I did most of my PGNT buying a year ago and with the stock up over 200% I'm still adding. This one may keep going so let's take a look.
It's been a while since we played our favorite game, Price That Stock! Here we go. No looking at the stock price before playing. Humor me
We'll play a few rounds. What do you think it's worth? First the standard NoName stats:
- revenue $108M in 2020 vs 112.9 in 2019 vs 85.1 in 2018
- shares common 1.7M vs 1.7 vs 1.7
- no preferred or warrants
- book value $11.8M vs 8.2 vs 6.6
- net income $3.12M vs 0.99 vs 0.95 after taking out loan forgiveness
- EPS $1.84 vs 0.58 vs 0.56
But the share count, that I do have comments on. It is beautiful to see. When Sham took over in 2014 there were 1.605M shares outstanding. In 7 years Sham has increased revenue by 100M while adding 100k shares. This is how you do it. In fact PGNT went as far as amending the Company's certificate of incorporation to decrease the number of authorized shares of common stock from 20,000,000 to 4,000,000. in 2019! You don't see that very often.
On the subject of Sham Gad let me mention some good and some bad. On the good side he owns a third of the common and is still buying (100k more shares in 2020). But he has a checkered past. He had a theft charge in 2004 from a company he worked at. This company dug up some dirt on false statements made by Gad to convince shareholders not to vote him onto the board. Gad is the biggest risk in this story.
Overall my feeling is the numbers don't lie and those numbers look kinda like a snowball rolling down a hill to me. Long term it's a bet on the CEO Mr. Gad which you may or may not want to take, but man is it cheap.
disclosure: long PGNT
"...and with the stock up over 200% I'm still adding". Interesting. I would rather not buy more because it has gone up so much. I prefer stocks which are still in the dog house.ReplyDelete
but the stock is small, cheap and has a strong "momentum". A nice combination.
I agree but it's cheap. Most of my buying was a year ago at $2. I prepared notes for a blog post and was still buying when the stock starting moving so I just froze and did nothing. Later in the year as the CEO kept making big share purchases I bought some more. And I've been buying more since the latest annual came out showing that great Q4.Delete
Hey Dan, you are right, earnings really have been great on this one. Just one thing really holding me back has been where those cash flows have gone: currently looks like Las Vegas Real estate. Remains to be seen if this is just an astute investor making bargain purchases or something like empire building. Fingers crossed for the former, and good luck to all. Keep up the good work Dan!ReplyDelete
Which statements in the Rubicon letter are false?ReplyDelete
sorry that worded strangely so I've rewritten that sentence. I meant the false statements made by GadDelete
It appears the three properties presently owned by Ohana are at Waldorf Astoria:ReplyDelete
Gad is the treasurer of the HOA: https://opencorporates.com/officers/154625524
Given his history of self-dealing and the fact that SI recently leased an office in Las Vegas, what are the odds he occupies one of the Ohana properties?
what is his "history of self-dealing"? Do you mean the $4k he stole from the store he worked at in 2004 that I linked https://www.onlineathens.com/local-news/2012-01-15/old-theft-charge-could-lead-longtime-athenians-deportation, or is there more?Delete
btw here's a podcast Sham Gad recorded with Bobby Kraft in Sept 2020. Gad recorded it at one of their Vegas buildings and said he was there on a business trip. https://planetmicrocap.podbean.com/2020/09/Delete
Yes, I'm referring to his theft of funds that were intended to go to charity.Delete
Another question - when did he graduate from Stanford? The Paragon says he attended the Graduate School of Business Executive Program: https://pgntgroup.com/management-team but as recently as last year there was no mention of the same credential: https://web.archive.org/web/20200131110805/http://pgntgroup.com/executive-management/executive-officers/
It might be a shorter several month long credential type thing.Delete
This standard page lists someone of his name on a project team in 2019. https://www.gsb.stanford.edu/alumni/volunteering/act/projects/stanford-university-voice-initiative
This 2014 Paragon press release mentions John Molloy completed "a three month Executive Management program at Stanford University." https://www.prnewswire.com/news-releases/paragon-technologies-announces-key-executive-changes-263063931.html
Maybe Gad did the same management program Molloy did. You could contact PGNT and ask
The decision to invest in Las Vegas real estate is a valid concern. It does appear to be roughly cash flow neutral (67k loss in operating income, which should include depreciation on a rental property), so at least it shouldn't hurt the core business. I guess I would rather see them invest in an easy to manage investment than try to do something crazy, but they are probably banking much more on price appreciation than cash flow.Delete
realized I forgot to mention one of my favorite things which is PGNT reduced the number of authorized shares from 20M down to 4M in 2019 so I've added a line about thatReplyDelete
Nice numbers.Cheap company and fantastic risk-reward opportunity.ReplyDelete
Like very much all your ideas.
