Two recent Buys w/ different measures of value (Buy at/near BV & GARP value)
1) Select Sands Corp SLSDF:TXTV- EV=$31mln (2018) - Bought 7/24/2018 @ $0.33/share
2) IntriCon Corp IIN:NASDAQ - EV = $425mln - Bought 2/26/2018 @ $ 18.43/share
Based on Select Sands Corp(SLSDF) EV of $31mln and 97.5 shares outstanding, BV is around $0.318/share.
Select Sands Corp. is an industrial silica product company. The Company's primary business is an advanced-stage silica sand project located in Arkansas, United States. The Company is focused on developing silica sand project to enable commercial silica sand sales to industrial and energy customers. The Company has interest in approximately 520-acre silica sand Sandtown property. The silica sand Sandtown property is an advanced-stage commercial silica sand exploration prospect underlain by the Ordovician St. Peter sandstone formation.
Their sand is used primarily in the 'fracking' process used in the oil/gas sector.
Here is a very good Seeking Alpha article that present the value proposition along w/ CAPx and growth projections.
Below is the author's 2017-2019 actual/estimates w/ share price upside potential of 37%(2018e)-208%(2019e)
The SLDF value proposition is purely one of (1) owning assets at/near EV, (2) conservative revenue growth estimates based on past/current CAPx investment, (3) basing value on conservative 12x PE. The author presents three valuations based on EBITA median multiples of 5x/6.5x/8x: Bear Case $0.44/share; Base Case $0.65/share and Bull Case $0.88/share
I see this a 6-18 month value hold w/ my fair value target at/above $0.80/share.
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IntriCon Corp IIN - A GARP stock w/ earnings (stock may have exceeded my GARP fair value rule)
IntriCon Corporation is engaged in designing, developing, engineering, manufacturing and distributing body-worn devices. The Company operates through body-worn device segment. The Company serves the body-worn device market by designing, developing, engineering and manufacturing micro-miniature products, microelectronics, micro-mechanical assemblies, complete assemblies and software solutions, primarily for the value hearing health market, the medical bio-telemetry market and the professional audio communication market. The Company has facilities in Minnesota, California, Singapore, Indonesia, the United Kingdom and Germany, and operates through its subsidiaries. The Company's product offering includes a hearing aid discount program for health plans. This program is available around the nation to health insurers, including employer-sponsored, individual and Medicare plans. The Company also has various international value hearing aid (VHA) initiatives.
The company works w/ Medtronic supplying many of their hearing aid key system components (GSM system sensors).
I was first attracted to this company when they reported positive earnings for the first time last year, no debt and appeared to have excellent growth prospects from the (future) deregulation of the hearing aid market (ie direct-to-consumer in U.S.).
I stumbled onto one of their next generation wireless earbud hearing aids that was also targeted to the "direct-to-consumer" market w/ built in software for audio/communication. IntriCon’s Lumen 155 product family incorporates NXP Semiconductor’s NxH2003 Bluetooth Low Energy audio streaming system-on-a-chip is the industry’s most power efficient, wireless audio streaming hearing aids in the market. The Lumen 155 can stream wireless audio to IntriCon's wireless accessories such as remote microphones ( IntriCon Corporation (IIN) CEO Mark Gorder on Q2 2018 Results - Earnings Call Transcript)
It's All About Growth in EPS-
Q2 2018 net sales $30.2mln vs Q2 2017 $22.5mln +33.9%
For the six-month period ended June 30, 2018, the company reported sales of $55.5 million, up 26.9% from the $43.7 million in 2017. The company delivered net income attributable to shareholders of $2.8 million, or $0.35 per diluted share, versus $398,000, or $0.06 per diluted share, in 2017.
No Longer a GARP stock?
I am not sure the 'reasonable' price is available as the market on last week's earnings have priced in almost 2 years of 30% expected growth running the stock to over $60/share.
The way I look at these very small cap stocks, is their market cap can easily double (ie stock price doubles) from $445mln to $890mln and still be well under the $1Bln market cap of many of these high tech companies that still book no profit. . . . For example BE (Bloom Energy) at $21.30/share, a company I have followed for over 8 years and now public (through an IPO 7/25/2018). CEO says company s/d be profitable next quarter and their market cap is at/neat $ 2.4Bln.
BE is 5.4x the market cap of IIN, not profitable and it is still unclear if/when they will show 30% growth YoY for several years. Not a GARP stock IMO. BE for me is not a value stock, but a potential technology disruptor 5-10 years out w/ a potential mainstream product used world wide.
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Therefore, IIN is at least profitable w/ a good expectation of 35% growth YoY for several years (based on market cap and the size/growth of industry niche market - hearing aid). My GARP value definition is if PE<= growth rate. So, IIN still needs to grow into that GARP value range . . will continue to hold my few shares.
SLSDF is one of thes value stocks based on my review of the assets they own and potential for the next 12-24 month revenue growth prospects. You are buying at/near EV value/share.
Good Investing
EKS |
