Firan Technology Group – $

Firan, along with many other businesses exposes to commercial aerospace, presents an interesting situation. Covid has hit one side of the business really hard (commercial aerospace) and the other side of the business humms along due to being declared as an essential business by most governments. These businesses usually carry high backlogs so results from a slowdown are usually quite delayed.


Firan Technology Group Corporation manufactures and sells printed circuit boards, illuminated cockpit display panels, and keyboards in Canada, the United States, Asia, Europe, and internationally. It operates in two segments, FTG Circuits (Circuits) and FTG Aerospace (Aerospace). The Circuits segment provides microvia technologies; buried capacitance, and blind and buried vias; multilayer boards; conducive filled vias; custom millings; cavity boards; metal core constructions; multiple sequential laminations; tented, filled, and flushed plugged vias; differential and controlled impedance products; and embedded filters and inductors, as well as mixed dielectric boards and back planes. It also provides design assistance and 3D modelling, controlled depth drilling, buried resistor layer, performance testing, and back drilling services, as well as engineering services for avionic, military, telecom, medical, advanced test and measurement, contract manufacturer, and power applications. The Aerospace segment provides panels, bezels, keyboards, caution warning annunciators, electro luminescent lamps, lighting power supplies, and electro mechanical subassemblies; and lighting technologies that are used in commercial aerospace and military applications. The company was formerly known as Circuit World Corporation and changed its name to Firan Technology Group Corporation in May 2004. Firan Technology Group Corporation was founded in 1983 and is headquartered in Toronto, Canada.

So we are exposed to defense and commercial aerospace activity. The business is made up of two segments: Circuits (mainly defense) and Aerospace. The business has grown well over the last decade, particularly in the last 5 or 6 years.

Firan goes into great detail in MD&A as well as the CEO gets very “operational” on conference calls. He really knows the business and you can tell he really had a hand in building the business over time.

There was a cyber attack in Sept 2019 affected about 10% of quarterly revenue.

Despite the charts being a little noisy, you can see that the defense part of the business is a little more stable. The revenue line (blue) has been gradually increasing for both, but profitability has been more consistent and generally higher in the defense portion of the business.

FTG Circuits – From AIF

FTG Circuits is a leading manufacturer of high technology/high reliability printed circuit boards within the North American marketplace. FTG Circuits has manufacturing operations in Toronto, Ontario, Chatsworth, California (“FTG Circuits – Chatsworth”), Fredericksburg, Virginia (“FTG Circuits – Fredericksburg”) and Tianjin, China, along with a sourcing arrangement with another operating facility in China. Its customers are technological and market leaders in the aviation, defence and other high technology industries. The FTG Circuits segment accounted for approximately 63.6% of the Corporation’s revenue during fiscal 2019 (approximately 58.6% during fiscal 2018).
A printed circuit board consists of one or more layers of etched wiring bonded to a board fabricated from insulating material designed to act as a base for, and to interconnect, microprocessors, semiconductors, integrated circuits and other electronic components. Profit margins on complex circuits are typically higher for those utilizing advanced materials meeting high reliability specifications or advanced production processes than those on standard materials designed to meet commercial specifications. Accordingly, the Corporation seeks to produce a high percentage of advanced technology boards in an effort to optimize its operating margins. The Corporation currently derives the majority of its revenue from such sophisticated printed circuits.
All printed circuits manufactured by the Corporation are custom-designed by customers because every printed circuit has a unique application. This requires the Corporation’s engineering and quality control groups to work closely with FTG’s customers. Through this collaborative process, the Corporation assists its customers in developing new products that optimize technical performance of the product, ensures high quality and reliability while minimizing costs.
FTG Circuits’ customer base has 205 active customers and 68.1% (57.0% in fiscal 2018) of total sales came from its top five customers in fiscal 2019. FTG Circuits has supply agreements with major customers for defined periods of time and at defined prices. Future contracts are dependent on acceptable performance with regard to price, quality and delivery.

