FP Newspapers Inc (TSE:FP)

Web Site
Google Finance
SEDAR Filing

July 26, 2012
2011 Data
All data is for FPLP, which FPI held 49% interest of it. 
Check list:
1.Major Business.
Newspapers: Winnipeg Free Press, Brandon Sun,etc.  Derksen Printing.
Segments: as 2010,  Ads: 67%, Circulation: 26%, Printing: 3%. Digital: 2%.
Seasonality: Fourth quarter the best, First quarter the weakest.

2.Balance sheet.
Recent Price: $4.00, Tangible book value: <$0: , Share outstanding: $14m, Market Cap: $56m.
Debt: $49m .

3.Credit facility.
at June 2012, $50 with HSBC, Banker's  acceptance rates + 1.75%-2.75%. $48.3m outstanding. $1m principle payment/year. Expire at Jan. 31, 2016

4.Financial data by years.

	2011	2010	2009	2008	2007	2006	2005	2004	2003	2002
Revenue	111	110	114	121	126	122
Earning	16.2	16.0	7.2	8.1	13.4	9.1
CF-WC	19.5	21.4	12.6	13.4	18.6	15
CAPX	3.7	0.5	0.5	2.0	2.0	1.5
Cash	14.3	11.5	9.2	7.8	9.9	3.7
Debt	50.3	55.2	60	116*	115.7	119.7
Dividend	10.1	10.8	9.5?	11.8?	12.1?	11.5?

*include $57m notes ???

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

6.Insider holding, options, Insider trading info, share buy back.
CanStar: 7m shares, 51%. controlled by Ronald Stern.
FPI: 6.9m shares, 49%.
4065565 Canada Inc. 1.67m shares of FPI. 24.2% of FPI. also controlled by Ronald Stern.

7.Management compensation.
Ronald Stern (CEO): $0.
Other 4 officers: around $1m/year for the past 3 years.

8.Employee numbers. Revenue/Employee. Compensation/Employee.
at 2011, 442. Including 362 unionized worker. Oct. 2002:  strike for 9 days.  Oct. 2008:  strike for 16 days.
Current contract is up for renew at June 30, 2013

9.Industry comparison.
At Winnipeg, adult reading rate: 39%, Compete with Winnipeg Sun (19%), Global Mail (4%).

10.Auditor
Better be among the big four.

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

12.Comments.
Negative Side:
(1) Newspaper circulation is in steady decrease.

(2) Union worker strike.
(3) Pension plan underfunding.
(4) Dividend might decease.
(5) No tangible book value.

Positive Side:
(1) Decent FCF ( > 20% of Market Cap). Conservative CAPX.
(2) High dividend rate( >15%).
(3) Ronald Stern has a big portion and don't take salary. Other management were paid not much.



Updated Dec. 17, 2012

Close my position at small gains. The company is doing OK now. The management is capable and well ding good in near term and will keep cost low. I expect next years dividend will be $0.48 per/share. However, if we think about 5 or 10 years later. There is much uncertainty ahead for the company. With more likely go downward.  So it is better not to touch those stocks.


Dec. 16, 2014
Q3 2014 Data

Recent price $2.56, Tangible book value still < 0.



(1) The stock is recently down due to news release that starting Q4 2014, dividend will be cut to $0.08/quarter. Which make future yield around 12% based on current price. For past 3 years, dividend is $0.60/year.

(2) The company is doing a little better than I expected. While revenue is down, its EBITDA remains at $20m level. It continued paying $0.60/year dividend until this quarter. However, I estimate 2014's EBITDA number would decrease to around $17m.

(3) The maintenance CapX is about $1m/year which is $3m lower than depreciation expense.

(4) In 2010, it converted from income fund to a corporation. Thus the subordinate notes converted to common shares.

(5) In past 10 year, it had pay out pretax income of $115m. While equity changed very little. It is quite consistent with the $11.2m/year income. There is also $23m increase in net cash position. Which is caused by $3m deference mentioned above and also some pension over contribution as well.

(6) In recent 3 years, it paid around $3.5m/year in tax

(7) Using $17m EBITDA, $2m interest expense, $1m CapX, $3m in tax. It would generate $11m in cash. Dividend is around $4.5m/year. That would give it around another $6m in cash to pay debt or do other stuff.

(8) Current net debt is around $32m. Added current market cap $36m, its EV is less than $70m. While its earning before interest payment is close to $13m/year.

(9) In latest 3 years, it contributed a lot more than average in pension plan. It states that its because of discount rate change. Current fair value almost 5 times of 10 years before and employee number actually decreased. I feel there is some value exist in the pension funding.

 (10) In my opinion, this is much attractive price than $4.00 which is 2 years ago. The underline business wasn't that getting that bad, but the price dropped by 40% . Off course it is related to the dividend cut, but all the money saved still goes to stockholder. It might pay down the debt, or invest in new business. The management are quite decent and I think they would do a proper job. The major risk is still the down of the whole newspaper industry. But I think it will still be profitable for many years to go. Eventually it might switch to another business.  Only if it get worse too quickly which should keep an eye on.

Update
August 17, 2015 
Q2 2015 Data
Current Price $0.7
(1) On Q2 2015 release, the company cut dividend totally. 2Q 2015 EBIDTA is $6.9m compare to $7.9 in same period of 2014. CapX $0.5m.  Interest expense $0.8.

(2) The company does get worse than I expected. Last year it actually generated around $18m in EBIDTA. This year, it might just generate $12 to $14 in EBIDTA or even less. So my $17m EBIDTA estimate is not achievable anymore.  One of the reason is the customer continue switch to digital advertising, second reason is local economy is down which make advertisement suffers.

(3) The company paid down debt to $39m. Net debt now is $29m. If using $10m in EBIDTA, $1m in CapX, $1.6m in interest expense, $2m in tax. It still can generate over $5 in annual cash. I think the risk of a bankruptcy is low unless the business is getting really bad.

(4) Overall, it is sure a mistake to get into this stock, the lesson I learned is that swimming against the current is really hard. When get into a industry that is doomed, we must be extra careful. Although there always will be newspapers, it doesn't means this company will survive. The company is lack of a sound digital strategy which is big concern for me. Unfortunately I just ignored it.

(5) However, when compare to $5m in real income to just a $10m in total market Cap. Current price is more a reaction of dividend cut than the real business result. I do have a feeling that the business it not that bad. But again it remains to see. Should monitor it quarter by quarter closely.

Update
Nov. 16, 2015
Q3 2015 Data
Current price $0.65.
(1) First 3Q EBIDTA is $9.4m. Net debt is still $29m.


Mar. 10, 2016
Q4 2015 Data
Current price $0.45.
(1)Full year EBIDTA is $13.6m.  Net debt is around $28m. Pension asset value is $41m at year end. Pension contribution is $4m at 2015.  Pension discount rate is 4.05% compare to 4.9% year ago.

GSI Technology, Inc.(NASDAQ:GSIT)

Web Site
Google Finance
Filing


Dec. 01, 2014
2015 Q2 Data

1.Major Business.
SRAM and LLDRAM manufacturer. SRAM is high end fast response memory used mostly in server or router compare to DRAM which used in PC. Fast SRAM has a market size around $600m to $800m/year. LLDRAM is a newer RAM developed by the company and I guess its sales is still not significant.

The company was founded at 1995 by its CEO Shu, Lee-Lean  who was working for Sony for 5 years before that. Later at Aug. 2009 the company actually acquired the SRAM business from Sony for $5.2m.

2.Balance sheet.
Recent price is $5.16. Shares 23.7m. Market Cap around $122m. Tangible book value $4.25. Cash $63m. No debt.

