First, let me say I’ve been quite lax in my posting, and for that I’m sorry. Real life sometimes gets in the way of these things! I will try to respond to all of the backlog of comments in the near future, as well as start posting content soon!
Anyway, I wanted to quickly mention a couple to happenings within my portfolio that show the importance of reading through filings and checking the fine print. Often times, the real big news stories can be buried deeper than the headlines.
For example, check out the disclosure of annual director election from Addvantage (AEY). Insiders control enough shares to effectively determine the outcome of any election, so why bother reading the results, right???
Look at the last paragraph of the release; the company paid off $9.4m in debt- basically all of their debt except for a small mortgage! This debt paydown frees them of debt covenants and gives them the option of repurchasing shares with their excess cash. Using some rough estimates, $AEY should have $3m in excess cash after the debt paydown. With a market cap of $22m, that’s some serious share repurchase potential. Remember, the company trades for under 10x P/E, 0.6x book value, and less then NCAV, so share repurchases could drive meaningful value creation.
For further evidence, check out OPST’s recent 10-Q. Revenues were down 24% YoY; time to panic, right? (Since we’re panicking, I’m assuming we’re just going to ignore the ~$11.75 per share in excess cash and investments)
Not quite. Backlog is up 10-15% YoY, and the company announced expected sales for the second quarter. Doing a bit of quick math, you can see the company’s expected sales for 2Q plus their sales from the most recent quarter ~ = last year’s first half sales. In other words, revenues were likely down due to some combination of timing issues and sales bottoming in the second half of last year. Sales look to be at least flat and are likely increasing significantly as their cycle gains strength.
ATPG may be a bit guilty of this as well. They announced a $15m expansion of their first lien facility and a slight drop in the interest rate; what they didn’t really highlight was asset sales + pending asset sales of $160m. Given how cash strapped the company is, that’s some pretty big news! Now, it’s true that we don’t know pricing and terms of the sales… maybe the company was trying to hide that? But still, for a company desperate for cash, that’s some interesting news.
One last bonus tid-bit: it wasn’t exactly buried in the fine print, but Asta (ASFI)‘s new share buyback program has to be considered a huge plus. Management had frequently said the reason they weren’t buying back shares was due to timing concerns. This program takes those concerns off the table. The program expires in one year, and it could be ASFI’s way of saying that, come hell or high-water, they plan on buying back 15% of shares within the next year if the prices stay this low.
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