FTG Aerospace – From AIF

FTG Aerospace manufactures illuminated cockpit panels, keyboards, bezels and sub-assemblies and assemblies for OEMs of avionics products as well as for airframe manufacturers around the world. These products are interactive devices that display information and contain buttons and switches that can be used to input signals into an avionics box or aircraft. The FTG Aerospace segment accounted for approximately 36.4% of the Corporation’s revenue during fiscal 2019 (approximately 41.4% during fiscal 2018).

FTG Aerospace’s customer base totals 120 active customers, with approximately 51.6% (62.6% in fiscal 2018) of total sales coming from its top five customers in fiscal 2019. FTG Aerospace has supply agreements with major customers for defined periods of time and at defined prices. Future contracts are dependent on acceptable performance with regard to price, quality and delivery.

Share Ownership

The CEO owns about 10% of the company if you count his preferred shares. He owns about 800k in common and has 1,775k in preferred shares. The prefs are convertible to common on one for one. If there is a liquidation in the business, the prefs will get $2.50 before the common get any.

Two funds own nearly 30% of the outstanding shares. Oakwest and Polar Asset Management.

Independent board members don’t own many shares.


The last 3 years have seen CEO comp at $500k on average. His share ownership is about 8x his compensation.


  • labour agreements in a couple of facilities in Canada
  • other operational risks – supply chain, sales, equipment, quality issues, etc
  • customer concentration in a few big customers – if a customer has a specific product fail to meet certifications or demand drops (see 737 MAX) Firan will be affected
  • short term currency volatility


Shares are trading around 5x FCF. Although the company has traded at lower levels of EV/Rev and Tangible Book in the past, so it’s not unreasonable to see those levels again.


Commercial Aerospace has been among the hardest hit by covid. Big backlogs and defense spending have supported the business better than I would have thought. There is a risk that aerospace takes longer than 3 or 4 quarters before customer activity returns and defense spending gets cut. Although record stimulus and market support could mean continued defense spending.

It does seem to be a decent risk/reward situation for a business that has some barriers to entry.

Anyone have a favorite aerospace business they own? Comment below.



*the author does not own shares in $


Filed under Company Analysis

Sangoma Technologies Corp – $STC.v

Well well well….

I am doing my best to prioritize writing in schedule. I can’t say that I’m getting better, but the inertia of starting and working through a post has reduced.

I’ve owned Sangoma for years (since 2013) and have averaged up a few times. I have a running word doc that I use to keep track of news that is well over 100 pages long now.

This post is meant to illustrate the path of one of my more successful investments. I will be a tour guide through the last 7 years of history of this business and the share price. I’ll share my thoughts and some insights that you can only gain by experiencing the ride. It demonstrates some of my evolution as an investor. I believe that investments like Sangoma represent what an average investor can obtain with the right mix of research, luck and (most importantly) patience. It should be noted that this investment did not rely on a drill bit, a phase 3 trial, some new technology adoption or a sky high valuation to be successful. Not to say that you can’t make money following any of those strategies, I’m just going to focus on what works for me.

Start with low expectations

When I first wrote up Sangoma in 2013 it was trading less than liquidation value, it was actually trading at less than net cash. It was a lumpy product business that was on the (slow) decline. They managed to grow top line a few million by launching new products that eclipsed the slow decline of legacy products (PSTN analog phone cards), while running a small profit. At the end of 2013, new products had grown from 0 to 5mil in a little over 2 years. The CEO (who is still on board today) was focused on growing top line without needing to continuously raise money to support a business that doesn’t generate cash. At this point the risk was dead money.

Continue with business improvement without the market caring

For 3 years the business continued to improve and the stock went down or sideways at best. 3 years. And it actually started in 2011. So really 5 years of slow business transformation without share price moving. I wrote about in an update here.

