market Cap: $91m.
Current asset:$59m, Current liability:$22m, Debt:0, Inventory: n/a, Cash: $34m.
Current ratio > 2.

3.Credit facility.
not important

4.Financial data by years.

	2011	2010	2009	2008	2007	2006	2005	2004	2003	2002
Revenue	113	102	94	79	59	43	31	24	14
Gross Profit	26.0	26.0	29.1	25.5	20.8	15.8	11.5	9.7	5.2
SG&A	17.2	15.6	13.9	10.5	8.8	6.4	4.1	3.4	1.8
CF-WC	17.4	15	19.5	17.5	14.8	10.2	7.0
CAPX	14.7	15.3	8.1	26.8(1)	6.4	5.9	3.1
Cash	33.2	35.6	47.6	40.9	56.7	52.8(2)	3.3
Dividend/s	0.24	0.38	0.49	0.61	0	0.15	0.19	0.39	0

(1) Includes $15.6 for Emek Teleport acquisition
(2) IPO at 2006.

5.Cost structure
Leasing obligations. Flexible cost structure or fixed cost structure? Cost controls.

6.Insider holding, options, Insider trading info, share buy back.
David Rivel(CEO):  2.3m. 12.9%
Del-Ta Engineering Equipment Ltd: 6.8m. 39%. Tanhum Oren seems be the major holder.
Kardan Communications Ltd.: 4.2m 24%

7.Management compensation.
David Rivel around $370k annual base salary + bonus.

8.Employee numbers. Revenue/Employee. Compensation/Employee.
Whether employees are unionized, etc.

9.Industry comparison.
Major competitors in the same industry. Whether the business is competitive?

10.Auditor
Better be among the big four.

11.Major events.
David Rivel retired at June 2012. Now the new CEO is Avi Cohen.

12.Comments.
(1) Gross margin
Gross margin down from 37% at 2005 to 23% at 2011. The main reason might relate to transponders fill rate which is topped at 2010 at 79% and still high, that increased the price for it to lease capacity. Also sometime it has to lease extra capacity than its customer needed(dual illumination). It seems to be stabilized at 24% in recent two quarter. Need to study more to better understand this issue.

(2) CAPX
CAPX quite a lot in recent 4 years. However, based on recent 2 quarters' conferences calls, it will be $8m annually as maintaining since major updates has finished. 2012 will be $5-$8. On the other hand, its past capx seems well returned by the revenue growth.

(3) Revenue growth
It has over 10% revenue growth for main years. However, the growth speed is slowing down. 2012 estimate to be around $115-$118m which not much bigger than 2011.

(4) SG&A
Although it keeps increasing, but pretty consistent around 14%-15% of revenue.

13.Conclusion
(1) By average it should get an $9-$10m FCF each year. A fair value could be around $140-$150m in market cap which equals over $8 in price.

(2) Major risks
1) gross margin might continue to decrease. 2)Revenue might decrease in the future. 3)New CEO.


Oct. 2016
The company was acquired SES for $13.29/share earlier this year. It is a pity that I didn't check back in the past several years.