November 2020 Update – $CSW/ & $CSW/, $OSS.v, $REPH, $, $ $, $STC.v, $, $, $, $FRD, $, $MTLO.v

Very busy month. 3 new company’s profiled ($MTLO.v, $DWSN, $SVT) and lots of updates.

Let’s get to it.

  • Corby Spirit and Wine Limited (tse: $CSW/ & $CSW/
    • Reported their fiscal Q1 2021
      • Strong q
        • Rev up 12%
        • Opex down 14%
        • Net earnings up 68%
    • Dividend upped to 0.22/share
      • Yielding almost 6%
    • They have made notes that they don’t expect this to continue for the full year
      • Some pull forward for holiday season but higher than prior consumption may continue due to reinstated lockdowns
  • OneSoft Solutions ($OSS.v)
    • JV to expand presence in Middle East – find it here
    • Released Q3
      • In line with expectations
      • Rev up sequentially and slightly up yoy
      • Best MD&A in the Canadian small cap space
        • New pay as you go sales model being trialed
        • A few customers in the trial phase – likely to be announced in 2021
      • Admitted that doubling of 2019 rev won’t happen this year
  • Recro Pharma ($REPH)
    • reported results – mixed bag
      • rev up from Q2 but still down yoy
    • positive
      • seeing some wins in business development
      • some renegotiated of debt to push out current payments and increased flexibility
    • negative
      • still no new CEO
      • still high cost debt
  • Pulse Seismic ($
    • reported Q3 and was a tough q
    • sales down to 1.8mil
      • still generate 860k for shareholders which shows how little their operating costs are
      • interesting that they had very little traditional data sale revenue and had a transactional sale
    • trading at about 50mil MC and a little more than 14x annualized FCF at the most depressed biz environment in the company’s history
    • You can see how low the active rig count is in Alberta relative to the prior 10 years
  • Information Services Corp ($
    • Reported a pretty decent quarter
    • There was some catch up from previous quarter as the economy in Sask reopened
    • Trading around 12x EV/EBIT and a little over 4% yield
    • It will be interesting to see if they do another acquisition in a couple of quarters and/or increase the dividend
  • Indigo Books & Music ($
    • Reported fiscal Q2 2021
    • Results were better than I was expecting
    • No questions on the call from analysts – I continue to think I’m the only one watching this one
    • Also announced an addition to the board that seems like a good fit
    • The holiday quarter is the most important quarter for IDG, it will be interesting to watch as Canada managed the 2nd wave of Covid
  • Sangoma Technologies Corp ($STC.v)
    • reported fiscal Q1 in line with expectations
      • they really are navigating the current environment very well
    • still looking to deploy cash from recent financing – I’m expecting something soon
  • Viemed ($
    • Reported Q3
      • Revenue was up 22% yoy
      • Still seeing impact from covid getting into hospitals and preventing new customer wins
        • Thinking there would have been even more growth if this wasn’t the case
      • Ancillary sales at 18% and growing fast
        • I liked how they focus not on incremental gross margin as the ancillary side of the business grows, but incremental gross profit in dollars
      • Some temporary PPE and equipment sales due to the pandemic
        • Still see this as a testament to mgmt. being nimble and adapting
        • Really seeing some gross margin compression
      • Prepared remarks had dialogue about a potential acquisition
        • Will be interesting to see if they find a potential company to acquire
        • They have 32mil in cash at this point
      • I continue to hold
  • Sylogist ($
    • new CEO announced
    • seems well credentialed to execute their M&A strategy
  • McCoy Global ($
    • New credit facility that gives them some additional flexibility and lower borrowing costs
    • Released Q3 results
      • Rev way down
      • Adj ebitda positive
    • Backlog stable at 10.6 mil
    • Continue to wait while things turn around – NCAV is stable to support margin of safety
  • Friedman Industries ($FRD)
    • Reported their fiscal Q2 2021
    • Smaller loss sequentially with some better expectations for Q3
    • Capital expenditure project costs are coming in higher than anticipated but I do appreciate them investing in the business
  • Freshii ($
    • Reported Q3 results
    • Non event as they are just above EBITDA breakeven
    • Closed a few more restaurants
    • Good news is that cash balance (and my margin of safety) is being maintained
  • Martello Technologies Group Inc ($MTLO.v)
    • Released fiscal Q2 2021
      • Numbers were below what the market was expecting and MRR was lower than I thought it would be
      • I believe there was higher expectation for organic revenue growth
      • Will keep monitoring the position
    • Announced a partnership with Rapid Circle (a Microsoft Gold Partner)
      • Further validates their value to customers in my opinion

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