Category Archives: Company Updates

May 2021 Update – $CSW/, $OSS.v, $REPH, $ISDR, $,, $STC.v, $, $, $, $, $FRD, $, $MTLO.v, $DWSN, $, $, $


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Thoughts on Market Activity

Another busy month.

This month continued the debate on whether or not the current inflation readings are transitory or more permanent. I’m not smart enough to know. Most seem to be over the worry about covid in the first world.

Personally, my portfolio took it on the chin this month. Bigger holdings in $STC.v and $ are the main culprits. I continue to believe in both businesses over the long term so I continue to hold. I’m still finding some interesting ideas, but they are more cyclical or neglected with lots of uncertainty.

Posts this month

Developments on Companies Mentioned

  • Corby Spirit and Wine Limited – $CSW/ & $CSW/
    • Reported fiscal Q3 2021
      • In line with expectations
        • Lots of lockdowns so in person dining is hit
        • But people still drinking
        • At about 4.8% yield
          • They’ve have issued special dividends before, as things recover and cash builds on the balance sheet, they may do it again as they now have almost $3 per share in cash
  • OneSoft Solutions – $OSS.v
    • Reported Q1
      • A little below my expectations
      • Last year had a large amount of data uploaded which led to a very tough comp
      • Still holding
  • Recro Pharma – $REPH
    • Reported Q1 2021
      • Results were better than expected
      • They provided full year guidance and the market reacted well
      • the business seems to have bottomed and having the visibility for full year results is a positive
  • AWM announced an initial position
    • 4.8 mil shares
    • I’m assuming they picked some up during the recent issuance
    • Can’t find a ton of info on the fund, but this does not look like a top 10 holding for them based on the last round of 13F’s
  • Issuer Direct – $ISDR
    • Reported Q1
      • Rev up 32%
      • Profitability up yoy and flatish from Q4
      • Outlook was positive
  • Pulse Seismic – $
    • Announced a data license agreement for 17mil
      • Immediate rev of 7.3mil
      • Remaining 9.7mil by April 15, 2022
      • YTD rev (17.2) is way ahead of full year 2020 rev
  • Information Services Corp – $
    • Reported Q1
      • Better than expected
      • The real estate market in Sask was stronger than I expected
      • It will be interesting to see what the rest of the year looks like given that the seasonality weak quarters were strong and there may be some demand pulled forward in parts of the business but also other parts (Paragon for example) are being held back due to stimulus
  • Sangoma Technologies Corp – $STC.v
    • Reported fiscal Q3 2021
      • Weaker than expected due to stronger CAD
      • Star2Star integration going fine
      • Not much detail on uplisting at this point
  • Velan – $
    • Released fiscal Q4 2021
      • Way weaker than I expected and shares tumbled on the day
        • Production issues in north America from selling the plant earlier than expected in 2020
        • Delays due to covid and supply chain interruptions
      • Backlog is up so it’s nice to see demand for their products
    • Still holding, going to regroup on this one
  • Viemed – $
    • Reported Q1
      • A little weaker than I was expecting
      • Guidance was pretty good
      • I really like the adjacent initiatives they have to drive customer value
  • Sylogist – $
    • Reported Q1 2021
      • Was weaker than expected
      • Seems like a mix of currency headwinds and covid lockdowns
      • I still follow and am curious if they can find some more acquisition candidates
  • McCoy Global – $
    • Reported Q1 2021
      • Was weak as expected
      • Continue to develop their product suite to support a fully automated TRS (Tubular Running Services) for end of 2022
  • Friedman Industries – $FRD
    • Ault Global Holdings announced a 416,000 share position or 6%
      • They have gone activist on company’s in the past and this will be interesting to watch
    • Provided Q4 guidance and new faciility
      • Expect earnings in Q4 to be 9.5-10.5 mil and EPS $1.37-1.52
        • The most profitable in history
      • Steel prices have been moving if you haven’t noticed
      • New facility
        • 21 mil cost
        • Estimated 3 million ton capacity
      • New equipment in Decatur
        • Started in May 2021
      • Shares have performed really well – wish I have bought some
  • Freshii – $
    • Reported Q1 2021
      • Weak as expected
      • They seem to be gaining some traction with the app and some omnichannel opportunity
      • Q2 will likely be weak as lockdowns in Canada persist, although likely not as weak as Q2 2020
      • Canada is doing well with administering vaccine and many provinces are talking about reopen, FRII now has to demonstrate how they can succeed in a more normal environment
  • Martello Technologies Group Inc – $MTLO.v
    • Launched cloud-based mulit0tenant Microsoft 365 monitoring platform
      • Sounds like this will be meaningful to revenue in 2022
  • Dawson Geophysical – $DWSN
    • Reported Q1 2021
      • Weak as expected though better sequentially
      • Maybe see a bounce in activity if oil remains at these levels
    • I’ve stopped following the company closely as the shares are continuing to trade above NCAV
    • I’m going to stop providing updates from this point on as this is really just a NCAV play
  • FAX Capital – $
    • Announced Q1
      • Book value up 6% sequentially and 24% yoy
    • Held AGM virtually – some interesting points
      • Approved the amended voluntary measures by-law
        • This gives them a little more flexibility on positions allowing for up to 2 holdings to a max of 25% of assets (each)
      • They are happy with the pace of cash deployment
      • They have monetized two investments which had led to cash on the balance sheet being higher than expected
      • I don’t think I understood the potential they see in Carson Dunlop
        • They gave some additional color on the call which was appreciated
  • Pizza Pizza Royalty Corp – $
    • Reported Q1 2021
      • As expected results were quite a bit weaker than last year as there was little to no covid impact in Q1 2020
        • Most of their markets had delivery and pick-up only for the quarter
      • Noted they are looking to grow the restaurant base by 5%
      • The tone on the call was more positive than typical
      • As Canada continues with it’s vaccine program we should see reopen happen slowly
  • Macro Enterprises – $MCR.v
    • Announced Q1 2021 and AGM
      • Confirmed min 250 rev for 2021


