Hey Blackie!!!... These the guy's u talking about???...
KIK Tire Technologies Inc -
M3 Research: "Growth at the No Flat Tire Company"
KIK Tire Technologies Inc KIK
Shares issued 9,255,600 1999-02-16 close $0.25
Tuesday Feb 16 1999
M3 Research INSTITUTIONAL RESEARCH
RATING: Buy
February 1, 1999
DJIA: 9,358.83
NASDAQ: 2,505.87
TSE 300: 6,729.10
KIK Tire Technologies Inc. (KIK.AL - C$0.45)
"Growth at the No Flat Tire Company"
52 Week range - Common C$0.93 - C$0.09
Common Outstanding (E) 10,418,000
Market Capitalization C$4,688,100
Estimated Float (shares) 7,478,000
Fully Diluted Shares (E) 10,418,000
Long Term Debt C$446,241
Debt / Equity Mkt Cap. 9.5%
Exchange Rate C$1.00 = US$0.66
Market Alberta Exchange
Auditors: Deloitte & Touche
Fiscal Year Ending
-----------------------------------
01/97 01/98 01/99 Est 01/00 Est
------- ------- --------- ---------
Revenue (C$000) $2,156 $2,422 $3,600 $5,077
Net Income (C$000) -$654.6 -$674.4 -$300.0 $121.7
Earnings per Share -$0.10 -$0.09 -$0.03 $0.01
6 Months Ending
-------------------
07/97 07/98
-------- --------
Revenue (C$000) $1,203.1 $1,702.3
Net Income (C$000) -$236.2 -$183.4
Earnings per Share -$0.03 -$0.02
(E) Estimate
Investment Conclusion
We are initiating coverage of KIK Tire Technologies Inc.
based in Calgary, Alberta (KIK.AL) with a Buy recommendation.
KIK Tire sells no flat, polyurethane tires and tire
assemblies for medical, lawn and garden, and industrial
applications. Sales at KIK Tire have grown at a 49.7%
compounded annual rate over the past three fiscal years
including the current year ending January 1999 for which we
project $US 2.4 million in revenue. This growth is the result
of careful management planning which includes William
Knooihuizen, Director and Executive VP who joined the Company
in 1993. Mr. Knooihuizen is a chemical engineer who has over
25 years of experience in polyurethane processing technology
and has developed strategic supplier and distribution
arrangements for KIK Tire.
KIK Tire operates a tire manufacturing plant based in
Oceanside, California and is headquartered in Calgary,
Alberta. After meeting with management on December 17th, we
are projecting sales revenue to increase 37.5% in 1999 over
1998's total to $US 3.3 million. Our twelve month price
target is C$2.00 based on aggressive capital budget in 1999.
In summary:
*To accelerate sales growth, the Company has developed and
is now marketing complete tire assemblies (hub included) to
broaden demand from customers. New assemblies being
developed will reduce prices closer to those of rubber
tires.
*With a C$3 million capital budget in 1999, EPS could
approach C$0.05 on over C$5 million in revenue in the
fiscal year ending Jan. '00 and in the fiscal year ending
Jan. '01, EPS could approach C$0.20 with revenue at C$12.4
million. M3 and Pickens Group, Inc. are supporting the
Company's plan to source funds to accelerate profit growth.
*KIK Tire's microcellular polyurethane tires are lightweight
and last 4 to 10 times longer than rubber pneumatic tires
depending on molded density. Combined with the benefit of
no flat tires, superior value is created for customers.
*KIK Tire's manufacturing plant is operating at 30% of
capacity and has tremendous operating leverage to boost
gross margins from 22.7% recorded in the year ending
January 1998. Operating leverage allows KIK to be more
price competitive with air-filled pneumatic tires.
Incremental unit production cost consists primarily of raw
materials.
Insider ownership (E) 2,740,000 (26.3%)
30 Day Avg. Daily Vol. 12,300
Fiscal Year January
EPS 1999(E) -$0.03
EPS 2000(E) $0.01
Summary
KIK Tire Technologies began trading publicly in September
1987 as a Toronto, Ontario based manufacturer of wheelchair
tires. In 1989, the Company acquired international rights and
technology to manufacture microcellular polyurethane (MCP)
tires from Urethane Technology, Inc. (UTI) based in Santa
Ana, California. At that time the Company relocated its
manufacturing operations to Southern California. From 1989 to
1995, KIK Tire was primarily a research and development
company. The Company greatly improved upon UTI technology to
develop a fourth generation of chemical formulation and a
third generation of manufacturing equipment. Perfecting the
chemical formulation to develop highly resilient materials
was the most difficult hurdle to overcome. A total of C$7
million has been spent on development including engineering,
tooling, testing, and manufacturing equipment. During the
first six months of 1998, the Oceanside plant began
generating positive cash flow which will accelerate with
production increases.