3.Credit facility.
Not important

4.Financial data by years.

5.Insider holding, options, Insider trading info, share buy back.
CEO: 2.4m shares. Including 500k options.
Currently there are 5m+ options outstanding average price around $5.2. 6m+ more options to be issued.

6.Management compensation.
Top five around $2.5m/year.

7.Employee numbers. Revenue/Employee. Compensation/Employee.
At Mar. 2014 has 138 employees. 42 in R&D, 18 in Sales, 10 in Admin, 66 in Manufacturing.

8.Industry comparison.

9.Auditor
PricewaterhouseCoopers LLP

10.Major events.
(1)The major player in SRAM is Cypress which has annual sales in SRAM around $200m to $300m. Since 2011, it filed 4 patent lawsuits against GSIT and GSIT won first two. The other two have been combined to one and is still going on. As a defence, GSIT filed antitrust lawsuit against the company and currently is still in process. This has already cost GSIT extra $20m+ legal expense and will continue in incur in near future.


11.Comments.
(1) There are two major problems of the company.

One is the Cypress litigation issue it is still unknown how much will cost in the future. One good part of this is the company if the company win the antitrust lawsuit, it should get $30m+ in return. Personally I feel it has a higher chance to win than lost. Anyway, this is temporary issue and won't drive it out of business.

The other one is the revenue is down for the past 3 years as well. The major contributor of this is Cisco which purchased more from the company after Sony acquisition. Toped at 2011 and then down since. It might or might not related to the litigation.  If remove Cisco sales from revenue, they are around $45m $50m for the past several years and actually increased a little bit at 2014.

(2) In cash flow, there are others item $3m to $5m which is combine of stock options expense($2m/year), write down of inventory($700k to $2m), and amortization of bond premium($1.2m to $800k).  Options expense is around $2m/years.

(3)Go forward, estimate $50m revenue, 45% gross margin, it would generate $22.5m gross profit. Assume it would be $25m. Assume $10m in SG&A. $10m in R&D. it would leave $5m in EBIDTA.
Use just $1m in Capx. $0.5m in tax.  The real income is still just $3m to $4m.  We could add some of the cash flow item and the interest income($0.5m/year) for about $5m. It is still less than $10m.

(4) The stock is priced that either the LLDRAM will pick up the revenue, or they could win the antitrust lawsuit. With the heavy payment of management and big options pay out, it is not really cheap.


12.Links


Aug 28, 2015
Q1 2016 Data

Current price $4.63, Market Cap: $105m.

For 2015, the company's gross profit is $25m which is close to my estimate. However, R&D is actually $12m which makes the real EBIDTA is just $4m.

On positive side: first, it solved the litigation with Cypress, which means eventually its litigation expense would go down. Secondly at Q1 2016, the company's revenue and gross profit both are up for $1m.

Going forward, it might be able to make $28m in annual gross profit. Using $10m SG&A and $12m in R&D. It would generate around $6m in EBIDTA. $4.5m in real income. Using 9 times P/E. It is cheap at $40m.

There is a mistake in previous study that the large cash balance should be counted in valuation. If using 20% discount rate with 2 years time frame, the current value is $40m.

On a cash flow basis, it should be able to add around $3m to $4m to real income. Which added another $30m to $40m value.

When added discounted cash to the real earning power, its real worth is actually over $100m.

Risks:
1. Litigation expense might last very long time, this will the company operate in loss for quite a while, however, currently the FCF-WC is neutral.

2. RAM business might go down again.

May 12, 2016
Q4 2016 Data

Current price $3.85, Market Cap: $90m.

Full 2016 revenue $52.7m, Gross profit $26.7m. Legal expense: $6.7m.  SG&A including legal is $17.6m. R&D is $12m.  Cash+investment: $66m

Finally the legal expense down to $200k at Q4 2016. The company made a small loss and a positive cash flow at Q4 I guess.

The company acquired an Israel company MikaMonu at Nov. 2015 who is specialized on associative computing which enable memory computing to solve bus bottleneck between cpu and memory. It does make sense to me although it might not work at the end. GSIT paid $5m + $2.5m in future. MikaMonu will not have any income contribution until 2019. The company has less than 10 employee and I estimate $2m extra expense for GSIT.

In future, the company will have $24m to $25m running rate of SG&A+ R&D. It profit should be able to maintain at above $25m level. So it would be just profitable. Cash side, it might be little more given $3m level in the others non-cash items.

Overall, with litigation expense is finally down. The company is more likely to make a profit in the future.  Currently stock price is just about 85% of book value which is quite cheap. However, whether the new acquisition will work remains unknown and takes a long time to see the result(at 2019).

Friedman Industries Inc. (FRD)

Web Site
Google Finance
Filing

May 28, 2008

Summery

Based on Q3 2008 (Dec. 31, 2007) data. Two business segment: Coil and Tubular. Down by housing market. Current price($6.30) below book value.

Facts:

1. Shares outstanding 6.77m.

2. Book value: 6.52.

3. Current ratio 3:1. No debt.

4. Ave earning for past 5 years: (0.91+0.90+0.83+0.33+0.19)/5 = 0.63.

5. Current dividend 0.24 rate pre year.

6. Recently insider sell quite a lot at $8+. One insider buy 1000 shares at $7.61.

Conclusion: Target buying price 0.63x9 = 5.67.

Updated: June 12, 2008

1. 15 years of paying dividend.

2. 37% of Float Held by Institutional & Mutual Fund Owners

3. No deficit in past 10 years. 2002, 2003 are their worst years. revenue around 100m compare to 180m in recent 3 years. Of course need to know whether they acquired something during that period.

4. According to Q3 2008 data, it had borrowed 5 million at Jan. 2008 to support working capital.

5. From Q1 2008 to Q3 2008, it has spent 4m on Capital Expenditures for new coil operation at Decatur Alabama. Totally they have spent 10m so far, and up to 16m could be spent on it. However, it says only 0.3m will be expected to spend on it in future. According to Q3 2007, the land price is 0.68m. According to 2007 annual, the land are 47.3 acre.

6. It is interesting to calc their land worth. In 2007 report, it owns (81.7 + 26.2 + 47.3) = 155.1 acres of land, and count as 1.08m in worth. If take the price of new Decatur land as the current price. It could worth 155.1 x (0.68/47.3) = 2.23m. Of course the price might not be the same for the three different land. But it should be more than 1.08m.

Nov. 14, 2014
2014 Q3 Data
Check list:
1.Major Business.
Steel coil and tubular manufacturer. It is founded by Mendel Friedman at 1939. Later his son Harold Friedman( retired at 2010) and Jack Friedman(retired at 2005) run the company.

2.Balance sheet.
Recent price is $7.90. Shares 6.8m. Market Cap around $54m. Tangible book value $9.38. No debt.

3.Credit facility.
Not important

4.Financial data by years.

5.Insider holding, options, Insider trading info, share buy back.
Insider holds very few shares. Jack Friedman has 360k under his name at 2010 and after that his name is not shown(he died at 2010).

6.Management compensation.
CEO Base salary is low($110k/year) but bonus varies from year to year($500k at 2009, $100k at 2014).

7.Employee numbers. Revenue/Employee. Compensation/Employee.
Currently have 100 employees.

8.Industry comparison.

9.Auditor


10.Major events.

11.Comments.
(1)It has been 6 years after I first wrote about the company. Its stock price went over $12 and now it is down below $8.

(2)It looks amazing to me that the company can remain profitable in downturn. Especially at 2010 when revenue was shrink by 2/3. One reason is the management is willing to cut bonus heavily at difficult time. The second reason is its revenue is tight with steel price which is actually pass through to customers. However, the volume still fluctuate quite a bit. Still it is a manufacturing company and suppose to have a fixed cost structure. I still do not understand how they can achieve this.

