Tag Archives: MCB

Jan 2021 Update – $OSS.v, $ISV.to, $STC.v, $VLN.to, $VMD.to, $SYZ.to, $MCB.to, $FRII.to, $RELL, $MTLO.v, $DWSN

Trying something new this month to catalogue some recent market activity and my thoughts around it.

Thoughts on Market Activity

I’m sure you’ve heard of activity around wallstreetbets reddit board and the short squeeze on some heavily shorted names (Gamestop being the most well known). Sorry to disappoint, but I won’t be participating in the short or long side of that corner of the market. It’s too risky for me. It is absolutely fascinating to witness in real time. I have been overly curious to understand what the thought process is for the individuals on each side. I will admit I have probably spent too much time listening to finance and non-finance people explain why they feel the way they do about it. Anyone interested in hearing some anecdotal data I’ve collected can send me an email or DM on Twitter.

I am not a macro guy. I can say that I have been finding interesting ideas lately, but I have not stumbled across businesses that I feel warrant a very large position in the portfolio. I am sitting on a higher than normal amount of cash, but that can change in a few weeks.

Posts this month

Relevant News from Companies Profiled Recently

  • OneSoft Solutions ($OSS.v)
    • Another customer signs on to integrate CIM into their pipeline operations
      • 4th customer in 3 months
      • This is a big positive and shares are up a bit for the month (about 15%)
  • Information Services Corp ($ISV.to)
    • They announced that they ratified a collective agreement with their in-scope unionized employees
      • They did this virtually which is good to hear
      • Provides 6 years of stability with the members with modest wage increases
  • Sangoma Technologies Corp ($STC.v)
    • Update on cyberattack
      • Had no material impact on sales or additional risks to the business
    • Huge acquisition announced
      • The had a call on Jan 29th to discuss
      • More details to come in the next few weeks
      • On the surface the acquisition seems like it is a good fit for the business and will further increase their value to customers, but the valuation is not cheap
        • This is common for Sangoma; all previous acquisitions looked a little off at first glance, but ended up being very well executed
      • I’ll likely to a more in depth post to help myself digest the news
      • As of this morning the shares are halted
  • Velan ($VLN.to)
    • CFO resigned to join a private owned company
      • Doesn’t seem a material event on the surface as he is staying to help transition the role
      • Would like to see a new CFO within a reasonable amount of time
    • Reported fiscal Q3 2021
      • The quarte was better than expected though covid is still having an impact on the business
      • They were able to execute the V20 plan remotely
      • They have the highest backlog in 8 years
      • Sale of the montreal plant resulted in a gain on the balance sheet
        • To me this gives additional margin of safety as looking at this as net-net gives no value to PPE which obviously has some value
    • I honestly think that this is one of those weird names that could earn more ebitda in a few years than the market cap in 2020
      • But that needs to be monitored
    • The bulletin boards are dead from this
  • Viemed ($VMD.to)
    • Released details of a recent Non-invasive vent study
      • Study was led by their CMO
      • Data was between 2012 and 2018
      • Seems like a good validation of NI vents and a helpful data point to bring to the table
  • Sylogist ($SYZ.to)
    • CI purchased shares
      • Bought 1.032 shares since Nov 10, 2020
      • About 40% of trading volume
      • These likely happened at the start of December as there was a spike in volume
    • New CTIO announced
      • Pedigree seems well
      • 225 options at $11.78
        • 5 year term that vest in equal tranches on 1st, 2nd, 3rd anniversary of $15, $17 and $19
  • McCoy Global ($MCB.to)
    • New board member announced (Cory Janssen)
      • Was co-founder of Investopedia
      • He’s quite connected as McCoy commercializes some of their digital products
  • Freshii ($FRII.to)
    • Alternative Monthly Report stating that Silver Ring Value Partners Fund LP
      • During the month ended December 31, 2020, Silver Ring acquired 195,500 Common Shares through open market purchases on the facilities of the Exchange, resulting in Silver Ring holding an aggregate of 2,806,233 Common Shares as at December 31, 2020, representing approximately 10.65% of the issued and outstanding Common Shares.1 Prior to December 1, 2020, Silver Ring owned, or exercised control or direction over, 2,618,733 Common Shares, representing approximately 9.95% of the issued and outstanding Common Shares.
      • Seems like a decent value shop
      • Nice to have a capital allocator own a large amount of the shares outstanding
    • Update on Special Meeting Circular announced
      • Reason for the special meeting is to reduce the stated value of the A shares so they can institute a NCIB
      • This is a step in the right direction
  • Richardson Electronics ($RELL)
    • Reported fiscal Q2
      • Results were better than expected and guidance was strong
      • Looks like wafer side of their business is rebounding and the current cycle could match or eclipse previous cycle
      • The CT tubes are seeing an increase in demand versus what was previously communicated, particularly seeing strength in Europe
        • looks like they could get the healthcare part of the business to break even closer than anticipated
      • shares spiked 20% on the news
  • Martello Technologies Group Inc ($MTLO.v)
    • Provided an update on operations
      • GSX (which was acquired in May 2020) is now fully integrated
        • Gizmo coupled with solutions MTLO already provides is set to take their DEM strategy to another level
        • Sales from all GSX and Savision were about 58% of rev in Q2 fiscal 21
      • Reiterated that legacy products have been declining and will mask core business growth
        • They noted that expenses related to managing the legacy part of the business are minimal
  • Dawson Geophysical – ($DWSN)
    • Wilks Family disclosed a passive stake of 2.28mil shares or 9.7% of the outstanding shares