In 1995, KIK Tire entered into a strategic alliance with
ARNCO for the marketing of the Company's tires under ARNCO's
private label "Carefree Tire". ARNCO's salesforce and network
of tire dealers actively market Carefree tires. ARNCO is the
world's largest international supplier of tire flatproofing
materials and sealants.
To facilitate the transition to maintenance free polyurethane
tires by major original equipment manufacturers (OEM) in key
industrial and lawn and garden markets, KIK Tire is now
manufacturing complete tire assemblies which reduces the
entire cost to the OEM. The tire and rim combinations from
one supplier simplify and improve quality for OEMs. KIK Tire
will introduce innovative assemblies with unbeatable quality
and more competitive pricing in its lawn and garden line in
1999.
The Company's production process requires the dispensing of
catalyzed liquid chemicals into a spinning mold. This
centrifugal casting of activated polyurethane base stock raw
materials results in a tough molded polymer with a uniformly
dense porous foam core. Production cycle time to produce an
MCP tire is measured in seconds as opposed to minutes for
rubber pneumatic tires. KIK tires can be designed and molded
to virtually any tread specification. The spin casting
results in the tires being perfectly balanced.
Markets
The home medical equipment (HME) market provides 50% of the
Company's revenue. KIK Tire produces "no flat tires" for
wheelchairs, scooters, and walkers. Everest & Jennings, the
second largest HME company is one of KIK Tire's largest
customers of no flat wheelchair tires. The market for no flat
replacement tires is also more profitable.
Industrial tires currently account for 35% of the Company's
revenue and provides the greatest opportunity for growth.
Industrial applications include hand carts, portable
machines, and dollies for shippers and manufacturers. KIK
Tire is selling its industrial tires in Europe through a
facility in the Netherlands. Europe already accounts for a
significant portion of KIK's sales and shipment volume should
increase substantially.
Lawn & Garden, including golf carts, currently contribute 15%
of sales revenue. Tire assemblies are made for mowers and
wheelbarrows. The Company has developed an entire assembly
for the wheelbarrow market. It is currently negotiating with
large equipment manufacturers to make KIK Tire's assembly an
intergal component of the wheelbarrow.
Management
Officers and Directors of the Company including major
shareholders own or are beneficial owners of 26.3% of the
shares outstanding. Management has extensive experience in
all aspects of polyurethane applications. The Company has no
institutional debt. Debt is held by Directors or individuals
who have been active shareholders in the Company.
Don Dean has been President, CEO, and a Director of the
Company since June 1987. Prior to joining the Company, Mr.
Dean was an engineer and plant manager for the Toronto
Marketing and Chemical Distribution Terminal for Shell Canada
Limited. Between 1984 and 1987, Mr. Dean was President of a
company that manufactured polyurethane foam insulated
fiberglass buildings and shelters for the energy industry.
William Knooihuizen has served as Executive VP, Manufacturing
& Marketing and as a Director since May 1997. He joined KIK
Tire as a plant manager in May 1993. As a Chemical engineer
he has over 25 years of experience in urethane processing
technology, where he has held the position of VP/General
Manager for Dam Industries, Inc., United Foam Corp., and
Evanite Permaglass.
New Developments
To accelerate sales growth and make KIK's tires more price
competitive, the Company has developed and is now marketing
complete tire assemblies (hub included) to price its tires
closer to the price of cheaper rubber tires. An immediate
developmental project to be undertaken is the design,
engineering, tooling, and prototyping of a more advanced tire
and wheel assembly incorporating a new hub designed
specifically for KIK's tire technology. This product can be
priced at levels competitive with cheaper pneumatic tires,
which considering all of the additional physical and
operating advantages of KIK tires, should significantly
increase revenue and profitability of the Company.
The full wheel assemblies KIK now produces utilize standard
pneumatic hubs that require more urethane mass in the tire
with added expense. The new assemblies that the Company will
introduce will include a hub exclusively for KIK tires. The
hub will mechanically grip the tire and extend upwards into
the tire area. Urethane mass required for the tire will be
reduced and thus reduce the cost of the tire and result in
more competitive pricing versus rubber pneumatic tires.
Polyurethane feedstock is more expensive than an equivalent
amount of rubber compound used to make rubber tires, so a
reduction in polyurethane mass offsets the higher feedstock
cost of polyurethane.
Valuation
KIK Tire Technologies has collectively spent C$7 million on
research and development to develop a broad line of MCP
tires. Over 200 different tire sizes have been developed.
Having perfected chemical formulations, the Company's capital
budget is now geared to expanding production to utilize
existing plant capacity. KIK is producing complete tire
assemblies to make it easier for a broad range of original
equipment manufacturers to purchase its products.
