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Definitely a pleasant surprise! EPL was my second largest holding behind AYSI as I had picked up some trading shares the past two days. Congrats to all holders.
Spoke with Sam last night as well and confirmed that quarterly results will be posted on a regular basis.
I will look to update the ibox with the latest financial results for Q1 over the weekend.
PEIX - Congrats on the great call Bob. Stock up nicely after-hours to over $10.50!
SFY - Bob, SFY has been dropping here in advance of earnings tomorrow morning. What are you looking for in tomorrow's earnings report?
Personally, I'd like to see them come within their production guidance of 3.0 - 3.1 MMBoe (preferably at the high end of course...). More importantly, I'd like to hear whether they added that third rig to their Eagle Ford drilling schedule, progress on the sale of central LA assets, and progress in terms of increasing IP rates from new wells. They mentioned two specific wells in their last earnings announcement that benefited from increased use of proppants. IP rates on those wells were 40%+ higher than the IP rates on other wells in the area. I'd like to see a continuation of that trend.
It's been a frustrating hold here, but the assets are there, they just need to execute and find a way to get more capital to really grow their production.
Appreciate your thoughts.
ANIK - Unfortunately I sold ANIK waaaay too soon in the $15 range. I seem to have a tendency to sell too early instead of waiting to see how the story unfolds...
Thank you very much for reaching out and confirming the quarterly releases will continue. Also good to hear that he was willing to speak with investors, a welcome change from the policy with Barry.
I think that there is no way that Gene is selling. Let's be realistic.
If Gene wanted to be the seller, he wouldn't bother flooding the market with shares. He would just hire an i-banker and get a full multiple and full valuation. Why would he be selling at less than 1x EBITDA and less than 1x revenue if other strategic buyers out there (Bradken, etc...) have shown that they're willing to pay 2x-3x revenue in the past for similar sized businesses!
This is Gene's company and his baby. He's been through much rougher periods, going back to the recession of 2008-2009 without selling shares and with shares trading at higher prices. Why sell and give up control? Especially at these prices if you could get significantly more without much more effort.
Hweb, revenues were down 2.6%, but keep in mid that revenues are reported in US dollars while the majority of sales are in Australian dollars. The Australian dollar weakened 11% year over year. So in Australian dollars, or what the company actual receives on sales, they likely grew revenue 7% to 8% year over year.
The impact of the lower Australian dollar is also reflected in the company's cash balance, which reportedly fell, though 4% of the fall can be attributed to the fall in value of the Australian dollar.
So there is no doubt that currency movements are impacting results.
But I view the fall in the Australian dollar positively. A few years back, the company enjoyed margins similar to the margins we're seeing today. That changed as the Australian dollar increased in value and made it more expensive to do business in Australia as the cost of labor, cost of goods, etc were increasing as well. You also had customers deciding to move high-margin finishing services overseas. I think what you're seeing now is a return of those higher margin products as a result of the low Australian dollar.
I think it should also help export growth, but I agree that the comments that sales to the US were lower were a bit puzzling. They do not have a plant here in the states, it is just a sales office at this point. They hired a new international sales exec who has a lot of experience in this space back in late September. I would hope to see US sales start to pick up given the recent investment and focus here.
I have no issues accessing the financials on the site. Perhaps you could try another browser
AYSI - With the resumption of quarterly reporting and continued strong performance, I don't see how this company continues to be valued at a P/E of less than 1.
I look forward to tomorrow's reaction and will be looking to pick up some more shares in the morning.
Big news for these guys, and big news for shareholders!
AYSI - WOW! Huge surprise and amazing news! Stock continues to be ridiculously undervalued as you mentioned, with $0.36 EPS for the latest twelve months and cash of $0.46 per share. Great to see them get back to regular reporting of financials, should remove some of the negative sentiment that has been hanging around this stock and its prior communications issues.
EPL - Nice move in EPL this morning on a positive article in Barron's over the weekend. Stock briefly peaked over $31. I sold some trading shares at $30.75 and just bought them back at $29.60. I think this one continues to move back to its 52-week high over $40 throughout the year.