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McCoy Global $MCB.to (update)

Very quick update.

I’m no stranger to McCoy. McCoy Global $MCB.to. 

The share price has not performed very well since then. I have owned a small amount of shares thinking that at some point oil and gas activity would bottom and McCoy would benefit from renewed interest in the industry. I have been wrong.

The market cap is now around 11.9mil with an EV of 12.4mil.

Update

  • purchased Draworks in late 2019
    • they assumed some backlog (2mil)
    • complimentary product to their portfolio that would not have been able to build in house
    • 6 mil purchase, had about 6 mil in rev in previous TTM
  • they did release a new torque turn product in Q2 2019
  • they have been working on a remote monitoring solution for customers (Virtual Thread Rep)
  • sales in the TTM have been down due to lower activity (obviously)
    • there is stronger activity internationally than in north america
  • covid
    • salary and wage cuts across the board
    • cut capex by 80%
    • took 2.7mil in PPP loan at 0.98% due April 2022
      • much of this may be forgivin
  • their backlog was down to 8.3 mil
    • although order activity did pick up after the quarter ended
  • from a GAAP standpoint they are net cash neutral as the cash on the balance sheet in 2019 was spent on Draworks

Summary

To me this fits nicely in a net-net basket. They business has been impacted and expectations are very low. In the meantime, management has pulled the levers they can in order to lessen the blow. The are not bleeding cash in a time when there is essentially zero interest in their industry.

 

Anyone else own this one?

 

Dean

*the author is long $MCB.to at time of writing

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McCoy Global $MCB.to

Continuing from the post where I said I was sniffing around the energy services names I took a look at McCoy Global. I’m no stranger to McCoy and owned it a few times in the past. The most recent post is from early 2012. I ended up selling in mid 2013 and early 2014.

Background

McCoy is a leader in threaded connections in well casings. They have exposure to onshore and offshore markets. Despite listing in Toronto, they do most of their business internationally.  About 5% of their revenue is derived from the WCSB.

McCoy has worked to remove the high cost manufacturing form their book of business, they outsource as much as possible now. Focusing on supply chain as they have become a global business has been a priority; especially given their size, their geographical exposure and large business customer base.

Current State

Their current backlog was only 9.9mil in Q1 2019, down from 15mil at the end of 2018. 7.2 mil of orders came in April 2019 and this gives confidence that they will survive this lean environment. Their top line has bounced back somewhat after the lows in 2016, but is very far below previous cycle peaks. As you can see McCoy has done what they can to control opex costs.

Valuation

At $0.63 (from a few weeks ago) McCoy has a market cap of just over $17mil and an EV of $12mil. See the valuations below.

Management compensation is reasonable and the board owns 3%. It could be better, but I’ve definitely seen worse in O&G. Several large institutions own significant stakes in McCoy.

McCoy has also continued to invest in R&D and building a suite of products that uses data to ensure the best possible connection and monitoring for the customer. I’m expecting a couple new products by the end of 2019.

Given the ever increasing well complexity (which lend well to McCoy’s products), diverse geographical exposure, off-the-grid size of the business and modest valuation; I feel that McCoy has substantially more upside than downside.

Are you finding any value out there?

 

Thanks,

Dean

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

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