Surveying KIK's competition, we found two companies that make
MCP tires but are not real competition for KIK. The largest
indirect competitor based in Southern California has sales of
approximately US$ 5.0 million. A private company, it
specializes in wheelchair tires and sells approximately 70%
of its output to one large home medical equipment company.
This competitor has experimented with bicycle tires but has
not yet achieved success. American Tire Corp. (OTC: ATYR),
based in Ohio has raised capital and is attempting to market
a "flat free" MCP bicycle tire. While the tire has achieved
positive test results, American Tire faces the obstacle that
all polyurethane bicycle tires face. Unless bicycle
manufacturers are willing to dedicate special tire rims to
polyurethane, the MCP tires cannot be fit tight enough on a
standard pneumatic tire rim. Bicycle manufacturers must
purchase a polyurethane tire and rim assembly for these tires
to gain acceptance. To date, bicycle manufacturers have been
unwilling to commit to a polyurethane tire because these
tires cannot also be used with rubber pneumatic tire rims.
Another reason is that an MCP bicycle tire is more expensive
than a rubber tire increasing the final retail sticker price
for the complete bicycle.
KIK Tire Technologies, Valuation Measures
KIK Tire Technologies American Tire
Symbol: KIK.AL Symbol: ATYR
Market: Alberta (ASE) Market: OTC
$US $(Canadian) $US
Price 1/29/98 $0.30 $0.45 $1.44
52wH $0.61 $0.93 $5.50
52wL $0.06 $0.09 $0.75
Shares out.(mil) 10.42 3.40
Market cap($mil) $3.09 $4.69 $4.89
Float sh.(mil.) 7.48 1.70
Book value/sh. - $0.54
Premium to BV/sh - 166.2%
Trailing 12mo
EPS diluted $(0.05) $(0.08) $(0.57)
PE ratio T12 - -
T12=Trailing 12 months
Sales ($000)
6mo. 1998 $1,702.3 $314.8*
Incr. (%) '98/'97 41.5%
Net Income ($000)
6mo. 1998 -$183.4 -$1,639.8*
Cash Flow ($000)
6mo. 1998 -$141.8 -$903.2*
Gross Margin(%)
6mo. 1998 15.4% 29.6%*
Gross Margin(%)
12mo. 1/98 22.8%
* 9 months ending March 1998
Exchange Rate C$1.00 = US$0.66
Because KIK Tire is diversified in its product lines and is
much futher along in building and marketing product lines
such as lawn and garden and industrial applications, KIK Tire
Technologies is better positioned to grow its business beyond
the home medical equipment market. Most of the Company's
plant operating expenses are fixed costs giving the Company
tremendous operating leverage as sales increase. This will
reduce the per unit cost of production and provide more gross
margin to KIK to improve profitability and also price MCP
tires more competitively with conventional air-filled
pneumatic rubber tires.
Summary
The ratio of unit price to tire tread life is already
superior for polyurethane tires versus rubber pneumatic
tires. This value achieved by consumers is in addition to
time saved with a maintenance free tire and reduced downtime
by industrial users. Operating leverage combined with new
tire assemblies marketed to customers will allow KIK Tire to
price product that will make this ratio even more compelling
as sales volume increases. Sales at KIK Tire have grown at a
49.7% compounded annual rate over the past three fiscal
years. With capital spending on new production equipment in
1999, EPS could approach C$0.05 on over C$5 million in
revenue in the fiscal year ending January 2000 and in the
fiscal year ending January 2001, EPS could approach C$0.20
with revenue at C$12.4 million. Our twelve month price target
is C$2.00 based on an aggressive capital spending program in
1999.
KIK Tire Technologies, Inc.
Balance Sheet ($Canadian) July 31, 1998
July 31, Jan. 31,
1998 1998
----------- -----------
ASSETS
CURRENT
Cash $94,592 $144,554
Accounts Receivable $595,638 $455,187
Inventories $206,251 $199,279
Prepaid Expenses $15,685 $12,172
Capital Assets $279,727 $298,597
Deposits $14,791 $13,470
TOTAL ASSETS $1,206,684 $1,123,259
LIABILITIES
CURRENT
Accounts Payable
Trade $697,839 $637,743
Other $551,121 $471,960
Current Portion
of notes payable $58,273 $55,460
Current portion
of loan payable $3,761 $6,460
TOTAL CURRENT LIABILITIES $1,310,994 $1,171,623
Deposit received for shares - $5,250
Due to Captive
Air Manufacturing Inc. $269,795 $269,795
Notes payable
and accrued interest $176,446 $71,153
TOTAL LIABILITIES $1,757,235 $1,517,821
CAPITAL DEFICIENCY
Share Capital $8,108,198 $8,099,448
Deficit ($8,650,919) ($8,467,491)
Foreign currency
translation adjustment ($7,830) ($26,519)
TOTAL DEFICIENCY ($550,551) ($394,562)
TOTAL LIABILITIES &
CAPITAL DEFICIENCY $1,206,684 $1,123,259
Disclaimer and Disclosure
This analysis has been prepared from original sources and
data believed to be reliable but no representation is made as
to its accuracy or completeness. This is not intended to be
an offer to buy or sell or a solicitation of an offer to buy
the securities referred to herein. M3 Research ("M3") and/or
its officers, employees, agents and or one of its affiliated
entities may from time to time have a position in one or more
of the securities referred to herein. M3, Inc. has purchased
common stock in KIK Tire Technologies Inc. during the past 90
days. This security may not be suitable for all investors.