My initial reaction to the resignation of Mr. Woodhouse:
It’s always a bit unsettling when an executive leaves a company. But it seems as though the resignation was amiable, as the board wished him well in his new endeavours.
Part of me wonders if it was Barry that was part of the communications issue here over the past year.
Over the years, I had an open line of communication with Barry and others at the company, however, that line had closed over the past year. I would send Barry emails and messages about various topics (when earnings would be released, questions about the new NC office when it was announced, etc…). He would always respond to those emails and messages, though his response would typically take 1-3 weeks. The last open line of communication was back in May 2013. However, I noticed that beginning in June 2013 that line of communication appeared to close. This was before the announcement that Gene was stepping down from CEO and before the announcement that they were suspending quarterly reporting. My emails and messages would go unanswered. I would even call the North Carolina headquarters to see if they would be able to relay my messages with no avail. I ended up calling the Australian headquarters several times, and actually managed to get a hold of Barry twice. Both times, the conversations were brief and he held back on disclosing any pertinent information.
The problem is, we don’t know who is replacing Barry and what his communication style will be like. I called the North Carolina office two days ago to see who we should reach out to in order to get questions answered, as Barry was typically the person I was directed to.
I spoke to Pat V. at the NC office regarding a contact person over in Australia that will be taking over the Investor Relations task. She mentioned that Sam Dahanayake will be the person to reach out to.
So I sent an email out to Sam, and within 10 minutes received this response:
Hi Chris
You can contact me on investor relations.
Kind Regards
Sam Dahanayake
Management Accountant
Alloysteel International
93 Mulgul Road, MALAGA, WA 6090
PO Box 3087, MALAGA DC, WA 6945
From: Chris xxxxxxxxxx [mailto:xxxxxxxxx@gmail.com]
Sent:Wednesday, 12 February 2014 1:28 PM
To: Sam Dahanayake
Subject: Investor Relations Contact
Sam,
I appreciate your help in directing me to the 2013 Audited Financial Results on the website a few weeks back. I spoke with Pat V. from your North Carolina office earlier today regarding the appropriate person to contact related to investor relations items. She mentioned that you would be the appropriate person to contact now with the departure of Mr. Woodhouse. I would appreciate if you confirmed that this is indeed the case as it would be helpful to have an open line of communication with the company.
Thank You and Best Regards,
Chris xxxxxxxxx
So I'm hoping this change opens the doors to a new line of regular communication, both directly with management and with the investment community.
I have not sold any shares since the announcement and began to buy some shares today. The financials of this company are solid, we just need the house to get in order.
I plan on sending a larger/longer email to Sam explaining the issues that we as shareholders had been facing in the past and continue to face with the company's current communication policy. I will let everyone know if I get a response.
I'd like to know what AYSI sellers are buying at this point... Still trading at a P/E of less than 1 ex cash...
In terms of the valuation tables I mentioned, I've included them here below. As I mentioned in my prior post, I'm just comparing AYSI's current multiples to a range of multiples. The first set of multiples shown is based on the company's EBITDA. As a reference point, Bisalloy trades at 5.9x EBITDA...
I've also put together a similar table related to the company's EPS and relative P/E multiple.
Take what you will from this, but it means to me that we're incredibly mispriced at the moment. Hopefully that translates to an opportunity here for buyers and investors in AYSI.
Good luck to all...
I think your range of $2 to $5 is definitely appropriate for the company given its strong growth and margin profile if they start to communicate regularly with the investment community. The first step would be a resumption of quarterly reporting. The next step would be communicating more information in those releases than just stating that the financials can be found on the site.
Imagine the response if the company's news release headlined:
"Alloy Steel International Announces Record Earnings for Full Year 2013"
And then if they included the actual results in the press release:
"Alloy Steel International today announced audited net income of $5,451,477 for the fiscal year ended September 30, 2013, representing an increase of $1,948,440, or 55.7%, compared to net income of $3,500,221 for the fiscal year ended September 30, 2012. Diluted earnings per share (EPS) were $0.32, a 55.7% increase over diluted earnings per share for the prior year." Then mention the sales growth...
