Bluedrop Performance Learning Inc(CVE:BPLI)

Web Site
Google Finance
Filing


Apr. 18, 2017
Q1 2017(Year end Sept. 30)
Current Price: $0.19

1.Basic Information
(1) History
This is a Newfoundland origin company founded by Emad Rizkalla at 1992 who came to Canada from Egypt at early age. Originally it did a lots of stuff and at 2004 it spun out 2 IT business and solely focused on e-learning. At 2012, it IPO'd through reverse merger. It since grow revenue from $10m at 2012 to $25m at 2016.

(2) Business related:
The company has two divisions:
1) Bluedrop Training and Simulation: Military aircraft training and simulation. It creates the courses and simulator and do maintenance work. This is its major business accounts around 70% of revenue. It is done by contract with government and aircraft company. It might be quite hard to get in and get contracts.

2) Bluedrop Learning Network: e-Learning for workforce. Its actually focused on LMS(learning management system) for government, unions, agent etc. It is more business oriented and less academic.

(3) Management.
Emad Rizkalla is the key person in the company. He seems quite capable of the role and growing the company quite well.

(4) Debt and Credit facility.
1) $3m convertible debt at 14%. It will be mature at end of 2017 and is convertible at $0.15. I believe those will be converted.
2) $3m term loan at 4%. Will mature at 2019.   This is intent to be used to pay down the convertible but I think it won't need it anymore. Currently it is in restricted cash.
3) $400k Newfoundland provincial loan at 4.75%.
4) $1m Nova Scotia provincial loan at 5%.
5) $500k interest free loans.
6) $1.8m royalty obligation, $40k/month till May 2017, then 1% of monthly revenue till paid down. Currently the company has $2m average monthly revenue, so it might be $20k/month.
7) $1.8m ACOA-AIF unsecured Royalty obligation: most pay 5% of yearly revenue related to the funding research.

Total cash $1.1m + $3m restricted;  Total interest bearing debt $7.4m; Total interest free debt $3.9m.

Remove the convertible,  interest bearing debt will be $4.5m with average 4.5%.


(5) Insider holding, options, Insider trading info, share buy back.

Emad Rizkalla: 62.5m shares,  62%.
Derrick Rowe: Executive Chairman, 14.5m shares, 14%.


(6) Employee numbers


(7) Industry comparison.


(8) Major events

1) It acquires Atlantis system at 2013 for $1m plus $2.5m debt. To do it, it entered $3m convertible debt with 16% rate which is very high. It incurs millions of losses in 2013 and 2014. However, since 2015, it seems the acquisition worked with big revenue increase and profitable.


2. Financial data.



3. Valuation
(1)Once the convertible debt is over, the new interest expense would be only around $200k/year compare to over $650k expense recorded in 2016.

(3)Net income in 2016 is about $1m. Depreciation $1.1m. Financial cost $1.9m,  Real interest $0.7m. Impairment+options $400k. CapX $100k. If added the difference up, the real income is $1+($1.9-$0.7)+($1.1-$0.1)+$0.4=$3.6m. Compare to current $22m market cap. It is quite cheap. However, the CapX is low, real might be $1m more. But if added the extra $450k interest saving. It still could generate close to $3m income.


4. Risk
1)It is revenue mainly from contracts with small number of customers. It might be versatile ans so was the profit. The 2016 is a exception yeas so far. The trend might not be continue.

2) The Atlantis acquisition seems not an easy one. I hope the management learn the lesson and be cautions. The debt it took is not really good term.

5. Conclusion
The company is growing very and managed well and current price is acceptable.

6.Links

XPEL Technologies Corp(CVE:DAP.U)

Web Site
Google Finance
Filing


Apr. 12, 2017
Q4 2016
Current Price: $2.00

1.Basic Information
(1) History
3M is the first who creates protection screen film for airplanes and military use.  XPEL was originally a distributor of 3M and use it on automobile. It created its own software to cut the film at real time and adding new models with fast online update. Gradually it created its own film and stop using 3M's. Its film seems better than the 3M's on aging issue which it doesn't change to yellow after several years. The company grow very well in last several years. On early 2016, 3M sued XPEL for patent infringement, at Mar. 2017, the lawsuit solved with XPEL paying license fee to 3M going forward.

(2) Business related:
The company's main business model is partner with independent installers (70%) and dealers (30%). It receives a fixed monthly fees for offering free cutting machine with software and free training for installer.