*Long $OSS.v, $ISDR, $, $STC.v, $, $, $, $, $, $ at time of writing

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Sangoma Technologies ($STC.v) – what is going on?

Woah. Sentiment swings hard in a short time. My last post on Sangoma was right after the announcement of Star2Star. Things were looking rosy. Everyone was in team #neversell and stocks only went up.

I’m going to journal my thoughts here. Hopefully it will help me digest the current set-up and maybe even encourage someone to reach out and share their opinion.

YTD and Fiscal Q3 2021

Here is a quick look of the YTD chart.

You can see where the Star2Star announcement was in late January. After the initial rise the stock went sideways for 3 months then has really been hit hard in the last month. It’s now down 23% this month alone and is well below the price before the S2S announcement.

A keen trader would have sold STC above $5 and waited for a better entry point. I did not.

The most recent quarter showed how sensitive Sangoma is to currency fluctuations. The fairly dramatic rise in the Canadian Dollar year over year had revenues down 2% in the reported CAD currency in fiscal Q3 2021. Revenues were up 5% in USD. Not stellar growth, but better than the surface numbers.

Comparable Businesses

Of course, the forward numbers are more important as they will include the Star2Star business going forward.

As mentioned in the previous post, Sangoma trades at a discount to other communication platform companies . The presentation used during the S2S acquisition identified relevant peers to use for a comparison of multiples.

Here is the slide from the presentation.

The recent share price weakness isn’t isolated to Sangoma. The entire sector has been hit as investors have been less excited by technology and seem to be rotating into more inflation protected and lower multiple names.

Here is a look at the performance of the previously identified comparable group.

Using analysts forward estimates, here is what the multiples look like now. As you can see the smaller companies tend to trade at a discount. Data is from

Of course none of these companies are exactly the same, so here is a quick look at margins for each company.

Though Sangoma boasts among the highest margins on both gross profit and EBITDA, they do have a lower growth rate than some of the group. They have stated that they intentionally run a balance between growing as quickly as possible and reasonable profitability. With the acquisition of S2S, Sangoma does have a larger portion of revenue being recurring than most of their peers.

Narrowing down the peer group

Though entertaining as it is to compare Sangoma to a bunch of different companies (some of which are only loosely related), I think I can narrow down the peer group a bit.

In a recent press release, Sangoma announced that they were ranked among the top 5 UCaaS providers in North America. The top 5 consisted of RingCentral, Zoom, Microsoft, 8×8, and Sangoma. I don’t believe it’s fair to compare Sangoma to Zoom or Microsoft, but 8×8 and RingCentral seems appropriate.

If we use the multiples for EGHT and RNG and apply them to Sangoma, we get a ton of upside.

You can see why investors are so excited to get a major exchange listing for STC as it should close some of this gap.

Though imperfect, I think using sales and gross profit are the best metric at the moment. It should be noted that both RNG and EGHT boast recurring revenue over 90% and are growing quicker organically. So that may justify the discount regardless of market cap and exchange listing.

However, Sangoma is comparable how much CFFO the business generates as % of revenue. Of course, I am eyeballing it as S2S is not included in Sangoma’s financials yet.

As well, Sangoma has more product sales than these two peers and spends less on SG&A as % of revenue. I mentioned earlier that Sangoma has utilized the strategy of slower (and profitable) growth.


