Circa Enterprises Inc. (CTO.V)

Website
Yahoo Finance
Filing

Feb. 25, 2019
2018 Q3 Data
Price: $1.20 Shares:10m, Cap: $12m
1.Business Information
(1) History 
The company was founded by at 1985 and IPOed at 1988. Ivan Smith is among the original founder.

In the beginning, the company's major business is the surge protection product for telecom equipment. This is still its major business today. It was growing quite well in the 1990s and reached $24m in sales and close to $2m in profit by the year 2000.

At 2002, it started a new metal fabrication facility in Ontario.  In 2003 Ivan sold his 20% share of the company to Jerry Zucker, a billionaire business person who is famous for taking over HBC company of Canada. Jerry acquired 46% of the company in total and installed two of his person on the board: Robert Johnston and Brice Sweatt. Ivan stepped down from the CEO role but remained on the board. Rick Schmidt who is the previous CFO took the new CEO role.

During the decade of the 2000s, the company's revenue continued growing but up and down a bit. It was profitable until 2007 and  2008, it suffered some losses.

At 2009, Ivan resumed the CEO role and did a restructuring of the company. Revenue down from $30m level to middle $20m level but became profitable again since 2010.

At 2013, Ivan resigned again from the CEO role again and Grant Reeves who is from Jerry's company took over as the new CEO. Later in 2015, Ivan quit the director role as well. I guess he left the company.

At July 2017, the company acquired Guardian Telecom for $3.5m. Guardian is also a telecom equipment maker, has around $5 to $6m in annual revenue. After one year of the acquisition, the acquisition seems worked pretty well.

(2) Major business.
1) Surge protection: This is its original business which is located in Calgary. Currently counts on around 40% of total sales.

2) Metal fabrication: 60% of sales.

(3) Debt and Credit Facility.
As of Q3 2018, there is $1m in debt.

(4) Employee numbers


(5) Industry comparison.


(6) Major events

2. Management
(1) Key person
Ivan Smith: He did a quite good job grow the company and later turn the company around in a difficult time.

Grant Reeves: He is the current CEO since 2013. Overall, the company managed well since then.


(2) Insider ownership
Jerry Zucker bought over 40% of the company at around 2004 and passed it to his wife after he dies. Now the shares are under his wife's name Anita Zucker. She is also a very active business person who was involved in HBC's management. However, she doesn't seem to involved with Circa. Maybe the company is too small for her.

Grant Reeves: Very few shares.


3. Financial data.


4. Valuation
(1) Currently, the company was traded less than 10 P/E. Just for the first 3Q, it generated around $1.4m in real income.

(2) The company paid a 5c dividend for several years and this year, it increased to 6c.

5. Risk
(1) It revenue relies on the telecom industry.

(2) The management owns very few shares although the Zucker family holds lots of shares.

6. Conclusion
The company is quite profitable through the years and the new acquisition worked well. Current price is quite cheap if it can remain current profitability.

7.Links

Reko International Group Inc. (REKO.V)

Website
Yahoo Finance
Filing

Feb. 11, 2019
2019 Q1 Data
Price: $2.97 Shares:6.5m, Cap: $19m
1.Business Information
(1) History 
The company was founded by Steve Reko in 1976 as a tool and mould company. Gradually grow the business and took it public in 1994. At that time, it already generates $25m in revenue. Its main customer is the big 3 US automakers. After that till 1999, it grew very well and reached $79m peak revenue in 1999 and $7.7m in profit. After that its revenue was down in 2000 and 2001 to $50m but rebounded to $60m to $70m level from 2002 to 2006. The profit remains low or even unprofitable. Since 2007 to 2009, revenue down to $50m level with some losses. Also at 2007, Steve Reko passed away and his daughter Diane took over the CEO role. At 2010, revenue down to $40 and lost several million.

At 2011, the company was getting almost bankrupted. Luckily it consolidated several factories to only 2 and sold the other buildings and paid down its debt. From 2012 to 2018, its revenue was up and down but remained at $40m to $50m level. It became more profitable. At 2016, it achieved again $7.6m profit on $50m revenue. However, in the last two years, its revenue was down to $40m level again profit down to $2m level.

At 2017 to 2018, it opens a new 40k sqft automation facility adjacent to its current building.

(2) Major business.
1) Tool and Mould: This is making the mold for the automaker to make the plastic parts of its vehicle. It is very tight related to the new model release number and also the auto sales number. Usually, one mold could cost $0.5m in cost and could be used to stamp 1m units.

2) Precision Machining: Also mainly used to build part of the machine for the automaker.

3) Automation: Supply automation hardware like robotics and related services to other manufacturers.

(3) Debt and Credit Facility.
By Q1 2019, it has around $11m in debt. Among which around $10m is mortgage at around 4% -5% in interest.

(4) Employee numbers


(5) Industry comparison.


(6) Major events

2. Management
(1) Key person
Diane Reko: Steve Reko's eldest daughter. He was a director of the company since 1984. She took over Steve's position after his death and lead the company through the 2009-2011 recession. The company's consolidation in 2011 was a great move and saved the company. Overall, she did a great job turning the company around and improves the profitability of the company.

(2) Insider ownership
The Reko family always holds 50% to 60% shares over the years.

3. Financial data.
(2018 data is not correct)


4. Valuation
(1) Currently, the company was traded around 10 P/E multiples. Also, its book value is more than double the current price. The main reason is that currently there is an expectation of the downturn of the auto industry.

(2) The automation division might generate good growth.

5. Risk
(1) Historically the company wants to shift away from too rely on the auto industry. However, it couldn't diversify its business even now. Any downturn of the auto industry will still have a big impact on the company. But I think now the company is much stronger than the 2010-2011 period, also, it is not likely that the big 3 will have the same trouble as then.

(2) The company's new automation facility might not generate profit.

6. Conclusion
Diane Reko did an impressive job turning the company around in the 2010 period. The company was in much better shape after that and is being managed well. The price is quite cheap as long as the company can remain profitable. Also, there is growth potential in the automation division.

7.Links

Nov. 22, 2019
Price 3.45. Shares 6.3m. Cap 22m. 
Full-year ends July 31, 2019
1. Revenue up to $48m vs $42m. last year.  Net income $1.5m including 0.4m in currency loss and $3.7m in depreciation vs $1.8m in CapX. Using Normal CapX of $3m, real income should be $2.6m. Real income in 2018 might be 1.5m. Debt $10.3m, cash $5.4m.