The company seems maintained very good relations with installers and offer marketing support for installers as well. It hosted several dealer conference yearly which trains the installers. This seems worked very well.

It target high end new vehicle owners who cares more about the protection of their cars. Usually it seems cost $1500 to $2500 for a full car protection. It seems very profitable business for the installer. Its major market is in US. It seems taken around 30% of total market shares.

The company is totally a US company and the stock is trading at CVE in USD$. Finance is in USD$. Kind of a pretty weird setup.

(3) Management.
Ryan Pape is the current CEO of the company, he seems was with the company since 2004 and was promoted to CEO role at 2009. His main strength seems on marketing side.

(4) Debt and Credit facility.
At Dec. 2016, the company has $1.8m cash. $3m loan, $1.5m vendor loan. Net debt around $2.7m. After the 2m shares issuing. Net debt should be close to zero.


(5) Insider holding, options, Insider trading info, share buy back.

At 2015, Pape's compensation is only $230k which is quite low. He holds around 1.4m shares which is close to 5%.

Richard K. Crumly, a individual investor who owns 5m shares which is also on the board. Don't know much about him.

Mark Adams, CEO of Sozo Global, a MLM company, owns 2.1m shares. Also on the board. Sozo is a private company and seems in trouble. Very interesting.

(6) Employee numbers


(7) Industry comparison.
SunTek: The quality seems very close to Xpel's.

3M: It seems 3M's film has a reputation changing into yellow after exposure to sunlight after a long time.

(8) Major events
1) Early 2017, the company issued 2m shares in private placement for $1.43/share. As explained by the CEO, this is mainly used as a weapon to fight the 3M lawsuit to show that it has the money for lawyer. Most of them were sold to insiders.


2. Financial data.



3. Valuation
1) The company's share was down to below $1 during the 3M lawsuit and now is back to $2. Currently, the market cap is around $58m including the 2m shares issued at $1.43.  The company's gross margin is close to 27%. SG&A is around 20%. Before tax income 7%. After tax 5%. Using 2016 data, this translates into only $2.5m real income which makes the P/E ratio more than 20 times. Not really cheap.

2) It indicated the license fee to 3M will be minimal. In a long-term, I feel its net margin can back to 7% with the lawsuit solved. If in 3 to 4 years its revenue can grow to $100m, using 7m net income,  15 P/E. It can support a $100m market cap which translates into $3.5/share price.

3)Given its size and high growth rate, it is a good target for acquisition by the big companies.

4. Risk
1) It seems harder to grow its revenue at the current rate. The auto industry also seems at peak since the financial crisis. It needs to grow at 20% rate to get to the $100m revenue mark at 3 to 4 years.

2) It might now as profitable as I wished. The gross margin might be below 30%. SG&A might go above 20%.

3) Also currently it doesn't need to issue new shares. It might do so to support growth in the future.

5. Conclusion
The company is managed very well and very competitive. The price is acceptable for a growth company but I wish it could be cheaper.

6.Links


https://vimeo.com/channels/xpel/49604671

https://www.eventbrite.com/e/xpel-dealer-conference-2017-tickets-29837844797#

May 27, 2018
Price US$3.3. Cap $88m. Share: 28m.
(1) The company solved the litigation with 3M last year with some royalty payment which according to the company has minimal effect on the company's profit.

(2) In Q4 2017 and Q1 2018, the company achieved record revenue growth. Especially in Q1 2018, it achieved revenue of $25m and net income of $2m, both are greatly unexpected. Also the company's sales in China had a big breakthrough which in Q1 2018 accounts for 30% of its total sales.

(3) Based on Q1 2018 number, it should be able to achieve $100m revenue and $8m income in 2018. Which is much earlier than I had estimated.

(4) Going forward, I think the company may able to double revenue to $200m by 2020. With an income of $15m.  It could support much higher market cap to $300m to $400m if the growth and the income can be achieved.   

Mediagrif Interactive Technologies Inc(TSE:MDF)

Web Site
Google Finance
Filing


Apr. 07, 2017
Q3 2017, year end Mar. 31
Current Price: $15.82

1.Basic Information
(1) History
This is a Quebec company founded by  Jacques Grenier and 2 other people at 1996. At 2008, he was ousted and replaced by Claude Roy who borrowed $11m and put close to $30m in this company overtime. Since Roy's took over, the company improved quite well and recovered from below $2 to $20. He made several acquisitions and integrated them. The company continue to improve financially with close to $30m in EBITDA and $16m real income compared to $11m & $6.5m at 2007 before his take over.

