SPECIAL ISSUE: Year End Bottom Fishing Picks
THE MARKETS
Commercial Consolidators CCZ.CDNX
Canadian company with 50% revenue growth in Cuba
Shares fully diluted: 11 million
CCZ only went public on October 14, 1999 when it did a take-over of Balmoral Capital on the ASE, exchanging the private company for 10.3 million shares at a deemed price of $1.00. They are in the business of manufacturing and distribution of 1. consumer electronic products (60% of revenues) 2. business equipment and supplies (30% of revenues) and, 3.construction materials and supplies. Not exactly broadband, wireless, or Linux, but there's still and emerging growth story here.
Bought economically distressed assets
The story is where they are located. The company started in Canada but has branched out and focused on opportunities in Cuba. Cuba experienced an economic depression from 1989 to 1993 when the Soviet Union collapsed, assistance ceased and economic activity fell by 35%.
In 1994 CCZ's CEO Micheal Weingarten identified Latin America and especially Cuba as a growth opportunity just as it was coming out of a period of economic distress and must have found some excellent bargains. He made a go of it, and while the U.S. was holding a trade embargo. Just think if the embargo were to be lifted, and investment were to come pouring in from the states. There is pressure within and from outside the U.S. to do just that, from people like Thomas Donohue of the U.S. Chamber of Commerce.
Now, Cuba is liberalizing its trading rules and it is currently the fastest growing economy in Latin America, growing at a brisk 5% rate. While the U.S. stands by its embargo, other countries are investing in droves.
Rapid top and bottom line growth, low valuation
For the year ending February 28, 1999, CCZ earned nearly $1.2 million on revenues of $29 million. For the six months ending August 31, they earned a similar amount in half the time, on revenues of $20 million. The top line is growing at a rate of 50% per annum, and the bottom line is growing even faster. At the current rate of revenues, CCZ is trading for less than one times revenue per share (will have approximately $3.22 in revenue per share) and a P/E ratio of around 11.5. That's pretty modest for a company growing at this rate.
Opens TV assembly plant in November
Meanwhile this past month CCZ commenced production at S.J. Electronica del Caribe, a television assembly plant with 140 workers under licence with Philips, Sanyo, and Samsung. They will also produce their own private label products, General Vision and L.E.C. This should give an additional significant boost to the top line in the coming year.
What's ahead
I would imagine the company had a reason for going public - the most obvious being to raise capital for addition growth opportunities. I suspect a fairly aggressive IR program will get underway in the new year and it may be an idea to take a position prior to this. In recent weeks the stock has been very quiet will few willing sellers.
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