(3)During the past 10 years, the company's average income is $6.5m/year. Equity grown by $30m. Dividend payment around $29m in total. Around half of the earning has been paid out.

(4)Average EBITDA is $11m. Average CapX is $2.0m. Average Tax is $3.3m. Average real earning is about $5.7m. It is $0.3m below the average $6.3m income. Mainly because the average depreciation is  $0.5m below the the CapX number.

(5)Given the book value is over current price. The company being profitable. The high dividend payout ratio. The average earning $5.7m/year. Current $54m market cap seems pretty cheap.

(6)The major risk is that the company's revenue is kind of unpredictable and fluctuate a lot. Also it relies on US steel which is both its biggest supplier and customer.

12.Links
http://www.oldschoolvalue.com/blog/stock-analysis/friedman-industries/

Macro Enterprises Inc.(CVE:MCR)

Web Site
Google Finance
Filing

Dec. 03, 2014
2014 Q2 Data
Check list:
1.Major Business.
Oil pipeline and site construction service company in Canada. Most of its revenue is contract based.


2.Balance sheet.
Recent price is $2.16. Shares 30.20m+2.8m preferred($4.2 convertible at $1.5/share). Market Cap around $65m. Tangible book value $2.6(assuming all preferred shares converted).  Debt close to $20m.

3.Credit facility.
Not important

4.Financial data by years.

5.Insider holding, options, Insider trading info, share buy back.
Frank Miles: CEO and founder.  9.1m shares 30% + $4.0 in preferred share which could be converted at $1.5/share.
Management controls 33% of total shares.
370k options outstanding at Dec. 31 2013. Price around $.30

6.Management compensation.
2013 top 5 around $2.5m.

7.Employee numbers. Revenue/Employee. Compensation/Employee.


8.Industry comparison.

9.Auditor
 EPR Daye Kelly & Associates

10.Major events.

11.Comments.


12.Links

http://quinzedix.blogspot.ca/2014/08/macro-enterprises_30.html?m=0





Update Jan. 09, 2015
The share price dropped a lot to below $2.00 after crude oil price drop. I found it is probably a mistake to get in since because I am not really understand what their business is. Although it looks really cheap, I don't have the confidence to buy more. I decided to let the writing as is and will clear my position in future.

TRIUS INVESTMENTS INC.(CVE:TRU)

Web Site
Yahoo Finance
Filing


Sept. 12, 2014
2014 Q2 Data
Check list:
1.Major Business.
Small garbage collection company locate at Fredericton, New Brunswick. It also 2 major investment in real estate one in salt lake US another in Calgary for toally $2m. Its founded and controlled by Gordon Wheaton and his family. The family has several other small business which can be found at the website.


2.Balance sheet.
Recent price is $0.365. Shares 10.35m+1m options prices at $0.11. Market Cap $4.2m. Tangible book value $0.44.  Debt less than $1m.

3.Credit facility.
Not important

4.Financial data by years.

5.Insider holding, options, Insider trading info, share buy back.
Gordon Wheaton(CEO): 3.35m  32%. + 300k options.
Robert  Harrison (CFO)  100k options.
Andrew S Burgess(Director) 300k options +970k shares?
John M Robertson (Director) 300k options + 320k shares?

Management controls 45.6% of total shares.

6.Management compensation.
around $400k for CEO +CFO for year 2012

7.Employee numbers. Revenue/Employee. Compensation/Employee.


8.Industry comparison.

9.Auditor
 EPR Daye Kelly & Associates

10.Major events.
(1)Before 2006, the rental business is its main business. At 2006, it sold the rental business back to Gordon Wheaton for $2m share of TRU (valued at $400k) which was cancelled at 2008. The name was changed to eCycling. At 2007, changed the name back to Trius investment.

(2) Since 2009, it start to invest in REIT in Utah US.

(2) Aug 2014, it sold several US investment which recorded close to $0 on book for around $1.3m. After tax should be around $1m.  The $0.44 book value includes this in calculation.

(3) Up to Q2 2014, the company invest around $650k loan + $350 equity in Colt Builders which is Canada branch created by a Salt Lake company with the same name. Its business is housing framing. At Q2, 2014, it suspended paying interest for the $650k loan to TRU.

11.Comments.
(1) The problem on Colt Builders in unknown.. Don't know whether it is temporary or permanent. Its other REIT investment seems doing quite well except for the Colt Builders. The Colt Builders has a parent company at salt lake with the same name.

(2) The core business is performing very well since 2009 with high EBITDA margin. However, its major expense should include the depreciation of garbage trucks. Based on the gain on disposal of equipment number, its depreciation expense is just enough to cover the real cost.

(3) Estimate $4m revenue, 30% EBIDTA margin.  $600k/year in depreciation, use 15% of EBIDTA for tax rate. Assume interest income will cover interest expense. It gives $1.2-0.6*0.85=$0.5m in real income. Current price is just 8x of earning. In addition, the REIT investment might generate good returns as well. However, it is a very small cap. So can't expect a high valuation.

(4) Overall the company is well managed. Although it is controlled by Wheaton and the REIT investment raise some concerns, I would not worry it too much. Also the $1m gain in recent sale might not recognized by the market. In Q3 there might be a boost in earning.

12.Links

http://www.oddballstocks.com/2014/06/calling-all-growth-investors-24-roe-at.html

http://www.siliconinvestor.com/readmsg.aspx?msgid=29343386

http://www.stockhouse.com/companies/bullboard/v.tru/trius-investments-inc/1

http://web.tmxmoney.com/news.php?qm_symbol=TRU#qmpage2

Dec. 01, 2014
Q3 release
Current price $0.375

(1)Q3 income is $0.08/share and book value is $0.44/share now as I estimated. Cash $3m.

(2) It released last week but somehow the news is not shown any where except SEDAR website. I feel it is a good news which is not recognized by market.


Mar. 29, 2016
Current price $0.48
(1)The company agreed to sell the waste management business for $5m. Its book value or waste management segment at Q3 2015 is $1.7m. So there will be $3.3m gains. Using 25% tax rate, it would be $2.5m after tax income. Added to book value at Q3 of $6.2m. It would be $8.7m new book value, using 11.35 as shares number. New book value per share is around $0.77.  Among the $8.7m, $2m is long term investment, $750k in short term investment and marketable securities. So it will have $6m in cash. I guess it might issue at least some of the cash as a special dividend($0.30-$0.50 maybe?) and keep some as well to continue the investment in US.

Apr. 20, 2016
Current price $0.50
(1)The company reported that the actually after tax gain is around $3m instead of $2.5m. So new book value should be at around $0.81/share. Net asset value is $9.2m including $7.2m cash and $2m investment.

(2)What the company will do is very interesting, I guess would be one of the following: 1)Pay out a special dividend 30c-50c and keep the rest in investment. 2)No dividend and put the cash to new investment. 3)Take the company private.  I believe given the high insider ownership and past record, no matter what the company choose to do, it is quite cheap at current price(62% of book value).

Oct. 18, 2016
Current price $0.71
The company declared $0.58/share special dividend which is $6.5m. After paying the dividend, the company might have $0.5m cash + $2m investment which is $0.22/share in book value.


Apr. 28, 2017
Current price $0.205
The company released full 2016 data. Surprisingly now it has $3m in book value which is $0.27/share. The main contribution is actually the $188k payment from its directors to pay back the company for the lost from Colt Builders. Also, there are some $300k which I think I missed somehow.  It has around $0.5m cash +$2.5m investment now. Total shares count still 11.27m.

