Yahoo Finance
Filing
Apr. 10, 2018
Q3 2017 Data
Price: $1.48, Share outstanding 46m. Options 3.6m at $1.48. Cap: $68m
1.Basic Information
(1) History
Joe Lanni and Alex Agius were friends in college in the early 2000's. They both worked in the construction industry for several years. In 2007 they co-founded the company as a small contractor for construction projects. At 2009, Alex started to work full-time for the company. The company grew rapidly from $10m revenue at 2010 to $60m in revenue at 2016. 2017 revenue is expected to be over $90m. The company grew mostly from organic. It IPOed at Sept. 2015 through a reverse merger.
(2) Business-related:
1) Telcom market: Provide fiber cable installation for Bell and others etc.
2) Hydro market: Provide maintenance service I guess.
3) Government projects:
(3) Management.
Joe Lanni and Alex Agius both seem to be entrepreneurs and very focused on growing the company. Previously they both worked in the construction industry for several years and it seems they managed the company pretty well. However, they seem to focus on growth than profitability. Also, the company's debt was growing to fast in my opinion.
(4) Debt and Credit Facility.
At Sept. 2017, it has $5m in cash and the following debt:
1) $12m term loan from RBC due May 2022. The interest rate is banker's acceptances rate + 1.85% to 2.85%. The effective rate should be around 3.5%.
2) $29m revolving loan from RBC. Interest rate similar to the term loan. $27.8m outstanding.
Debt covenants: Debt/EBITDA < 4.25:1 at Sept. 2017, < 3.5:1 at Dec. 2017.
(5) Insider holding, options, Insider trading info, share buyback.
(6) Employee numbers
(7) Industry comparison.
(8) Major events
2. Financial data.
3. Valuation
2017 EBITDA is around $9 to $10m. It might be able to increase to $15m in 2018. EV/EBITDA is over 10. Not really cheap. However, the company is growing very consistently in the past several years.
Assuming $15m EBITDA, 50m net debt. 10 EV/EBITDA, 50m shares, it should support a $100m Cap and $2/share price.
4. Risk
(1) The major issue with the company is that its receivables and work in progress keep going up. It has to issue new debts and shares to keep up the working capital needs.
(2) Its working force has been unionized which has increased its cost and might cause trouble in the future.
5. Conclusion
The company's growth is very good and profitable. Current price is acceptable. However, the company needs to bring down its receivables and working in progress. Needs to watch closely.
6.Links
Interview