During these 3 years, the business was restructured and 3 acquisitions were made. There was always something to muddy each quarter’s results. Inventory levels, age of receivables, margins, acquisition integration, not spending the cash quick enough, etc. In the meantime, they continued to build the business strategically and gain more share of wallet from about 10-20% to 50% of a business’s connectivity purchases. Recurring revenue continued to climb higher each quarter as they focuses on cloud based and services. I was starting to see the long term potential of the business and was happy with management’s ability to grow the business without diluting shareholders.

Success after years

The work started to bear fruit. The share price responded (finally) at the end of 2016. I ended up adding a little in early 2017.

I think it’s important to note that as an investor I could have sold out a reasonable gain. It’s tempting to take the money made and distribute it into other opportunities.

The business had successfully shifted and expectations have changed. This was not the net-net from 2013. This was a larger, more complex organization and your measure of success needs to change.  Quarterly lumpiness was really reduced and visibility increased to the point where they could issue guidance in fiscal 2017.

Their biggest and most complex acquisition to date was executed (VoIP Supply). This was the 5th acquisition they made since I had followed the business (MicroAdvantage, Schmooze, RochBox, VegsStream). I will admit I was usually skeptical of the acquisitions on the surface, but I had seen enough examples of well executed acquisitions and integration to continue to hold the majority of my position.

Continued execution and share price appreciation

Sourcing and executing deals continued with CCD, Digium, VoIP Innovations. The share price has responded, although it still trades at a discount to peers.

Operations were humming along nicely. Continued share price appreciation was driven by the ability to source and execute acquisitions with minimal dilution. The scale and complexity of each acquisition grew bigger incrementally. It was reassuring to see that the CEO was able to keep the pipeline as robust as he did.

Performing continued due diligence is a must. Once you realize that you have a multibagger potential in your portfolio, the last thing you want to do is sell after a rough quarter when it won’t matter several years down the road. As the price grew, the company took up a larger and larger percentage of my portfolio. Things like culture, ego, foresight, customer focus are now the most important things.

Sangoma Today

Obviously I don’t think Sangoma will be a 10 bagger from here, but there are still many things to like about the business. They have been quite insulated from covid, their shares trade at a discount to peers, the are a well run organization, over half of their revenue is recurring, and they still have the ability to up-list on the the TSX from the Venture. I will continue to hold.


The journey to multibagger is colorful. I have about 30 different data points on their financial results over the years. 7 quarters have been softer than anticipated, 15 have been stronger than anticipated and  8 have been kind of meh. I think each multibagger comes with it’s own merit badges or battle scars that you have to earn and endure.

  • stock price drops of 15-20% after a “bad” quarter
  • 1-3 years of no price appreciation
  • naysayers telling you that it won’t work out
  • market prognosticators predicting another recession worst than all the other ones put together
  • everyone else getting hilariously rich off bitcoin

Anyone care to share a multibagger story?




*the author is long shares of Sangoma Technologies ($STC.v) at time of writing


Filed under Company Updates, Investing Lessons

Indigo Books & Music $

We all love to hear the success of founder run companies. Fintwit is full of support for founder run companies and how they can bring their company from the garage to a multi billion dollar business. There is even an ETF ($BOSS) that specifically holds founder run companies. It has outperformed the S&P500 since it’s inception in February 2017.

Well, I’m going to take a dive into a company that doesn’t quite fit that template.

Indigo Books & Music (mostly recognized as Chapters to Canadians) operates brick and mortar retail stores (almost exclusively in Canada) and an online store through The company has been public since before the turn of the millennium. They merged with Chapters Inc in 2001.

The company CEO is the founder of Indigo since it’s inception in 1996. I’ve owned IDG in the past and made (a wee bit of) money. I still loosely follow out of interest.

The shareholders have had a bumpy ride to say the least. Shares are down 75% since they began trading and down about 90% over the last 12 months.

Bring a competitor to Amazon has not been easy for Indigo. They have had some periods of strength over the last decade.

Operating Performance

Given how seasonal the business is, it’s best to judge operating performance on an annual basis.

Revenue is on the right (secondary axis). This isn’t a compounder bro stock.