Going forward, if the company can generate $200k income from its $2.5m investment in US, then could get around 1.5c/share annual income. Current price of 0.20 is actually quite a good one.


Sept. 18, 2017,
Current price $0.20.
(1) The company got a new director and issued 650k options to him at $0.20.

(2) Recently USD/CAD is down from 1.3 to 1.22 level. I estimate its NAV at Q3 might be $0.20 to $0.22.  Down from the 0.27 in the previous quarter. In a long run, it is still worth holding if the investment works out.

Mar. 17, 2018
Current price $0.13. Share 11.3m, Cap. $1.47m
(1) The current NAV/share is only $0.175. Mainly caused by big wrote down of investment portfolio at Q3.

(2) At Mar. 2018, the company released news that one of its holdings which is "MV Property, LLC" was sold and its share will be around $650k less any expenses. The property was recorded as $330k on Q3 2017 book and $450k on Q4 2016.

(3) Current investments

Property	Size	%	Q4 2016	Q3 2017	Dis 3Q17
MV Property, LLC	13,000	24.4%	$454k	$333k	$37k
RL Property One, LLC	16,000	20%	$199k	$166k	$19k
GS Chicago, LLC		27.8%	$671k	$459k
RW Austin Property, LLC	17,500	10%	$470k	$233k	$27k
Brunswick Members, LLC	43,000	11.8%	$671k	$333k	$39k

(4) Assuming $550k will be received for MV at the end. Assuming fair vlaue of 10 times of annual distribution. Then there will be $250k for RL, $360k for RW, $520k for BM. There will be $220k+$60k+$90k+$190k=$600k increase in NAV, which makes a $23c/share NAV.


May 8, 2018
Current price $0.16. Share 11.3m, Cap. $1.8m
(1) The current NAV/share is $0.17.

(2) If using 5% expense for MV sale. It can receive 585k in net proceed.

(3) The company released today that it will sell its GS Chicago interest for net proceed US$475k. Which is around CAD$590k.

(4) Current investments

Property	Size	%	Q4 2016	Q4 2017	Dis 17
MV Property, LLC	13,000	24.4%	$454k	$335k	$50k
RL Property One, LLC	16,000	20%	$199k	$167k	$25k
GS Chicago, LLC		27.8%	$671k	$461k
RW Austin Property, LLC	17,500	10%	$470k	$235k	$36k
Brunswick Members, LLC	43,000	11.8%	$671k	$336k	$52k

(5) Using the same formula of 10 times distribution for fair value, the fair value of above 5 will be $585k, $250k, $590k, $360k, $520k. The addition of NAV will be 250k+80k+130k+120k+180k=760k. That is 7c increase in NAV.

May 30, 2018
(1) Today the company released that it will sell the last 3 investment for around $900k. Also the MV property will not be received in cash but will be reinvested in other RE.

(2) Based on Q1 2018 numbers, it has around $400k in cash and other assets. Added together, it will be $400k+$590k+$900k=$1.89k in cash and around $585k in investment. Which is $17c in cash + $5c in investment.

Village Farms International Inc(TSE:VFF)

Web Site
Investor Relation
Google Finance
Filing
Filing

Sept. 12, 2014
2014 Q2 Data
Check list:
1.Major Business.
Producer of greenhouse tomato, pepper, cucumbers. It has 110 acres of greenhouse in BC Canada + 130 acres of greenhouse in US. Main product is tomato-on-the-vine(TOV). Its revenue is quite seasonal. Around 2:4:4:3 for four quarters.

2.Balance sheet.
Recent price is $1.15. Shares 39m. Market Cap $45m. Tangible book value $1.5.  Debt $57m.

3.Credit facility.
Bank line of credit: $10m. currently $4m outstanding.

Term loan mature at Apr. 01, 2018:  Current interest is below 4%. $53m outstanding. Annual repayment is around $4.2m.


4.Financial data by years.

5.Insider holding, options, Insider trading info, share buy back.
Michael A. DeGiglio : Founder CEO, 10m, 26%
ALBERT VANZEYST: Co-Founder,  9.4m, 24%,

6.Management compensation.
Top 5 around $1.5m/year

7.Employee numbers. Revenue/Employee. Compensation/Employee.


8.Industry comparison.

Mucci Farms: Ontario private company, 400 acres of green house. July 2014, the CEO was charged with mislabeling Mexico tomato as Canadian tomato.

9.Auditor
PricewaterhouseCoopers LLP

10.Major events.
(1) At March 2001, the company actually filed for bankruptcy due to $110m debt load.

(2) Oct. 2006, it merged with Hot House Growers Income Fund which is an income fund traded on TSX.

(3) at 2009, it converted to an corporation and stopped paying dividend.

(4) Dec. 2010, Albert Vanzeyst left the company with unstated reason. Apr 2014. he filed that he intent to sell 4.3m of shares.

(5) 2011-2012, it build another 30 acres of green house in Monahans, Texas. Cost is around $44m($37m 2011+$7m in 2012). There are 90 acres in the same location is able to build in future.

(6) May 31, 2012, its 82 acres greenhouse in Marfa Texas was damaged by hail storm. It received $47m($31m in 2012 and $16m in 2013) from insurance company. It repaired 40 acres in 2012 with probably just $3-$5m. Repaired another 20 acres from 2013 to Q2 2014 for a cost of $8m. The rest 20 acres is severely damaged and the cost to repair estimate around $12m. The rest 2 acres is for research and won't be restored.

11.Comments.
(1) From 2006 to 2013, its equity increased by $40m in 7 years after 9.4m dividend payment. However this includes the insurance payment $47m in 2012 and 2013.  Assuming $10m is extra gain from the insurance. That would translated to $40m net increase in equity in 7 years. Around $6m/year.

(2) From 2011 to 2012 $44m spent on new green house. From 2012 to 2014, over $10m spent in repair work.  It states its maintenance CapX is around $2m/year. However, the really number seems always higher. Probably around $3m/year.

(3) Tax expense is way higher than tax paid. The reason is mainly the deferred tax from insurance payment. Estimate normal tax rate 15% of EBITDA.

(4) Cash increased about $30m after $9.4m dividend. This excludes $44m spending on new greenhouse at 2011-2012. Over $10m in repair work. Totally is over $90m. That's from $42m in income, $47m in insurance proceeds.  $8m in deferred tax increase, $20 in difference in depreciation and maintenance CapX.

(5) At 2013, the US government renewed the expansion agreement with Mexico which protect US tomato grower from Mexican dumping. In 2013, the US TOV price did increased which benefited the company. However, starting Q2 2014 TOV price dropped 15%, mainly caused by 22% increase export from Canada to U.S. while mainly are mislabeled Mexican tomatoes based on VFF's CEO. I guess Mucci farm played quite a role in this, if this is true, the recent charge might stop the mislabeling.  The company also tries to lower TOV as a percentage of sales. It has decreased from 99% to 50% in latest quarter.

(7) Excludes 2012, its normal EBIDTA should be around $13m to $15m. 2014 could be lower than $10m if current price of TOV continue to be low. It also state that it might trigger its debt covenant which is quite a risk to the company now.

(8) Use $12m as normal EBITDA, $3m in maintenance CapX. $3m in interest. 15% tax. It might be able to generate ($12-$3-$3)*0.85=$5.1m/year in real income. Current price is quite cheap.

(9) Overall, the business is quite unstable mainly caused by the versatile of TOV price. Price in 2009, 2012, 2014 affect the company quite a lot. Should not heavily invested unless its supper cheap.

