Comtrex Systems (COMX):
I first wrote about COMX in Apr 2016 with the stock at about $1.60. Now the stock is $2 and maybe cheaper than it was. If you don't know the story I'd encourage you to read my original post. I see two main issues with COMX: one they are dark so no one knows any of this and two most of their sales and cash are in the UK. I don't know what the company plans to do with the current and future cash. Maybe I'll try contacting them.
In short, COMX had an outstanding year with sales up 13% and earnings up 44%. Actually they've had an outstanding past few years. COMX paid off their long term debt in 2015 so a half million went into earnings and cash that otherwise wouldn't have. I hope they keep it going. See below for the numbers:
So COMX has been growing revenue at around 15% the past few years. Earnings has more than tripled. Long term debt has been paid off. Yet it's trading at 0.9x cash, 2.2x earnings, 0.4x book. Ridiculous. The stock is at $2 and I'll say it's worth around $8.
Sonics and Materials (SIMA):
I first wrote about SIMA in Sept 2016 with the stock at $0.65. Now the stock is $2.75 and still super cheap. Again please read my original post for the back story. The company is dark
A few weeks ago I sent a letter to the SIMA board reminding them of their fiduciary duty to do what's in shareholders' best interest. I told them I think it's time they put the cash to use and buy out all minority shareholders at a fair price (my suggestion $12). I received a call back from a lawyer representing the company. He said the board has discussed my letter; they are aware of the large cash balance and are evaluating their options. He said the company is private and they think they've done the right thing in being private to avoid the fees of a public company, and he doesn't think the company would get a good multiple in the public markets with little growth. He said if the company is sold shareholders will benefit from the large cash balance in the form of increased purchase price. One possibility he mentioned a few times was doing a tender offer. I did not push the fiduciary duty of a board that lets the stock sit at such a low valuation. I should email him again to make sure they are considering a special dividend. He could not give any time table on when the board may act but at least it sounds like they're moving somewhere. Fingers crossed...
On the year SIMA did well. Pretty much the same as they have been doing recently: flat revenue and a couple more million in the bank. Numbers below:
Even with the increased share price since my last post this stock is very cheap. We have a stable company with flat revenue earning about $0.60. Strong balance sheet with no debt. Currently trading at 0.6x cash, 0.4x book, 4.3x earnings. The stock is at $2.75 and I'll go with a value around $10-12.
Disclosure: long COMX and SIMA
It's incredible that such big price to actual value discrepancies exist in the markets still. Your blog is truly unique and I enjoy reading your articles (even though I invest in a different style). It's also cool that you actually get responses out of a lot of these companies when you send them emails and letters. Keep up the good work, one day you're sleuthing is going to pay off handsomely. Graham would approve of you buying companies for 20 cents on the dollar.ReplyDelete
Thanks and I'm glad you enjoy the blog. This style of investing suits me well, just buy and wait. I don't have time for more. One of the benefits of investing in these tiny companies is management will actually talk to youDelete
Sucks i couldn't buy SIMA at interactive brokers. What brokers do people use?Delete
here's a post about which brokers to use: http://www.nonamestocks.com/2016/10/brokerage-firms-otc-markets-and-dark.htmlDelete
Questrade works in Canada.Delete
Got here as a result of Berkshire/Fairfax. I'm curious as to how you find the data on Comtrex.ReplyDelete
I encourage you to read over my first post on COMX. They are dark and do not file reports so you'll have to contact them to get a report.Delete
They have a UK subsidiary which does most of their business. This sub does file reports and there's a link to that in the comments of my first COMX post: http://www.nonamestocks.com/2016/04/comx-is-as-cheap-as-they-come.html
here is the link for COMX's UK subsidiary's reports: https://beta.companieshouse.gov.uk/company/01367328/filing-historyDelete
Do you look at foreign stocks? One that is catching my attention is HERB. 0.45x earnings, selling for like 5% of its book value lol. Chinese stocks unfortunately but it's on the gray market and might be up your alleyReplyDelete
Thanks for the idea. I don't spend much time looking at foreign stocks. Those numbers are super cheap. A grey market Chinese company does not scream credibilityDelete
Very true. I wish that China had more credible companies because there are some (what seem like) dirt cheap deals right nowDelete
Dan, does COMX break out options or any other possible dilution in their financials? Is that 1.6mm shares out fully diluted? Given that they (at least the UK subsidy) are a growing tech-y company wouldn't you think there would be a good chunk of options out there. Thanks!ReplyDelete
There is no mention of options or any sort of dilution in the financials. I just sent an email to the CEO asking the question and will let you know.Delete
Heard back from the CEO. 1.65M is fully diluted. There are no outstanding options or option plans. The only recent dilution was 80k shares during an acquisition in 2014.Delete
Wow. Impressively quick response (both you and the CEO!). Thanks!ReplyDelete