Going head to head with Amazon on price would be foolish. The company has had to pivot to remain as profitable as they have. They have had to close under-performing stores aggressively while promoting general merchandise in store as well as online.

Traditional Retail

As mentioned the store count has had to be rationalized over the years.

The large superstore count has been pretty flat while they have cut out net about 60 small format stores. Their total square footage is about flat from 2008 but it’s down roughly 10% from the peak in 2018.

They have had some success driving revenue higher per square foot, but remember their annual results showed higher revenue in 2017, 2018, and 2019 although overall profitability hampered in 2019.

As mentioned they have been shifting to general merchandise from print. The strategy is to match (or closely match) Amazon on price with books and drive margin higher with general merchandise and experience in the store. They sold their share in Kobo in 2011 for $315 US.

2017-2019 seems to be an example of driving revenue higher without an eye for expenses doesn’t work in this business. They spent much of fiscal 2019 and 2020 cutting redundant expenses cutting back on less productive promotional material, including repatriating a design studio from New York, while keeping as much margin as possible. They have gone from burning cash to generating it, or at least they did before covid hit.


Most of the board owns little shares. The CEO is also chair and personally owns 98,000 shares. Her spouse is also on the board and owns aver 50% (directly and indirectly) of the shares outstanding. A couple other institutions own around 20%, but they are less than 1% of their assets.

Compensation (pre-covid)

Many executives have a total compensation package of around 1 million per year. The CEO’s salary was 1 million alone in 2019.

Covid Impact

They lost at least two weeks in fiscal Q4 due to covid lockdowns. The quarter was progressing quite well before the shutdowns and they feel they were on the path to sustained profitability. This is among the hardest hit with the lockdowns and the effects will linger for awhile. They had around 120 mil in cash at the end of Q4, which in prior years was criticized as too much. Minimum lease commitment for fiscal 2021 is 67 mil. They are negotiating with landlords during covid and have decided that 15 small format stores will not renew leases after June 2020.

Since the covid lockdowns hit they are trying to manage the cash burn: (from most recent MD&A)

• ceased its normal rent payments as of April 1, 2020 and is in negotiations with its landlords regarding rent-abatements;
• assessed and leveraged applicable government business support programs for COVID-19, including the Canada Emergency Wage Subsidy;
• extended payment terms with many of its vendors and plans to reduce its inventory levels while maintaining an optimized assortment;
• implemented a cost reduction plan to minimize non-essential operating costs;
• reviewed the capital investment plans pre-dating COVID-19 to account for the widespread economic impact of COVID-19;
• suspended much of its planned marketing spend in the first half of fiscal 2021;
• reviewed its head office workforce model and commenced certain role restructurings;
• froze salary increases and elected not to pay discretionary fiscal 2020 annual incentive plan bonuses; and
• the Chief Executive Officer elected to temporarily forgo her salary.


Obviously looking at profitability metrics during the pandemic is probably not productive. They are likely to lose money for the next few quarters even with some forgiveness from landlords and assistance from the government, but I could be wrong. They will have to be nimble to navigate this climate without blowing up the balance sheet. Under “normal” circumstances they should be able to generate 70mil in CFFO before capex. I think maintenance capex is minimal in the business, but this doesn’t include lease payments.

Today they have a market cap of less than 30mil which is about half of tangible book value. To say that there are little expectations on IDG isn’t a stretch. There were no analyst questions on the most recent call. If they survive and things go back to normal this feels like a situation where they can earn their market cap today in cash in 2-3 years time. They could also have to raise cash at a very poor time.

If you do take a position, I would watch it closely and likely use a mental stop loss at which you dump your entire position. To me, this isn’t the company to put a large portion of your portfolio into. It does scratch the proverbial contrarian itch. I mean being a contrarian can be fun, but (for me at least) it isn’t always a constructive use of capital.

Anyone ever look at Indigo or any retailer? They seem to have a large community presence.



*the author does NOT own shares of $ but may initiate a position.

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