(2) Business related:
The company owns more than 18 websites. Each is niche by size. Most of them are concentrated in Quebec and major in French. However, together they are quite profitable with 80% gross margin. It includes the following:

1) e-procurement websites: Total 7 websites. I think those might be its most profitable website. Really niche but worked well. Also some of them might be in constant decline.

2) B2B websites: Total 7 websites. Some supply chain, auto parts, wine, Jewelry etc. These probably are also very profitable.

3) Consumer: 3 websites. LesPac: kijiji in Quebec; jobboom: Monster in Quebec; reseau contact: Dating website. I feel although these are popular but generally should be much less profitable.

(3) Management.
Claude Roy is the key person. Previously he found Logibec at 1982 and grow the company through acquisition etc. It is a IT company specialized in health care. At 2010 he sold the company at over $200m. He has very good ability to made sound acquisition of IT companies and did great integration work.
As a major share holder at 2008, he intervened into the company and made quite a good turn around for the company.

(4) Debt and Credit facility.
Currently net debt $25m. Historically the company didn't carry much debt. Only use it when making acquisitions.

(5) Insider holding, options, Insider trading info, share buy back.

Claude Roy owns over 23% of the company and keep buying the shares.

(6) Employee numbers

Currently it has 450 employees, almost the same number as 2007 which is the result of Roy's great effect to streamline the business at 2009-2010. Sales/employee is constantly improved.


(7) Industry comparison.

(8) Major events

1) In 2010, it bought InterTrade for $8m.

2) In 2011, it bought LesPac from Yellow page for $72.5m. If compare fiscal year 2011 and year 2013, revenue increased by $14m and EBITDA increased by $10m. Although some of these might came from internal growth. Overall it seems the acquisition worked well.

3) In 2013, it bought jobboom and reseau contact for $65m in total. If compare fiscal year 2013 and 2015, revenue increased by $9m while EBITDA only increased by $2m. It seems the acquisition not working.

4) In 2016, it bought ASC(Advance Software Concept) for $18.5m. It is yet to see whether this will work out.

2. Financial data.

3. Valuation
(1)Current Cap is $236m. Current EV is around $260m, EBITDA is close to $29. So EV/EBITDA is around 9. Not really cheap. The company CapX includes $2m hardware + $2m software + $1m software purchase. Using $1m interest expense. Its real income is around ($29-$5-$1)*0.75= $18m. Current P/E is 13.

4. Risk
(1) It seems some of its platforms is in declining mode. Its major growth is coming from acquisition. It is hard to tell if without acquisition whether it can be profitable as it was.

(2) The 2013 acquisitions don't seem working well. The 3 consumer websites seem to face competition and Ad price has been reduced.

5. Conclusion
Overall the company was managed quite well and most the acquisition seems worked. However, the current price is not really that cheap. Hope it could be cheaper.

6.Links


Feb. 14, 2018
Q3 2018
Price: $10.55, Cap: $157m
(1)After almost 1 year, the company turned out not doing very well. Mainly because in June 2017, it acquired a company called Orckestra for $2.2m. It generates around $1.2m/quarter revenue while incurs close $2m in expense. Added other softness, its EBITDA was down from $7.5m/quarter level to $6m/quarter level.

(2) Besides the Orckestra, it seems other businesses weren't doing great as well. However, the company still pretty stable with the new EBITDA level.

(3) Using the $6m/quarter EBITDA, its new income level is around  ($24-$5-$1)*0.75= $13.5m. Current P/E is around 11 which is actually lower. However, since the income is trending down. It is very reasonable.



Aug. 21, 2018
Q1 2019
Price: $9.16, shares: 14.8m. Cap: $136.
(1) Full-year 2018 EBITDA decreased to $24.3m including $2m retention and termination fee.  EBITDA for Q1 2019 further decreased to $5.3m. CapX in 2018 is around $4m. Interest expense $1m.

(2) It is hard to tell whether its EBITDA will be stable at over $5m level. It seems that it could achieve that. Based on the $20m EBITDA/year level. $4m CapX, $1m interest, 25% tax rate. It could generate ($24-$4-$1)*0.75=$11m level income. The current cap is around 12 P/E.

(3) Its book value is close to $9/share. However, mostly it is just goodwill.