Hammond Power Solutions Inc.(TSE:HPS.A)

Web Site
Investor Relation
Google Finance
Filing

Sept. 2, 2014
2014 Q2 Data
Check list:
1.Major Business.
Canadian company located at Guelph, Ontario. Manufactures dry type low voltage transformers and etc. The company is close 100 years old and was founded by the Oliver Hammond. At the beginning, it just produce radios. At 1920's, it starts to build transformers and metal case. The company is passed to second generation mainly know for Fred Hammond. IPO at 1986.  At 2001, it split into 2 public companies. One is Hammond Power Solutions which produce transformers. Other one is the old Hammond Manufacturing which produce enclosures. Both companies have similar A, B share structure and both are tightly controlled by the Hammond third generation.

2.Balance sheet.
Recent price is $7.50. Shares 8,920K A shares + 2,778K  B shares. Market Cap $89m. Tangible book value $6.64.  Debt $32m. Current dividend $0.24/year.

3.Credit facility.
Bank line of credit:
(1)USD$25m  $18.7m outstanding at Dec. 2013. Interest rate is low
(2)USD$5m overdraft  $4.2m outstanding at Dec. 2013. Interest rate is low.
(3) Euro$4m overdraft $3.4m outstanding at Dec. 2013. Interest rate is low.
Term Loan: $4.8m at June 2014.

4.Financial data by years.

5.Insider holding, options, Insider trading info, share buy back.
WILLIAM (BILL) G. HAMMOND: CEO, 1m A shares and 2.8m B shares. 32% of total shares.

6.Management compensation.
CEO+CFO around $1m/year.

7.Employee numbers. Revenue/Employee. Compensation/Employee.
1470 at end of Dec. 2013. Around 1000 are hourly workers and all Canadian workers are unionized.

8.Industry comparison.
ABB, Siemens, etc.

Bemag: Canada Company, seems small(employees less than 100)

Marcus transformer: Canada Company.

9.Auditor
KPMG LLP.

10.Major events.
(1) February 7, 2008, acquired its competitor Delta Group and Delta Transformer with $12.6m in cash and $2m in stock. It contributed $38m in revenue for 2008.
(2) In 2008, it sold 45% interest in Moloney Electric Inc for $7.7m with a gain of $1.0m.
(3) 2008-2009: extra $10m CapX on set up a new factory in Mexico and a new warehouse in Canada.
(4) March 21, 2011, acquired Euroelettro S.p.A. in Italy for $7.8m with annual revenue $15m. However, in 2012, it only added $9m in revenue.
(5) Feb. 23, 2012, acquired 70% interest of Pan-Electro Technic Enterprises's transformer business in India for $15.8m with annual revenue of $16m. In 2013, it contributed $9.5m in revenue.
(6) Feb. 12, 2013, acquired resin transformer business from Marnate Trasformatori s.r.l. in Italy from $9.7m. with annual revenue about $8.0m In 2013 it contributed $6.5m in revenue.

11.Comments.
(1) Including the $8.8m dividend. It roughly increased equity value by $100m for the past 10 years. Average $10m/year.  However, average EBITDA-Interest-Depreciation-Tax is only 16.7-0.7-(2.8+0.4)-4.6=$8.2m. Seems other income is missed.

(2) Its average depreciation rate is around $3.2m/year is lower than average CapX rate of $4.1m. Mainly because  2008/2009 extra CapX. 2011-2013 have more spending in intangibles for a new ERP system.

(3) The 2008 acquisition of Delta seems a very successful one from any point of view. The 2011-2013 Italy and India acquisition is still yet to see. If removed the $25m+ revenue from those acquisition, the company is close to recover to its 2008 sales. But the EBITDA is still far away.

(4) The company's annual reports are very well written and the CEO is quite likable. Unfortunately, all the conference call recording is only accessible from phone and all expired.

(5) From 2009 to 2013, if remove the new acquisitions, the company's performance are pretty flat except an temp re-bounce in 2012. However, I do think it has quite high potential to regain growth. Although might not be able to regain higher margins like before.

(6) Going forward,  estimate $18m in EBITDA, $5m in maintenance CapX(including intangibles), $1m in interest expense. 27.5% tax/EBITDA rate. It comes close to $8.7m in real earning which is close to 10 year average. Currently price is pretty acceptable.

Hammond Manufacturing Company Limited(TSE:HMM.A)

Web Site
Investor Relation
Google Finance
Filing

Aug 21, 2014
2014 Q2 Data
Check list:
1.Major Business.
Canadian company located at Guelph, Ontario. Manufactures metallic and non-metallic enclosures, rack, surge suppressors and transformers. The company is close 100 years old and was founded by the Oliver Hammond. At the beginning, it just produce radios. At 2001, it split into 2 public companies. One is Hammond Power Solutions which produce transformers. Other one is Hammond Manufacturing which is this company. Both companies have similar A, B share structure and both are tightly controlled by the Hammond family.

2.Balance sheet.
Current price is $1.60. Shares 8,556K A shares + 2,778K  B shares. Market Cap $18.1m. Tangible book value $3.1.  Debt $10.4m.

3.Credit facility.
Bank indebtedness: Prime+0.5% interest. 9.4m outstanding
Term Loan: $1.4m outstanding.

4.Financial data by years.
5.Insider holding, options, Insider trading info, share buy back.
ROBERT HAMMOND: CEO, 1.4m A shares and 2.8m B shares. 36% of total shares.

6.Management compensation.
less than $1m for top 3. Quite low.

7.Employee numbers. Revenue/Employee. Compensation/Employee.
574 at end of 2013. 425(76%) of them are hourly workers. Those are unionized

8.Industry comparison.



9.Auditor
KPMG LLP

10.Major events.
(1) In 2008, it sold 45% interest in Moloney Electric Inc for $7.7m with a gain of $2.2m.
(2) In 2011, it purchased 6.5 acres of land for $1.3m.


11.Comments.
(1) For past ten years. The average real earning is $4.9(EBITDA)-$2.3(CapX)-$0.7(Interest)-$0.6(Tax) = $1.3m which is very close to the average reported income $1.4m. It translated to around $14m increase in book value. Which is translated into inventory increased by $12m while debt decreased by $2m.

(2) The average tax expense is very close to real tax paid. The average CapX is very close to depreciation.

(3) The company's inventory keep increasing, especially in recent years. That's probably one of the reason the stock is cheap. However, its sales has also increased by 50% in the past ten years. Inventory as a percentage of sales, doesn't changed that much. although 29% of sales is a little high. I wish it could down to 25%.

(4) Currently it pays 3c dividend/year. Quite low, this is another reason probably the stock is cheap. If it continue to pay down debt, I believe eventually it will pay more dividend given the high insider ownership.

(5) The company currently has a environment litigation pending. It might to pay $2m if they lost the case.

(6) Estimate future earning,  using $5.5m EBITDA. $2.5 CapX. $0.4m interest, $0.6m tax. It would generate $2m real income/year.

(7) Overall the company is well managed and the price is very cheap.

12.Other writings

http://www.oddballstocks.com/2014/07/hammond-manufacturing-revisited-still.html

http://www.oddballstocks.com/2013/09/hammond-manfacturing-boring-cheap-and.html

Otelco Inc(NASDAQ:OTEL)

Web Site
Investor Relation
Google Finance
SEC Filing

Aug 18, 2014
2014 Q2 Data
Check list:
1.Major Business.
RLEC(rural local exchange carrier) telecom service provider. Mainly provide phone lines access to rural areas.

2.Balance sheet.
Current price is $4.87. Shares 2.87m. + 233k B shares. Market Cap $15m. Tangible book value 0. Net Cash $6m. Debt $117m.

