very interesting post on misc.invest.canada:
Article 12 of 842
Subject: PLT: Pallet, Pallet The Story
From: rlingen@inforamp.net (Roy Lingen)
Date: 1997/03/11
Message-Id: <5g2fog$lhk@news.inforamp.net>
Newsgroups: misc.invest.canada
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There have been a number of messages in the last couple of days on
this stock because of the 25% ($0.30 to $0.38) price jump on high
volume, normally an indicator that SOMETHING is going on, but the
question is WHAT? More hype or something real?
A lot of the messages have been very negative, and not without reason.
A look at a weekly chart of this stock is almost enough to scare any
investor away from the market permanently. (I'm sure that a lot who
bought the hype on the run-up have been.) It's always hard for a
darling stock (which this one once was) to come back from disgrace,
but I think that's what's happening in this case.
This is the story as I see it. It's completely my opinion, formed from
digging around and reading between the lines of news releases. I got
the news releases off my Bloomberg terminal, but maybe they're
available on the Net somewhere for anyone to verify.
The bullish case for the stock is based on three releases, plus an
apparently unrelated matter on Wall Street (which I will describe at
the end.)
(Releases are paraphrased to save my typing time unless in quotation
marks)
Jan 9/ 97
Bank of America Backs Pallet Pallet with US$20 Million Line of Credit
Company announces it has received a committment letter from B of A for
US$20Million revolving working capital line plus US$2.2Million term
loan.
Committment subject to successful public offering of a minimum
C$3Million new equity "and other normal conditions". Prospectus filed
by First Marathon and Porthmeor Securities.
Jan. 14 /97
Second Quarter Fiscal 97 results (ended Nov 30/96)
Sales revenues US$24.1 Million (the company reports in US$)
Positive EBITDA $600,000
Loss after provision for taxes $200,000 (trivial = $0.00 per share)
All comparisons favourable except sales, but they declined because of
discontinued operations. [a good thing in a turnaround]
Moore, (Pres. and CEO) says "...Company's turnaround continues. Second
quarter performance was impaired by the company's constraint of
capital..."
March 6 /97
Closing of Common Share Offering
Closed public offering of 16,666,667 shares at C$0.30 for C$5Million
Greenshoe of 2,000,000 shares for an additional $600,000 also
exercised.
Analysis:
The company is in the last stages of a turnaround. Losses have
stopped, they're still selling about US$100 Million a year (so much
for the argument that the company is all air) and both banks and
institutional investors are ready to give them new money of
approximately US$25Million and C$5Million respectively. I think we can
safely assume that there was a good amount of "due diligence" done. I
think we can also safely assume that the investors who bought the
16Million shares aren't in it for a 20% flip.
What's its value? This is where the Wall Street story comes in. Alex
Brown and Montgomery Securities are in registration with an offering
for an IPO by the name of PALEX INC., Houston based, also in the
pallet market. They are offering 30% of the company for approximately
US$30million. I cannot verify the following information about PALEX
yet, but I am told that it is a company formed from the merger of 3 of
Pallet Pallet's last acquisitions that never went through when PLT
started to crater. I am also told that PALEX's sales are about US$100
Million (all of this could be confirmed by anyone with the
prospectus). Based on this, the pricing of PALEX is 1 x sales.
The current market cap of PLT is approximately C$20-25Million (about
60 million shares). It's sales are US$100Million. You do the math. A
sharp biz school graduate might even suggest to PALEX 's management
that if they can sell their business at 1 x sales, he knows a place
where they can get more business a whole lot cheaper than that!
BTW, for the record, of course I'm long.
I will respond to e-mails, but I can't guarantee to respond to
postings. I definitely will not respond to any snide, sarcastic or
otherwise inflammatory comment, only informed discussion. I would
particularly appreciate hearing form anyone who can confirm/contradict
my hearsay information about the financial status of PALEX. |
