Google Finance
Filing
Nov. 1, 2017
Q2 2017 Data
Price: $4.13, Share outstanding 18.7m. Cap: $78m
Report is in USD$, share is in CAD$.
1.Basic Information
(1) History:
The company was founded by David Green, an oceanographer, at 1995 who is trying to solve the battery issue on off-shore signaling device by adding a solar panel on the device. The company was up and down for many years without actually making a profit. Until 2013, Michael Sonnenfeldt, the major owner of Sol Inc, a solar-powered LED light company, came in as a major shareholder. David left the company in early 2013 and the management changed. Also, John Simmons, another entrepreneur, stepped in as CEO of the company.
The company merged with Michael company Sol at 2014 and did 10 for 1 stock split. Under Michael and John, the business was getting much better since 2014 to now with consistent improvement of profitability. However, lately at Aug. In 2017, Michael resigned from the board and Jim Meekison success-ed him. Michael sold over 4m shares to Jim at $5. Later, the company bought back 6m shares after that which reduced shares from 25m to around 19m. After that, Michael owns less than 10% while Jim owns around 22%.
(2) Business-related:
The company's main business is Solar powered LED signaling devices used by marine, airfield, off-shore wind farm etc. It generates around $40m/years revenue lately. The company is pretty strong is this segment I think. The margin is around 40% to 45%, the revenue is pretty stable. It acquired several small companies in this area over the years.
The second business is the solar light which mainly from the Sol Inc it merged with. This segment generates just around $8m/year revenues and seems unstable. Pretty the Sol company is solely on this and never made any money as well. I feel the competition in this segment must be tough since there is little barrier to entry. On the positive side, the cost of solar penal is much cheaper than 10 years ago and LED is more efficient than before, so it is much more competitive when competing with regular
street lights using wired electricity.
It used to have other businesses like Solar Panel ( on-grid and off-grid) but were divested lately.
(3) Management.
Michael Sonnenfeldt: He is the longtime owner of Sol Inc. an entrepreneur, but is no more with the company.
John Simmons: Previously founded Integrated Paving Concepts Inc. at 1990, but he was forced out from the company at beginning of 1999. The company has $10m sales and $1m income at 1998. The company has around 8.1m shares. By 2005, It revenue had increased to $14m but profit was all the way down. At 2006, the company went private at price of $1.2/share. Later at 2008, John went back to the company to turn it around until it was sold at 2013. He did it very successfully.
(4) Debt and Credit Facility.
At Q2, it has $23m in cash. After Q2, it sold its off-grid business for $19m, it paid down $6m debt, it bought back 6m shares for 25m, it acquired Vega Industries for $9m. So by Q3, it should just have around $3 to $5m in cash with no debt.
(5) Insider holding, options, Insider trading info, share buyback.
Michael: 8% after the buyback?
John: 600k at 2016, don't know how much after the buyback.
(6) Employee numbers
153 employees at end of 2016.
(7) Industry comparison.
Sealite Pty Ltd: An Australia private company employed over 100 people. They compete in the Offshore wind, Marine.
Avlite systems: Seems part of Sealite, competes in Airfield and Obstruction. Seems located at Canada.
Tideland Signal: A US company. Compete in Marine.
Metalite Aviation Lighting: Part of AGI Holdings LLC, A UK company.
Solar Electric Power Company (SEPCO) : Solar LED light, US company. Seems small.
Stop Experts, Inc.
(8) Major events
Aug. 2017, acquired Vega Industries for $9m. Seems a competitor. Will added around $6m in revenue.
2. Financial data.
3. Valuation
(1) The company achieved around $7m adjusted EBITDA at 2016. That gives an EV/EBITDA around 9 times($78/1.28/$7=8.7). It is not really cheap in that way.
(2) The company is pretty capital light with very little assets. Currently, the CapX on hardware is around $400k/year, software is around $200k/year. While depreciation is around $1.6m. That is a saving of cash around $1m.
(3) Assuming $55m revenue, 43% gross margin, 30% SG&A. That indicates $7.1m EBITDA, Using $600k CapX, 25% tax, it generates around $5m real income. That gives a P/E of 12 times ( 78/1.28/5). On a cash basis, the company didn't need to pay that much tax it reported. It should generate close to $6m in real cash.
(4)The signaling segment seems still have potentials for consolidation. If the company can continue to generate cash and use that to acquire small players, it will be good.