3.Credit facility.
$117m term loan:  mature at Apr. 2016.  .
Interest rate: Index rate(4.25% minimum) + 3.25% or LIBOR rate(3%minimum) + 3.5%.  Current interest rate is 6.5%.
Repayment:  5% repayment of principal and 75% of excess cash must be used to pay down the loan.
Covenant:  Total Debt/Adjusted EBITDA less than 4 .25
$5m revolving loan. mature and interest the same. no balance.

4.Financial data by years.

5.Insider holding, options, Insider trading info, share buyback.
Ira Sochet: 250k, 8.8%, an activist investor.  
Management seems to hold very few shares.

6.Management compensation.
Quite high compared to the sales it has.

7.Employee numbers. Revenue/Employee. Compensation/Employee.


8.Industry comparison.
LICT


9.Auditor


10.Major events.
(1) The company filed for bankruptcy at 2013, mainly to cut the debt. Previously, it was traded under IDS(Income Deposit Securities) structure which contains one common share + $7.5 of notes at 13% interest rate with $109m in balance. After bankruptcy, the IDS is canceled, it also paid down other debt. so total debt reduced from $270m to $135m.

(2) In 2012, it loa an major contract with Time Warner. which is the major cause of $14m drop in revenue and EBITDA in 2013. Also its network access revenue is affected by new regulation as well.

11.Comments.
(1) The 2013 bankruptcy was not really a bankruptcy except just to wipe out old IDS holder. All the rest was unchanged.

(2) The stock is trading around 1/2 of one year EBITDA. Even after interest, tax and CapX, it still has around $8-$10m/year income. The price is really cheap.

(3) The company is still losing RLEC lines in the past several years, although the speed is lower now. Also its network access revenue seems decreasing as well. It is hard to estimate how the EBITDA will be in the near future. Generally it should be decreasing, but in 2m to 4m .

(4) Currently the company's TTM Adjusted EBITDA is about $29.5m. With 4.25 times ratio, it support maximum debt balance of $125m. With current debt balance of  $117m, it requires a minimum TTM Adjusted EBITDA of $27.5m. The company is pay down debt as much as possible now. However, EBITDA is getting lower as well. It is kind a race that whether debt or EBITDA will be reduced faster. This post quite a big risk for another bankruptcy. This is the main reason the stock is so cheap now.

(5) First half of 2014 EBIDTA is $15m. Assuming second half of 2014 EBIDTA is $14m.  Assuming 7.5% interest rate,  $6m/year in CapX, $4m/year in tax.  This would make it be able to pay down another 4m to 5m this year. That would make a debt balance of $112 to $113 by end of 2014.  Assume 2015's EBIDTA is $26m, $8m in interest. CapX and tax the same. It would be able to pay down another $8m at 2015. That would make a debt balance around $105m at end of 2015. EBIDTA requirement for this two years would be around $26.5m and $25m. This is pretty much its bottom line to avoid triggering the debt default.


Update
Mar. 02 2015
(1)Q4 2014 date released. Adjusted EBITDA for 2014 is $28.7m. Interest expense $8.85m. CapX: $6.5m.  Tax $3.2m. Debt balance at Dec. 2014 is $112m.


Update
Jan. 25, 2016
(1) Current Price $6.4. Total debt at end of 2015 is around $100m. The company renewed its debt which is due at Apr. 2016. With around $85m term loan( 9% interest rate) + $15m term loan(14%).  The total debt/EBIDTA covenant is set to 4.4:1 at 2016 and will be gradually reduced to 3.25:1 at 2020.

(2) The debt renewal seems not that good to me. Annual interest will be around over $10m/year for now which is maybe $3m more than old terms. The bottom EBITDA for 2016 is still around $25m. The covenant is still very tight.



July 11, 2016
Q1 2016 Data
Recent Price $4.10. 
(1)Revenue $17.5m. EBIDTA $7.6m. Interest expense $2.5m which includes $250k of debt refinance cost amortization. Debt origination cost $5m will be amortized for $1m/year. Debt gross balance $100m(recorded as $95m in the balance sheet which excluded the $5m refinance cost). Minimum debt repayment seems $1m/quarter. Cash $7m.

(2) Since the $100m debt was refinanced at Feb. 17. Based on Q1 data, annual interest cost should be around $10m excluding the debt refinance cost amortization.

(3) There is minimum TTM EBITDA requirement in new debt which is $22.75m at Dec. 2016, $21m at Mar. 2020 and after.

(4) Since I first studied the company at Q2 2014, after 2 years, the net debt reduced from $112m to $93m, plus the $5m prepaid refinance cost, totally $24m cash had been used for debt reduction. It is actually better than I expected.

(5) Previous using of Market Cap/ EBITDA in 2014 was wrong.  Should use EV/EBITDA which was ($111+$15)/$29.5=4.3.  Current EV/EBITDA is around ($14+$93)/$28m = 3.8 which is cheaper.

(6) Assume it can hold the EBIDTA at above $25m until 2020. Using $27m as average number, it can pay down $7m debt/year, then interest expense will decrease by at least $0.7m each year, which will save another 0.7+1.4+2.1+2.8=$7m, then at 2020 its gross debt will be $58m($100-$42), then its EBITDA covenant at 2020 should be $58/3.25 = $18m. Assume 2020 EBITDA is $25m, using 4x EV/EBITDA valuation, then the stock will worth $25m*4-($58-$7)=$49m. Roughly 3x today's market cap.

(7) Assume it can pay down $5m debt/year. Interest expense decrease $0.5m/year. Then at 2020, its gross debt should be $70m($100-$30). Then EBIDTA covenant at 2020 should be $70/3.25 = $17.8m. Assume 2020 EBITDA is $23m, using 4x EV/EBITDA valuation, then the stock will worth $23m*4-($70-$7)=$29m. Roughly 2x today's market cap.

(8) If it can only pay down $4m debt/year and interest expense decrease by $0.4m/year. Then at 2020 gross debt should $76m. covenant minimum EBITDA should be $76/3.25=$23.4m. If at 2020 EBITDA is only $21m, then it might fail the covenant requirement. On valuation, it might worth $21m*4-($76-7) = $15m.

(9) I think currently its share price still integrates the risk for bankruptcy. However, after two years, its EBITDA is more stable than expected. It is more likely to be able to maintain an stable EBITDA in the future.

(10) There is another risk buried inside is that there is the same management who totally wiped out the previous notes from the share holder.   Now if there is another chance, they probably will do the same thing.

(11)Overall, although the new loan is worse, if the company can maintain relatively stable EBIDTA above $25m in next 2 to 3 years, then it is actually a good investment at the current price.

Nov. 05, 2016
Q3 2016, Current Price $4.9
(1) After two quarters since last update, its net debt decreased by $1.5m to $98.5m, Cash increased by $2m to $9m. Q3 EBIDTA $6.7m,  First 3Q EBIDTA totals $21m.
(2) It seems to be able to achieve $28m EBIDTA and pay down $7m in debt this year.

Mar. 08, 2017 Q4 2016
Current Price $6.35.
(1) Full year 2016 EBITDA is $28.1m, Interest expense $9.2m. Debt $97m(including $4m refinancing cost). Cash $10.5m which is close to $3.7m higher than 2015.  It will pay down $3.1m debt at Q1 2016 to bring debt down to $94m.  CapX close $7m.

(2) After pay down the $3.1m debt. The cash will be roughly the same as 2015. In 2016 totally is has been able to use ($100-$94)+$4=$10m in debt payment. Interest Expense+CapX+Tax=$20m, but there is $2m deferred tax, so $28m EBITDA -$18m will generate $10m cash for debt repayment.