Thanks for sharing.
You're welcome. Thanks for reading and commenting back to meDelete
I haven't dug into their recent filing, but I also purchased a while back in the 2s. Forgot about it to some degree and bought a little more this year around $5. Haven't been patient enough to get as large of a position as I'd like. I have found myself wondering what it will take to get a normal P/E on this stock....get smallish spikes on good news, but certainly seems like it should be higher than it is at this point.ReplyDelete
I agree it's weird for the stock price to be so low. They are fully filing and have been for a long time so it's not a lack of info. I guess the market doesn't trust them. Whatever, I'll take it and wait for something to happenDelete
Thanks for the write up! Nice to have this new one on my radar.ReplyDelete
Any thoughts on 2021 outlook for the Automation biz? Q1 numbers were significantly down, and Sham mentions in the shareholder letter that bookings were $4M to start the year, down from $7M in 2020. Certainly COVID was good to SI Systems - just wondering how good.
not many thoughts on my part. Just watching and waiting. we'll see what the next Q saysDelete
PGNT is down a bit...there is a problem with Colombia. CV-19 is running rampant, and there is also a tremendous amount of social unrest and rioting. That can't be good for their distribution business.
I think the question becomes just how bad the situation is in Colombia. Does it last 1-2 quarters, OR 1-2 years? OR is it permanently impaired? I tend to think that it lasts a couple of quarters until the vaccination rates get a lot higher.
I also wonder about the Vegas properties. I was skeptical on the 1st purchase, but that has worked out well. The new purchases seem to have good financing behind them...but it is at the peak of a cycle? Sham addressed that in the latest quarterly conference call by admitting that property prices are indeed high, BUT that they got good financing AND that the market is very thin on the types/class of property that they are getting. Supply of that class of property is limited, so maybe they have some downside protection?
Finally, if PGNT prints a bad/weak quarter, might the stock go down substantially? Assuming it is a temporary problem, could be a buying opportunity?
Any idea what the false statements to the government agency were? Are they related to Sham's first conviction? I like him and think he was just a stupid kid back then seems like he is legitimately sorry.ReplyDelete
I don't know. they're mentioned here a bit: https://www.businesswire.com/news/home/20160526006535/en/Rubicon-Technology-Sends-Letter-StockholdersDelete
nice Q that just came out. the stock is cheap
A lot of very good reports came out lately for low float stocks and stocks crushed. The market is weak. Although S&P at around all time highReplyDelete
I'm going to trust Sham if he's really out to enrich himself at the expense of shareholders. Then he certainly has a strange way of doing it especially given PGNT's strong preformance and investor friendly policies.ReplyDelete
Arent margins too low? Hardly any free cash flow. What is the catalyst here?ReplyDelete
I don't see a catalyst.Delete
as for margins what do you mean? too low for what?
The Catalyst will be an uplifting to the NYSE-AMERICAN they mentioned it in the last annual call.Delete
Actually, I think the margins are high...very high.ReplyDelete
The vast majority of their revenue comes from computer hardware distribution. Distributors are low margin. Some distributors are LUCKY/GOOD to get a 1% net margin on their sales.
