McCoy Re-buy

Very similar to Flint Energy Services (FES.to), I have been buying shares of McCoy Corp. recently (MCB.to). I sold MCB late 2010, so this is my second kick at the can.

You can see from the chart that MCB has done a good job of taking advantage of the increased economic activity. Ebitda margins are near record and ROC is on its way up. The CCC is at an all-time low.

Why is this…

MCB has been deploying it capital intellegently. They recently (June 2011) announced that they would divest Rebel Metal Fabricators. Rebel manufactures and supplies vac and hydrovac systems to customers operating mainly in Western Canada. Earlier (February 2011) they announced another division sale, McCoy Parts and Services.

Apart these operations aren’t extremely meaningful. But together they show how important capital allocation is to management.

MCB had about $0.68/share in cash at quarter end. They recently announced they would issue a quarterly dividend of $0.03/share. Giving MCB a yield of 3.87%. I would expect the dividend to grow quickly going forward.

As you can see, MCB is trading near the valuation low of q4 2008 on an EV/Ebitda basis. Though we are at a larger premium to tangible book and EV/Revenue. You can see that the share price rebounded sharply and the stock appeared expensive on ttm EV/Ebitda basis. Now that those expected earnings have come in (quicker than I had expected), and shares are down 20% or so, the company is cheap enough to warrant purchase.

As long as we aren’t at peak cycle, I think MCB is worth picking up. Given the current economy and outlook, $4.50 doesn’t seem like a far stretch for fair value.   Upper limit fair value could be $6.00, but we’ll talk at $4.50 (if we get there).

Dean

Disclosure: The author is long MCB.to at time of writing.

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One response to “McCoy Re-buy

  1. Pingback: McCoy Re-buy - Petty Cash - The B-Hive - WAGGLE

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