(3)The deferred tax are $28m which was just $22m at 2013 that I am kind of ignored. Those money could be used to pay down debt if it continue to grow.

(4) The company accepted FCC's A-CAM offer which will increase its funding from government for  $1.5m/year for 2017.

(5) Later 2016 the company is looking for strategic options which I think the many cause for the stock price raise.  It is possible looking for an acquisition or debt refinancing.

(6) I was skeptical when the company refinanced the debt at high rate. However, currently the company is in a much better situation. 1) It is possible to target an acquisition. 2) It is possible to refinance debt at lower rate(6%-7% I think) by paying 2.5% penalty after Feb. 2017. 3) It is very likely to continue pay down at least $7m/year debt until 2020 given the $1.5m more funding from the government. 4)The A-CAM is a win-win for the company since it helps the company to increase the internet speed for its user, also it indicates it don't need to increase CapX in 2017.

(7) Overall once the debt issue is solved the company is well worth $50m at 2020 which I estimated previously.


Aug. 01, 2017
Q2 2017 Date Current Price: $7.00

(1) For the first half of 2017,  EBITDA is almost the same as last year at $14m.  Total debt 92.6m(includes 3.4m debt issuance cost). Cash $11.3m.  Net debt down over $4m. It indicated another $3m pay down after Q2 end. By year end total debt should be around $87.5m.

(2) CapX $3.8m. Net interest for 6m around $4.5m which already $1m lower that $10m/year estimate.

(3) Overall interest + tax + CapX  might still around $20m. If it can maintain $28m EBITDA, it can still pay down $8m in debt.

(4) I hope it can refinance the debt but there seems something blocking it. Overall it performed quite as expected or little better.

Nov. 07, 2017
Q3 2017 Data, Price: $10.5. Shares 3.45m, Cap: $35m.
(1) The company refinanced its $87m debt with reduced interest from 10% to around 6%. Interest saving for 2018 is around $3.5m. Also, the new facility gives it much more freedom to pay down earlier, paying dividends, buyback shares etc.

(2) Currently debt $88m, Cash $8m. Net debt around $80m. EBITDA is around $7m, for the first 3Q is around $21m. It is quite stable at $28m/year. CapX is around $6m for the first 3Q. $2m higher compare to last year because the A-CAM requirement I think.

(3) Overall the refinance is a very positive event for the company. It makes the company much safer than before. The interest saving will generate over $2m/year after tax income which can be used for more debt repayment or dividend payment.

(4) Since there is $2m debt prepayment penalty, plus new facility cost. I assume by end of 2017 its net debt still will be $80m. Assuming EBITDA stays for $28m for next 3 years. Interest expense will be $5.5m, $5m, $4.5m. Assuming $6m CapX, $4m Tax. It actually can pay down as much as $11-$13m in debt each year. If it does that, the net debt by 2020 would be around $40m-$45m.

(5)From income view, at 2018 it can generate ($28-$6-$5.5)*0.65=$10.75m in net income, which is  $3/share. Using 10 time P/E, it gives a $30/share fair price.

(6) I think the market will gradually realize the value of the company. Of course, it still has the risk of not been able to keep the $28m/year EBITDA. But even the number drop to $20m by 2020, I think it can still comply with the debt/EBITDA 3.25:1 covenant by then.

Apr. 12, 2018
Q4 2017 Data, Price: $16.75. Shares 3.45m. Cap: $57m.
(1) Debt $86m. Net debt $82.5m. CapX $8.5m. EBITDA $27.4m. Tax paid: $1.8m.  Assuming $27m, $26.5m, $26m EBITDA for the next 3 years, $5.5m, $5m, $4.5m for interest, $7m CapX. $3m tax. Its real income could be $10m to $12m each year. By 2020, the total debt could be around $50m.

(2) The company did a little bit worse than I expected actually. Mainly because of the higher CapX and also the close to $4m in refinancing cost. Still, it should be able to pay down at least $10m debt each year for the next 3 years. However, interest expense will be down much slower. Also, it might start to pay a dividend again sometime.

Mar. 04, 2019
Q4 2018 Data, Price: $16.95, Shares 3.45m Cap: $57m.
(1) Debt $74.6m Net debt $70m. CapX $8m. EBITDA $25.7m  Interest paid $5.4m. Tax paid ($0.5m). For 2018, it paid down $11.3m in debt which is pretty good.

(2) 2019 CapX will be $9m. Assuming $25m EBITDA, $5m interest, $2m tax, the actual cash it generates may be only $9m.

(3) Full-year 2018 EBIDTA is $1.7m less than 2017 which is quite less than I expected. Currently, the company is implementing fiber internet which might bring new revenue. It is hard to estimate how it gonna do in the future. However, the debt should be less an issue after 2020. It is just whether the company can stop the current EBITDA downturn trend.

Actions Semiconductor Co., Ltd. (ADR)(NASDAQ:ACTS)

Web Site
Investor Relation
Google Finance
SEC Filing

Aug 13, 2014
2014 Q1 Data
Check list:
1.Major Business.
China SoC (system on a chip) developer, previously famous for mp3 chip-set. Now is building android tablet SoC.

2.Balance sheet.
Current price is $2.10. Shares 68.5m. Market Cap $145m. Tangible book value $3.80. Net Cash $212m. Debt $40m. Inventory $25m

3.Credit facility.
Not important

4.Financial data by years.


5.Insider holding, options, Insider trading info, share buy back.
(1) Insiders seems have very few shares.
(2)Since 2007 the company has repurchased 22.5m ADS. However, they are not retired yet.

6.Management compensation.


7.Employee numbers. Revenue/Employee. Compensation/Employee.
Around 600 to 700 employees. Mainly engineers.

8.Industry comparison.
MTK is its main competitor.
2014年第一季度，中国大陆平板应用处理器供应商出货量，瑞芯微、联发科（MTK）、全志占比分别为28.9%、25.3%和23.5%。


9.Auditor
Deloitte Touche Tohmatsu

10.Major events.
(1) Since 2011, the company start to draw on USD$ loan and deposit with restricted RMB at the same time. The idea is to take the advantage of the low USD$ interest rate while earn higher interest on RMB deposit. Currently there is $40m loan outstanding.

(2) The current CEO Zhou, Zhenyu, is selected since 2011.

(3) There is a fund called Accretive Capital got quite pissed off with the management and demand $100m tender offer. Link

11.Comments.
(1) Since 2008 the company's net cash has decreased by over $50m. However, that includes the share buy back spending, inventory build up. The real lose is probably just below $20m.

(2) The company was doing very well from 2004 to 2008 mainly because its mp3 audio chip. It has a market share of > 50% at top time. Since then the mp3 market is shrinking and company failed to convert to new market. Since 2011, it invested in android tablet chipset. Although it has build quite some volume. Currently it is hard to tell whether they will be success in this market.

(3) The main attractiveness is its balance sheet. However, it is hard to tell whether it will conduct a tender offer in the near future.  Its major business is losing quite a lot money every year.  But its investment income help to offset major part of that. Overall, the cash burning rate is quite low now.

(4) Its inventory is building up quite a lot to $25m now which is about half year revenue. This is quite a concern. Also its R&D spending is very high compare to revenue.

(5) Overall the stock price is quite cheap now. It is very uncertain that the tablet SoC business will turn out to be good. Also the management doesn't seem to be share holder friendly.

Gencor Industries, Inc. (NASDAQ:GENC)

Web Site
Investor Relation
Google Finance
SEC Filing

Year End: Sept. 30
Aug 1, 2014
2014 Q3 Data
Check list:
1.Major Business.
Manufacturer of heavy machinery used in highway construction. Products include asphalt plants, combustion systems and fluid heat transfer systems.