(5) The lighting segment is tough and I would rather they divest it as well unless the price of solar can compete with electricity cost.
4. Risk
(1) The new chair and the CEO might not get along.
(2) The company might not be able to keep its current revenue and profit.
(3) The company might not be able to continue acquiring others.
5. Conclusion
On a no-growth basis, the company is not that cheap. The management did a great job turning the company. I have some confidence that it will continue to generate cash and consolidate other companies.
6.Links
Nov.14, 2017
Q3 Data, Current Price 4.23, Market Cap $80m
(1) The company finished Q3 with $32m in Cash + $3m in receivables related to the off-grid solar sales. Debt $7m, Removing $24m for share buyback after Q3. It should have around $4m in net cash. It also has around $5.3m from Hydro Ottawa and some other parts which might it at least should get some back I think since the maximum claim from Hydro Ottawa is $2.6m.
(2)The first 3 quarters EBITDA is around $4.5m. However, Q3 EBITDA is $1.8 including $800k for inventory write down. It is roughly close to my estimation. Revenue of signal segment is $35m for first 3Q and $14m for Q3.
(3)Cash-wise, it generated around $4.3m in real cash before CapX but including the $800 inventory wrote-down in 3Q. While the first 2Q generated $2.7m in real cash before CapX. Using around $600k annual CapX. It should be able to achieve over $5m/year real income.
(4) There are close to $1.1m included in adjusted EBITDA for 3Q of 2017 which is only $100k in 3Q of 2016. So for 3Q 2017, adjusted EBITDA is $5.8m compared to $5.7m in 3Q of 2016.
(5) The signal segment is doing well while the light segment is pretty bad. Overall as expected and need to wait for several quarters for things to settle down.
Nov. 14, 2018
Q3 2018 data, Current Price: $3.86. Shares: 19m. Cap: $73m.
(1) For the past one year, the company wasn't doing very well. Over financial was actually worse than last year with 3Q EBITDA was down $800k from last year.
(2) The company has $12m in cash with no debt. It settled with Hydro Ottawa so the receivable related to this was collected to reduce the debt.
(3) Book value US$3.15/share which is close to the current market price.
(4) The signal segment is now facing some delay and challenge. The light segment is stable and actually picked up sales a little bit.
(5) Currently, the company is still profitable with a good balance sheet. It is slow but it seems OK to continue holding it. It might need several more quarters for things to turn better.
Q3 Data, Current Price 4.23, Market Cap $80m
(1) The company finished Q3 with $32m in Cash + $3m in receivables related to the off-grid solar sales. Debt $7m, Removing $24m for share buyback after Q3. It should have around $4m in net cash. It also has around $5.3m from Hydro Ottawa and some other parts which might it at least should get some back I think since the maximum claim from Hydro Ottawa is $2.6m.
(2)The first 3 quarters EBITDA is around $4.5m. However, Q3 EBITDA is $1.8 including $800k for inventory write down. It is roughly close to my estimation. Revenue of signal segment is $35m for first 3Q and $14m for Q3.
(3)Cash-wise, it generated around $4.3m in real cash before CapX but including the $800 inventory wrote-down in 3Q. While the first 2Q generated $2.7m in real cash before CapX. Using around $600k annual CapX. It should be able to achieve over $5m/year real income.
(4) There are close to $1.1m included in adjusted EBITDA for 3Q of 2017 which is only $100k in 3Q of 2016. So for 3Q 2017, adjusted EBITDA is $5.8m compared to $5.7m in 3Q of 2016.
(5) The signal segment is doing well while the light segment is pretty bad. Overall as expected and need to wait for several quarters for things to settle down.
Nov. 14, 2018
Q3 2018 data, Current Price: $3.86. Shares: 19m. Cap: $73m.
(1) For the past one year, the company wasn't doing very well. Over financial was actually worse than last year with 3Q EBITDA was down $800k from last year.
(2) The company has $12m in cash with no debt. It settled with Hydro Ottawa so the receivable related to this was collected to reduce the debt.
(3) Book value US$3.15/share which is close to the current market price.
(4) The signal segment is now facing some delay and challenge. The light segment is stable and actually picked up sales a little bit.
(5) Currently, the company is still profitable with a good balance sheet. It is slow but it seems OK to continue holding it. It might need several more quarters for things to turn better.
