WBE on CDNX at $0.16
WestBond is a leader in the development, manufacturing, and sales of
paper and poly disposables for airline, healthcare, industrial, and other uses.
The company's products include waterproof hand mitts, stretcher
sheets, pillowcases, diaper liners, underlays, patient wipes, gowns, and dental bibs. WestBond is also one of the largest converters of examination table paper in Western Canada.
The company has taken a major step in diversifying its product line
and has decreased its exposure to single market (health care) pressures.
WestBond has invested additional capital resources which will allow production of such product lines as industrial towels, tissue, and other high demand paper disposables. The addition of these new products and associated machinery will not only increase sales to existing distributors, but will also expand the company's distribution network as new customers are secured.
These new product lines could generate sales exceeding WestBond's entire current annual revenue base over the next year.
The company moved into a larger 25,000 square foot facility and
overhauled most of its production equipment in July 1999. With this facility and existing equipment, WestBond has the capacity to support annual sales of up to $15 million. In late November 2001, the company's newly acquired jumbo roll and tissue machine commenced operations. Sales from the machine are exceeding expectations with the bulk of new business to be recognized financially in the first quarter of fiscal 2003 (April to June 2002).
For the 9 months ended December 31, 2001, WestBond had gross sales of
$1,982,253, which resulted in a gross margin of $547,163, and net
income after tax of $44,097 or $0.005 per share. These numbers are slightly lower than results for the comparable period in 2000 as a result of the loss of Canadian Airlines business in June 2001. However, the other divisions of the company, such as health care and industrial products, have all improved considerably. Furthermore, the reduced activity level has opened up new opportunities for WestBond which have significantly higher margins.
As at December 31, 2001, WestBond was in a strong financial position with positive working capital of $141,770 and long-term loans of only $179,363.
The company has 9,526,967 shares issued and outstanding with
management and insiders holding approximately 40%.
DOWNSIDE PROTECTION
1) While investors will always speculate on future growth potential,
WestBond is in the enviable position of being a profitable company
with a full range of existing customers and product lines.
2) WestBond's shares are currently trading at the bottom-end of their
historical trading range. The company's shares also have strong bid
support at current levels.
UPSIDE POTENTIAL
1) WestBond's new jumbo roll and tissue machine became operational in
late 2001. This new machine is expected to have a significant impact on financial results.
2) The company is currently evaluating a number of machines which, if
purchased, would likely be in full operation by June 2002. This
equipment would be financed through additional term loan proceeds and surplus cash flow. These machines could add up to $2 to $3 million in annual revenues.
3) The company has been successful in identifying certain raw
material for less than half of the previous cost. This reduced cost has enabled WestBond not only to reduce its material costs, but has also lead to the potential expansion into other products which can utilize the cheaper material.
4) WestBond has submitted a proposal to Air Canada to supply
in-flight paper products. The contract period is for two yeas and the potential value is over $2 million per year. To date, the airline is still evaluating all the bids. The company is encouraged by the response of the purchasing people at the airline and it is hoped that at least a portion of this contract will be awarded to WestBond. A decision is expected by the end of March 2002.
4) The company has a new focus on investor relations. This focus
should result in a broader investment base and higher trading volumes.
5) With the new machines and product lines, revenues, cash flow, and
earnings could increase significantly. Sales, which are expected to
be in the order of $2.6 to $2.9 million in fiscal 2002, could increase to an annual level of $5 to $10 million depending on several pending and new orders. As the company's fixed overhead and G&A expenses will only increase marginally, this revenue growth would contribute substantially to the bottom line and could lead to annualized earnings per share of $0.05 to $0.07.
While this is currently only speculation, the potential exists to
meet or exceed these forecasts. |