2.Balance sheet.
Recent Price: $10.78, Tangible book value:$11.90, Share outstanding: 9.5m, Market Cap: $103m.
Current asset:$111m, Current liability: $5.3m, Debt: $0m,  Cash: $91m.


3.Credit facility.
Not important

4.Financial data by years.


5.Insider holding, options, Insider trading info, share buy back.
E.J Elliott: Founder and CEO, 1.1m common shares + 1.3m class B shares. 26%. He controls major voting shares.

6.Management compensation.
Top 4 average around 1.5m for the past 3 years.

7.Employee numbers. Revenue/Employee. Compensation/Employee.


8.Industry comparison.


9.Auditor
Moore Stephens Lovelace, P.A

10.Major events.
(1) 2001 the company forced to file for bankruptcy and later the debt was actually paid in full.

11.Comments.
(1) From 2005-2008 the company received $94m from investment in green fuel production. Mainly from government credit. After tax it would be around $50m.

(2) For past 10 years the company's cash has increased by around $100m. However, it includes the $50m from fuel investment. Another $20m from equity investment.

(3) From 2004 to 2013, the US government from all level spend around $70B to $110B on highway funding. The fund is increased annually compare to GENC's sharp drop on revenue since 2009. I think the reason is either its customers became cautious on capital spending or it became not competitive and lost business.

(4) For the past several years, the US highway trust fund is short of funding. Currently there is legislation work pending. Once legislation finish and new funding rules set. It would be a good for its business.

(5)  In 2013 the company does get better on cost saving despite its revenue is down. Its SG&A cut quite a lot compare to other years.

(6) The most attractive part of the company is its cash balance over $90m. However, its revenue was dropped to $60m since 2009 and setting there since.

(6) I estimate $3m EBITDA going forward. $3m in investment income. $1m CapX.  use 30% tax rate. It comes around (3+3-1)*0.7=$3.5m annual real income. If using 15 times P/E. Plus the cash it has. It should be a worth around $140m. Currently price is still no cheap enough.


Updated. Feb. 2015

Bought around  $10 and sold around $9.50. I realize this is a wrong calculation. When deal with a company with high cash balance, I need to split the cash, investment income with the core business. In this case. it generates around $3m in before tax investment income which is about 3% of the cash. No too bad. But if this is is a mutual fund, then it is not a buy. if use a 10% discount rate for 2 years, the percent value of the cash balance is less than $80m.  About the business, it generates only $2m before tax income which converted to a fair value around $20m. Together the fair value should just about $100m. Now it is trading at $90m. There is not enough margin there.

I think now people are buying it because it is quite a safe investment and also there will be good upward possibility if the government pass any long term high-way funding bill. But historically, its EBIDTA is not that great even in good years. In 2004-2008, the real income is probably just $3.5m/year ( $5m EBITDA, 30% tax). Which is about $52m in fair value. Adding $80 in cash, it would have a fair value around $130. At $90m there is still not enough margin, this is already a good case.

Global Sources Ltd. (Bermuda)(NASDAQ:GSOL)

Web Site
Investor Relation
Google Finance
SEC Filing

Year End: Dec. 31

July 17, 2014
2014 Q1 Data
Check list:
1.Major Business.
China B2B services provider. It has two main business, both count around 50% of revenue. One is online hosting and printing magazine. Basically let vendors to advertise product online and on magazine. Another is trade shows which is held multiple times a year at different places. Many of its customers seems likely to join both.

2.Balance sheet.
Recent Price: $7.60, Tangible book value:$3.90, Share outstanding: 29.8m, Market Cap: $230m.
Current asset:$184m, Current liability: $146m, Debt: $0m,  Cash: $93m(after $50m tender offer).
Properties:
Since 2004, it has purchased quite a lot business units in Shenzhen, Shanghai, Hongkong, Singapore. with over $160m spending. At Mar.31,2014, it has totally $310k Sqft with a book value of $145m. Average price is $468/sqft. On Dec.2013, it says on its report that market value on its is $95m higher than book value. Which implies a $798/sqft market price.


3.Credit facility.
Not important

4.Financial data by years.


5.Insider holding, options, Insider trading info, share buy back.
Allan Hinrich: CEO and founder. Around 47%.

6.Management compensation.


7.Employee numbers. Revenue/Employee. Compensation/Employee.


8.Industry comparison.
Two many competitors: Alibaba and Made-in-China.com. Mainly on online business, this has caused their online and printing business shrink quite a lot recently. On trade-show part, there are many promoters. Alibaba and Made-in-China seems not hosting any.

9.Auditor
PricewaterhouseCoopers LLP

10.Major events.
(1)Feb 2008: Bought back 6.9m share by $50m. June 2010, bought back 11.1m shares by $100m. May 2014, bought back 5m share by $50m.

11.Comments.
(1)Its online and printing business are down significantly. Printing business is down from 2007's $50m to maybe less than $10m at 2014. Online business down from 2012/2011's $120m to maybe less than $80m at 2014. However, exhibitions business grow from $50m at 2007 to now close to $90m which offset the printing revenue decline. Overall it still face down pressure from online business. Total revenue could shrink to $150m or less in coming 2 to 5 years. This probably is the major reason for its price been low.

(2)Since 2004, it has spent $200m in 3 share tender offer, $140m net in property purchase. While cash remained almost same( $60m at end of 2003, in 2005, it received 38m by issue shares. at July 2014, it should have $93m after tender offer.). Which means in past 10 years it has generated over $34m/year in FCF.

(3)Shareholder's Equity increased from $28m at end of 2003 to $151m at Q1 2014. Including the $200m tender offer and exclude the $38m in share issuing.  It indicates roughly a little less than $30m/year increase in equity.

(4)Its depreciation includes intangible assets impairment and building depreciation. The real maintenance cost should be much less than the number. I estimate 1/3 for real cost, 1/3 for intangible assets impairment, 1/3 for building depreciation.

(5)Its EBITDA margin is quite consistent around 20% except 2008,2009. Originally I was bit worry about that its exhibition business has lower margin than the online business. But the margin seems stable from 2010 to 2013.

(6) Its tax cost is below 10%. 2013 tax is higher mainly because of properties sale tax incurred for sales of two properties. 

(7) Estimate 10% tax rate. $150m revenue, 20% EBITDA margin, $1m interest income. $3m maintenance CAPx. $3m impairment of intangibles $2m in none cash compensation . It comes (150*20%+1-3-3-2)*0.9=$18.9m annual income.

(8) If adding $95m difference in properties carrying value and market value to book. Its tangible book value would be 7. Of course China property price might be in bubble now. So those value might not be real. But at least I believe its properties should worth the carrying price $468/sqft. Also, if the company starting to dispose more properties, it might be able to do another tender offer in future. However, it may continue invest more cash in properties which is more risky now.

(9) Overall, current price is pretty cheap already. However, the main risk lays on the online revenue shrink and also the property investment strategy. I wish the price could be even cheaper.


Oct. 27, 2016, Q2 2016 Data
Current price $8.10. 
After another buy back of 6.6m shares at 2015, now it has less than 24m shares.  Hinrich now controls around 2/3 of total shares. Tangible book value around $5.75/share. Cash $3.6/share. If adding $100m in fair value of real estate, book value around $10/share now.

2015 EBITDA is around $31m.   First half 2016 EBITDA is around $13m.  2015 sales of subsidiary and property disposal created more than $10m after tax income.

With the large cash on balance, I suspect the company might do another tender offer. However, since Hinrich has so many shares now, he might consider dividend this time.