Friday, January 26, 2018

MGTC: Cheap with a Side of Dark

Megatech (MGTC) is another in my line of super cheap yet unfortunately dark companies.  It's also very illiquid so good luck on that front.  This will be a quick post because there's not much to the story: real company, real dark, real hard to get info... and real cheap.

Currently trading at 10% of book.

***
Update 1/27/2017: How funny. I published this post last night then this morning MGTC sent the latest financials. I've updated the numbers with 2016 data.
***


MGTC makes automotive training equipment.  Think lab equipment for training technicians and mechanics in trade school.  Not the most exciting arena but it's stable.

Here are the most recent numbers I have:
  • share price $0.03 
  • BV $1.2M in 2016 $1.2M in 2015 vs $1.2M in 2014
  • no long term debt
  • 3.9M shares out
  • rev $1.83M vs $1.85M vs $1.86M
  • earnings hovering around nothing
    • net income -$7.4k vs $9.2k vs -$71k 
The main problem is lack of information.  I have financials for 2013-2015.  In June of 2017 they told me the 2016 annual report would be ready soon but I haven't seen it.  I recently started bugging them again to give me some numbers but I'm not holding my breath.  MGTC fits in with all the rest of these dark companies that are very slow with the financials.  The company will respond to email sometimes and that's the only way I've gotten any information.

As for what's going on and what are their plans, I have no idea.  I've never talked to them.  They de-registered from the SEC in 2004.  At that time Vahan Basmajian was CEO, aged 65.  Now Vahan's son Varant is CEO, age 52.  According to the last proxy in 2004 Vahan and Varant own 28% of the shares.

Just looking at the website you can see they are coming out with new products so at least we know they are alive.  It looks like they're diversifying as they have a lot of alternative energy equipment that I don't remember seeing before.  Things like solar panel and wind turbine training equipment.

On the subject of my thesis I have none.  The stock is cheap and I am patient.  Latest price is $0.03 giving a market cap of $0.12M.  I'd put value around $1.5M = $0.38 per share.

The stock doesn't do much.  There are spikes every so often but on the whole it hasn't moved in almost 30 years.  You can see the stock crumble after they stopped communicating.





Super high upside but the question is will it ever be realized and that I don't know.  Maybe the son will get bored and sell some day.

--Dan
Disclosure: long MGTC

12 comments:

  1. Did they ever have any earnings? Is this something you think will eventually earn a return or is this something that should just be liquidated?

    ReplyDelete
    Replies
    1. They are like many of these little companies, just sort of scraping by. If a product catches on then revenue and earnings could take off, but who knows. For now they are just doing their thing. I don't think they should be liquidated. There is not an abnormal amount of cash or anything like that. In 1994 they earned $240k on $4M in revenue. Anything is possible

      Delete
    2. Well how much is the CEO paying himself? How much does the CEO and father own in terms of % of this business too?

      Delete
  2. The whole co is worth $120,000? Dan buy the company and liquidate it! :)

    ReplyDelete
  3. Any ideas as to what the assets are and how much these guys are paying themselves?

    ReplyDelete
    Replies
    1. The assets are normal business stuff as far as I know: cash, receivables, inventory. I don't know if they own any real estate.

      Delete
    2. I don't know pay. The annual report doesn't list that.

      I see they do have about a half million of "building and improvements"

      Delete
  4. I emailed Megatech for financials a long time ago and never heard back. Then, I called them in December, was given an email for a guy in accounting, sent him a message, and he gave me the 2016 numbers in a few days.

    Boring stock, but it's worth owning a few shares.

    ReplyDelete
  5. According to masslandrecords.com, it looks like they own their office unit in Tewksbury.

    ReplyDelete
  6. How do you go about finding all of these sub 5mm market cap stocks that are actually viable and have operations? What sites do you use?

    Do you screen or just get a list then sort by Market Cap and start with the "A"'s?

    ReplyDelete
    Replies
    1. Unfortunately I don’t have any special secrets for you. One large benefit of having a blog is people email me ideas. I bought RBCL after a reader emailed me about it. Other interesting ideas I’ve seen recently are ERMS and TMED.

      Most of my ideas come from one friend who has been doing this for decades and spends his days reading filings.

      I talked a bit more about it an interview with Jan Svenda I did last year. http://www.nonamestocks.com/2017/09/an-interview-with-nonamestocks.html

      Delete