------------
NEWS RELEASE
------------
M3 Initiates Coverage of KIK Tire Technologies Inc.
CALGARY, Jan. 25 /CNW/ - KIK Tire Technologies Inc. (ASE:
''KIK'') announced today that Dallas, Texas - based venture
capital and institutional research firm M3, Inc., has
initiated research coverage on KIK Tire. M3 will also assist
the Company in its future corporate financing activities.
KIK operates a manufacturing and international marketing
operation for its proprietary flat-proof, off-highway tire
product line from its base in Oceanside, California.
"We have great confidence in KIK's management and their
ability to identify new and expanding markets for its unique
tire system," says Michael Pickens, President of M3. "We have
taken a substantial equity position in KIK as an expression
of our commitment, and we look forward to working closely
with their management in carrying out the Company's growth
strategies."
According to Don Dean, chairman and CEO of KIK, "Michael
Pickens and M3 have an excellent industry and institutional
following, particularly in the U.S., and we are fortunate to
have developed this affiliation. With M3, KIK will receive
the skilled support and recognition it deserves from a
significant force in the U.S. financial community."
Both Pickens and his associates have served several Wall
Street firms which have directly provided their services for
major industry investors including Carl Icahn, Gordon Getty,
and T. Boone Pickens.
KIK Tire has been developing its technology and polyurethane
tire applications for over 12 years, and now markets over 200
tire and caster products through strategic partners and
distributors world wide. KIK's markets include industrial
applications such as materials handling equipment; lawn,
garden and turf equipment applications such as wheelbarrows,
mowers and golf carts; home medical equipment such as
wheelchairs and power scooters; and sports equipment
including bicycles.
The Company wishes to advise its customers, shareholders and
interested parties that the KIK "Home Page" is on the World
Wide Web and available for review and business updates at its
Internet address
THE ALBERTA STOCK EXCHANGE HAS NEITHER APPROVED NOR
DISAPPROVED OF THE CONTENTS OF THIS PRESS RELEASE.
------------
NEWS RELEASE
------------
KIK Tire Technologies Inc. Posts Significant Revenue Increase
February 15, 1999 - KIK Tire Technologies Inc. of Calgary,
Alberta is pleased to announce that sales revenues for the
1998 operating year increased by 46% over the previous year.
Sales to January 31, 1999 were $3.5 million compared with
$2.4 million for the same period last year. There was
considerable strength in fourth quarter sales of KIK's
private labelled tire brands to the U.S. industrial and lawn
and garden equipment markets. Sales are particularly strong
to the growing network of hub and wheal manufacturers who in
turn mount KIK-manufactured tires on their hubs and sell
complete wheel "assemblies" into a wide variety of markets.
Wheelbarrow tire/wheel combinations assembled at the KIK
factory in Oceanside, CA and sold to a major distributor are
expected to increase significantly through 1999 as agreements
are concluded with large mass retailers. More information on
this activity will be announced shortly.
As announced in KIK's news release dated January 25, 1999, a
Dallas, Texas-based venture capital and institutional
research firm M3, Inc. has completed a favourable research
report on KIK's current and long term growth prospects. Their
report is available upon request. As also reported, M3 will
assist the Company in its future corporate financing
activities.
KIK manufactures a broad line of off-highway polyurethane
tire products at its California plant using its proprietary
technology. Markets include materials handling equipment;
recreational products such as bicycles and golf equipment;
wheelchairs and power scooters, and lawn and garden equipment
such as wheelbarrows and mowers.
THE ALBERTA STOCK EXCHANGE HAS NEITHER APPROVED NOR
DISAPPROVED OF THE CONTENTS OF THIS PRESS RELEASE.
THERE'S NUTHING NEW HERE...IT'S ALL OLD NEWS OTHER THAN THE SALES
NUMBERS...
Management stated that they would be cutting back on their fees...
YAHOHOHOHOHOHO!!!!.... If one checks the latest financials, one will
see that where they cut back on the management fees, they increased
their consulting fees by as much, if not more...
I still think that the product is good, but one really has to take
the Calgary maagement into consideration...
...ed |