PGNT is selling/distributing into a small and sheltered market, so perhaps they can earn much higher margins than what a distributor can in the USA.
Another solid quarter. I doubt it moves the price, since it is consistent with recent quarters. At some point you would think it would get a normal multiple...ReplyDelete
yep great quarter again. Earned $0.52 on the quarter and none of that is PPP stuff or anything. TTM EPS of $1.90 and BV of $7.59 for a $6 stock. talk about cheapDelete
company has been doing great. Next Q has seasonally been there best and last year earned almost a dollar on that quarter alone.
The stock should be much higher. back to waiting
Paragon technologies maybe is down because of his name. The last days "technologies" is a bad name if you have a company in the stock market.ReplyDelete
The earnings report seems to be delayed and they fired the cfo and brought back deb something seems amissReplyDelete
none of that is trueDelete
why do you think earnings is delayed? they always file the annual end of March which is still a few weeks away
and where did you hear the CFO was fired or debt was brought on?
or did you mean Deborah? sorry I thought your lower case deb was meant to be debtDelete
with the recent drop I have been wondering if we have bad news on the way. we should know within a monthDelete
Wonder if it has anything to do with the filing about RBCN: https://www.otcmarkets.com/filing/html?id=15599867&guid=nOHwkn4eJq52B3hDelete
The RBCN filing is interesting. I was also worried about bad news coming, but if there were issues would they be pursuing this with RBCN?ReplyDelete
I'm not sure what to think of the CFO only lasting a couple of months. Could be anything...very bad or completely insignificant. I will be interested in seeing Q4, I can't see any reason why it would be bad. Exchange rates have been favorable in the last couple of weeks. I think it is driven more by the automation business, so backlog will probably be key. Distribution is relatively low margin.
With the price action in real estate over the last couple of years, you would think they have some pretty significant equity in their properties already as well. I bought more when it fell down to the low 5s, but have a full position at this point.
I take the RBCN news as positive for PGNT. I think it means they have excess capital to employ which likely means the next report will be good, inline with previous Qs.Delete
I think the PGNT offer for RBCN is too low to really work but it would be great if it did. I take it to mean PGNT is in good shape
Agreed, I can't see them accepting less than the stock was trading at a few months ago. Maybe in the 11-12 range...but even then, their main complaint is that insiders are getting all the benefits at the expense of other shareholders. I think it would take a significant premium to get them to give that up. Maybe they can get support from the other large shareholders.ReplyDelete
I think the better question is if they don't get this to go through, do they purchase the identified target company on their own? Or does it only work with the NOLs? I guess it may also be too big for PGNT to do on their own as well...
Very good news for parangon!ReplyDelete
Earnings look pretty solid with $1 EPS in Q4 alone. If you adjust for PPP from prior year, employee retention credit this year and ignore unrealized gain/loss on securities, it is pretty solid growth.ReplyDelete
Unfortunately, I doubt this moves it much. Pretty consistent for the last couple of years..
Yep another good Q. One bad part was the foreign currency adjustment but still super cheap. Interesting to see Gad get no bonus for 2021 which gives me some hope it's tied to stock performanceDelete
I mostly ignore the fx adjustment, but I agree it does have an impact on the stock. Do you have any viewpoint on that going forward? I see the peso has strengthened since the end of the year, but the long term chart doesn't look great...ReplyDelete
I would have thought that it was primarily driven by politics, but it has continued to weaken after a short correction at the end of 2020.
just makes me wonder how much of the cash is usable in the US versus sitting with subsidiary in Colombia.Delete
That is a valid concern, I don't see a breakout of that at all. I know I have seen corporate charge management fees, etc to bring back some of these funds, but I didn't see them disclose anything like that. I'm also not sure what the cost is to bring money back from Columbia.ReplyDelete
It should be noted that the FX translation adjustment is on the entire balance sheet, so it could be minimal cash sitting there. I do see they have lines of credit with balances in the foreign subs, so I would assume they don't have a lot sitting there.
