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.
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.
(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.