I think it’s been beaten to death that Sangoma trades at a discount to it’s peer group. With the recent decline in share price, Sangoma now trades at what I view as reasonable valuations to build a position. Just under 3x EV/S and 17x EV/EBITDA. Of course, these are forward looking.


  • Inflation
    • As witnessed in March-May of 2021, inflation scares have a negative effect on companies like STC who derive most of their value in the terminal value of business.
  • CAD rising
    • Though a slow rise in CAD is likely to have a more muted effect, a sharp increase in the CAD will hurt the reported results in the near term.
  • Valuation
    • STC is not cheap on an absolute basis using more “traditional” metrics even after the pullback.
  • Integration of S2S
    • Though it hasn’t been an issue previously and I’m not expecting it to be an issue, Sangoma could take longer to integrate Star2Star than expected.
  • Key Personnel
    • Given how integral the CEO has been in the long term strategy for STC, I would view his (or any of the C-suite really) departure as negative.


At these prices, I believe Sangoma is cheap relative to it’s peers and reasonable absolute valuation. The team has been good at sourcing M&A opportunities and providing value to stakeholders. To build their platform from the ground up would be no easy task. In my digging I feel that Sangoma is one of the companies that has maintained a comparable offering for on-prem and cloud based solutions. Despite the allure of the cloud, many of the new customers are won using on-prem solutions and some businesses are not ready to migrate to the cloud. This provides a future sales funnel for their cloud solutions.

Anyone else follow STC.v?


*I am long $STC.v at time of writing.


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FAX Capital Quick Update – $

A little over 3 months ago I wrote about FAX. Since then they have reported Q4 2020, Q1 2021 and held a (virtual) AGM.

Since the initial mention of FXC, shares have returned 12-13%. This compares to the TSX 60 return of about 8%, bitcoin is about flat, lumber is up 59%, and dogecoin is up about 400%. So I give my 1 quarter performance a B-.

We now have 6 quarters to compare the book value of FXC and measure the capital that has been deployed.

Of course, this is just a snaphot at the end of the quarter.

They have done quite well with the capital that has been deployed so far. The growth in book value given the drag of having a large % in cash has been impressive. Of course, there is no guarantee that this will continue.

There is still a fair bit of cash to be deployed, so I would expect to see continued deployment over the next quarters.

AGM Update

At the AGM the amended voluntary measures by-law resolution was approved. This allows FAX the ability to have more than 25% of assets in a position, which is up from the previous two portfolio investments be maximum 25% of assets (each). They state that the added flexibility will broaden the investible universe.

From the MIC

By removing the Investment Concentration Restriction, the Company will have access to a larger universe
of potential investments and the Company will be able to make larger investments in current Portfolio
Companies, if determined to be in the best interests of the Company. While no specific investment
opportunities have been identified by the Company that would necessitate an investment in an amount
greater than what is currently permitted under the Investment Concentration restriction, the Company
believes that the removal of the Investment Concentration Restriction will provide management of the
Company with increased flexibility to execute on the Company’s business objective and investment
strategies should one or more investment opportunities be identified and be determined to be in the best
interests of the Company.

Given the track record, I’m not concerned about concentration. I also have other positions in my portfolio, so really if FXC becomes concentrated the effect on my overall portfolio is muted.

They also provided quite a bit of detail on the first private company transaction. I don’t think I appreciated the market position of Carson, Dunlop and Associates. It would be nice to see a few more of these in their portfolio.


Based on what has been disclosed in the filings, I have book value of $5.30. This doesn’t take into account any trading fees or frictional costs that may have occurred post Q1. The site is free, so I wouldn’t be surprised if I missed something. At the last quoted price ($4.22) the P/B is 0.80. This seems reasonable to me.

Founder Warrants

For some extra leverage to the upside in the near term, you could take a position in the Founder Warrants. They expire Nov 21, 2021 and strike at $4.50. The shares are close to that now and you have 180 days until they expire. The last quoted price for the warrants was $0.15 so the shares would have to be higher than the strike price to make some money on the warrants.

Be careful as these could expire worthless and are extremely illiquid. Although the could be a multi-bagger in half a year and you could be the most popular person at your kid’s friends birthday parties. Potentially even more popular than a crypto investor. Ok, maybe I’m getting a little carried away.


I still like this idea and continue to hold my shares. The investment team and management seem very conservative deploying capital and are not going to speculate on anything short term. They have executed very well and do not seem to be slowing down. A gradual deployment of capital, continued growth in book value, and buyback program could close the discount to book value.

Anyone else in $


*the author is long $ and (an extremely small amount of) $FXC/

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