18th May annual metting audio file. Very transparent and optimistic.
Hope fantastic years to come for the company.
Seems the video isn't posted there anymore anyone know where I can find it? Any ideas why they took it down?Delete
You can email me, I have it saved. I don't know why they took it downDelete
I haven't gone through the 10Q report in detail, but on the surface it seems like a disappointing quarter. Rev was down over the previous 3 quarters and is about the same as the period a year ago. EPS was only 0.22, which is lower than any of the previous 4 quarters. Does anyone have any thoughts?ReplyDelete
A disproportionate amount of net income is related to the automation business. That is where the revenue is down most. I know I have read in the past that the revenue can be lumpy based on timing of projects for customers. I believe they only provide backlog data in their annual filings....at this point, I think I'd need to see another quarter or two before having a strong opinion on whether it was just timing of sales or a larger issue with declining business conditions.ReplyDelete
On the distribution side, I'm sure they are seeing some margin pressure with higher fuel/shipping costs, increased interest rates and the weaker peso, but nothing too major at this point. I would say the earnings were disappointing based on how much they have beaten expectations the past year plus, but not too bad when you factor in the few items that were definitely working against them this quarter.
Any concern with the change in government in Colombia? There are some who think Colombia will go the way of Venezuela with the new ex-terrorist very left leader.ReplyDelete
that is not something I've given any thought toDelete
another great Q. $1.05 quarterly EPS. $9.82 book value. $3.90 in cash + securities.ReplyDelete
TTM earnings per share of $2.87
Stock has fallen to $6.50 for I don't know what reason.
Maybe the stock has fallen because of political issues in Colombia. Good results, hoping the stock follows results. Also waiting results for EKCS, lets see...ReplyDelete
God I wish they'd just buy back some of the float. A relatively small amount of money here would go a long way.ReplyDelete
Has sham spoke at all on potential of uplisting?ReplyDelete
Yes I feel like someone asked him about it at the last annual meeting. I don't recall specifically but I think he downplayed the chances, just saying that's not really where he wants to spend money and effort.Delete
Sham wants to be Buffett. He releases numbers on Friday night, he has a super basic website and never puts out press releases. I feel like he saw BRK stock do amazing even though Buffett never did a split and he wants PGNT to do similarly well without any promotion. That is my guess. I don't think he's going to uplist
Agree with avoiding stock promotion. Focus on creating value has worked so farDelete
How reputable is their accounting? You have more experience with this part of the market — what do you need to look out for with pink sheet stocks? Trying to go through all the scenarios where there could be outright fraud
Obviously the skin in the game and capital allocation decisions from management makes me more optimistic than 95% of NYSE stocks. Unbelievable risk/reward, potential for long term compounding and multiple expansion. Need some more trust with my understanding of reporting standards before I concentrate further
I'm no accountant. Seems fine to me. What I look at is how does the company talk and what does the balance sheet look like. Do they keep diluting constantly. Do they always talk about the next thing and never finish the first. Does the CEO have side businesses that he funnels money through back to himselfDelete
I also do not concentrate because I feel like anything can happen
Any comments on CVV's rise?ReplyDelete
New silicon carbide stuff is exciting and growing. I hope it keeps going and numbers back up the potentialDelete
another great Q reported yesterday from PGNT in the 10k. The stock is cheapReplyDelete
on the year PGNT earned $2.76 per share. Book value rose 23% to $10.60 per share. $3.12 in cash. And here the stock has been sitting at 7 for months. 2x earnings and 70% of book. great balance sheet
3x the average earnings over the past three years. ridiculous
Fantastic results! Smallcaps are being punished, we have to be patient.ReplyDelete
Not sure why they are paying down accounts payable so fast unless customers in colombia are demanding payments earlier. Not a huge deal thoughReplyDelete