https://www.coconutgroveintimates.com/
Yahoo Finance
Filing
Sept. 02, 2018
Year end: Sept. 30th
Q3 2018 Data
Price: $1.85, Shares: 26.2m, Cap: $48m
1.Basic Information
(1) History
The company was founded by Hylton Karon in 1985. Originally it was called Coconut Grove Textiles. Its main business was women's intimate apparel likes bra and underwear etc. In 2008, it also formed an Intelligent Fabrics Division("IFTNA") which aimed to create the fabric with a special characteristic that could be used in medical or sports etc.
It was IPOed at 2012 through a reverse merger and Coconut Grove became a subsidiary of iFrabric Corp. In 2012, it has revenue of around 6m and a just break-even profit. The revenue is mainly from intimate apparel division. In 2013, its revenue increased to $8.2m. In 2014 revenue grew to $13m mainly because it signed new sleepwear license with the existing customer. The company was uplisted to TSE in 2015. In the next 3 years, the intimate apparel slows down but the IFTNA division has picked up revenue to over $6m in 2017. The share price was up to over $5 in early 2014 and stay over $3 for a long time.
Since Q2 2018, especially in Q3 2018, both divisions were down. First, the company decided to phase out the sleepwear line which caused the intimate apparel division revenue down by 25%. Also, its IFTNA division was down by 50% because of one customer changed factory from China to another country. As a result, shares price droped to below $2 lately.
(2) Business-related.
Intimate apparel division: Bra, underwear, sleepwear etc. The company signed a contract with Maidenform at 2012. Later renewed for 4 years at 2014. Then in 2018, renewed for another 2 years. Recent revenue from this division was around $12m/year. The company discontinued the sleepwear business lately. The reason for this is that the sleepwear carries lower margin and facing tough competition lately. Without the sleepwear business, it might be down to less than $10m/year.
IFTNA division: It carries several branded fabric techniques and was doing very well during the past several years. It seems to carry better margin than the intimate apparel division. Overall this has very more growth potential than the intimate apparel business.
(3) Management.
Hylton Karon: He is the original founder and has a textile background. Overall the business was staying profitable and rarely issued any new shares.
(4) Debt and Credit Facility.
$4.7m in cash and $1.4m in the bank loan.
(5) Insider holding, options, Insider trading info, share buyback.
Hilton Price: CFO, 400k shares, 1.5%.
(6) Employee numbers
It has 29 employees in 2014, reduced to 28 in 2015, further reduced to 24 in 2016 and 2017.
(7) Industry comparison.
(8) Major events
2. Financial data.
3. Valuation
(1) The company generated around 1.6m income in 2017. $1.4m for the first 2 quarters of 2018. Besides those, it never made any serious money. However, it should mention that all the R&D in the IFTNA division are buried in the expense of those years. Still, it is very likely that the company won't be very profitable in the new future. So based on profit, it is not a cheap stock.
(2) Generally, I believe the company will be profitable and may make $1m to $2m income again. If the IFTNA division is growing again, then it might be able to achieve a higher profit in the future.
(3) I did view the decision to discontinue the sleepwear business is a right decision. Although it created temporary revenue down pressure.
(4) The company outsource its product in Asia and only has 24 employees. The SG&A was actually down in 2017 while the revenue was up. With the elimination of the sleepwear business, it might reduce the number even further.
4. Risk
(1) It is business is contract based. Lose of its major customer will affect the business significantly.
(2) It revenue might shrink even further in the near future. Even make it unprofitable although not very likely.
(3) The CEO family owns way too many shares which make the shares unattractive to the institutional investors.
5. Conclusion
The company seems very managed and does has some potential do very well. It is likely to remain profitable. However, the current price is not very cheap and there is some risk that the business might go bad.
6.Links
http://www.cbc.ca/player/play/2500386027
