Yahoo Finance
Filing
Western Financial Filing
Apr. 15, 2019
2018 Q3 Data
Price: $0.365 Shares:30m, Cap: $11.2m
1.Business Information
(1) History
The company was founded by Scott Tannas in late 2015. Previously he was the founder of Western Financial Group(WFG) in 1996 as an insurance brokerage. Later entered insurance and banking. He took it public and creates which was a successful investment company which is sold to Desjardins for $440m. It was an 11-bagger for the original investor after 15 years.
The company IPO'ed at 2016 with a $50c offering. Later it issued more at a higher price. Totally it had raised around $16m in total with 30m shares outstanding. All the $16m has been used to invest in 4 business from 2016 to 2018. It had used something similar to the leveraged buyout approach which raised debt in each of the business it acquired.
(2) Major business.
1)Glassmasters: Car glass repair and wholesale. Seems generates 20m revenue and $1m net come normally.
2) Golden health: Four nurse homes, one 30% owned by WI, rest are 25%.
3) Ocean sales: Demo sales in Costco etc.
4) Foothills Creamy: Icecream and butter brand.
(3) Debt and Credit Facility.
As of Q3 2018, there is $1.5m in debt. Early 2019, it added another $4m convertible debt for the new Fortress acquisition.
(4) Employee numbers
Currently only 3.
(5) Industry comparison.
(6) Major events
2. Management
(1) Key person
Scott Tannas build the WFG from scratch and running it for over 15 years. It did very well. It remained profitable even at the 2008 financial crisis. Also, his compensation is quite low. However, he seems not very interested to own many shares of the company he creates. At the sell of the previous company, he only holds 510k shares which gave him just over $2m in value.
(2) Insider ownership
Scott holds around 1m shares, just around 3.4% of the total shares.
3. Financial data.
4. Valuation
(1) Currently, the 4 investments create over $1m/year income for the company. However, since all of them acquire a significant amount of debt at the acquisition, it will take several years for the company to be able to receive cash from those investments. Also the book value over $15m which is higher than the $11m market price.
(2) The company generates over $200k in management fees in 2008 from its investments which will be able to cover its daily expenses which are nice.
(3) As indicated in an interview in 2018, it will continue to acquire 10 to 15 businesses in the next few years. I estimate it will issue 20m shares and raise $15m cash. Also might issue some debt or preferred shares.
(4) Assuming by 2021, its book value is $30m; 50m shares. $3m annual income; it might support a share price of $1.
5. Risk
(1) There is some significant debt in each of the investments. Although it doesn't guaranty these debts, those businesses might still go bad.
(2) It does not control the day to day running of those businesses. The owners of those businesses will have less incentive to operate their business for good since they sold the majority of their shares.
(3) Scott Tannas doesn't own too many shares of the company just likes he was with the previous company.
6. Conclusion
Scott Tannas had done very well in managing the previous company. I feel he is very likely able to achieve a similar result. The current price is quite cheap.
7.Links