How about a quote from the CEO or CFO...
"We are pleased to report the Company delivered record financial performance for the fiscal year of 2013," noted the CEO/CFO. "The Company continued to grow and invest in the business. Gross margins showed improvement year over year as the Company improved the efficiency of its manufacturing process."
And vuala, you have a press release that gets people interested...
Abht,
If you're looking to solve for market cap, you take the approach that I took:
Market cap = EV - debt + cash
AYSI - I've posted some updated thoughts on AYSI's valuation on the AYSI board. There are definitely some warts with this one that are well known to those on this board (suspension of quarterly communication, lackluster PR's, etc...). But I thought I'd share my thoughts with the group in case anyone is interested...
I've spent a good amount of time the last few days trying to triangulate what the fair value of Alloy is given the company's latest financial results.
During that process, I put together some additional tables that I plan on sharing here later this evening that show the value of AYSI's shares based on a variety of multiples.
Specifically, I have a table that looks at what AYSI's share price would be if you value the company at 1x EBITDA, 2x EBITDA, 3x EBITDA, etc... I also put together a table that looks at what AYSI's share price would be if you valued the company at a variety of revenue multiples and P/E multiples.
In terms of valuing companies, I tend to focus on Enterprise value, and in particular, Enterprise Value to EBITDA multiples. This is typically what Wall Street investment banks use when valuing companies, especially in the industrial sector. By using Enterprise Value to EBITDA multiples, you’re essentially looking at earnings that exclude any non-operating items (EBITDA) that are available to all stakeholders in the business (debt holders and equity holders) to value the entire business (enterprise value).
To get from the enterprise value to the company’s share price, you need to adjust for items such as debt, cash, and other non-operating items which have value, but are not producing earnings that would be included in EBITDA.
So one would subtract debt from enterprise value, because it is the debtholder’s claim on the business. You would add cash on the company’s balance sheet, because it is a non-operating asset and is not generating earnings that are included in EBITDA.
In the case of Alloy, you would also add in the value of the Indonesian land and investment, which is value that AYSI could realize if it decided to sell the asset. The Indonesian land is not currently generating earnings that are included in EBITDA.
So what multiple would you apply to AYSI’s EBITDA? Similar to a P/E approach, the best way is to look at similar companies in the industry and space and see what multiples they trade at. The companies that I’ve looked at are mostly Australian based: Austin Engineering Ltd. (ASX:ANG), Bisalloy Steel (ASX: BIS), Bradken Limited (ASX: BKN), and Joy Global (NYSE: JOY). Joy Global and Bradken are much more diversified and are significantly larger than Alloy. They trade at 7.2x EBITDA (Bradken) and 6.0x EBITDA (Joy). The other two comps are smaller like Alloy. Austin Engineering is a provider of off-highway dump truck bodies; hydraulic excavator and shovel buckets; wheel loaders; water tanks; lubrication service and fuel modules; tire handling equipment; and various materials handling products. They have a market capitalization of $250 million. Austin Engineering trades at an EBITDA multiple of 6.8x.
The most comparable company in terms of business and size is Bisalloy. Bisalloy sells quenched and tempered steel plates under the BISPLATE brand name. That is all they do, similar to Alloy. Bisalloy has $80 million of revenue and $8 million of EBITDA. Alloy has $28 million of revenue and $8 million of EBITDA. Alloy has always enjoyed higher margins due to its high quality, proprietary product. So if both companies are earning the same amount, then shouldn’t the value of the businesses be similar?
Well there are a few differences. Bisalloy trades on a national exchange. They also report earnings semi-annually, versus Alloy’s current annual release. One would expect Alloy to potentially be valued at a lower multiple due to those factors.
However, in reality, based on current prices of both companies, there is a huge disconnect between the two valuations. Bisalloy trades at 5.9x EBITDA, or approximately a $50 million enterprise value. This multiple is similar to the multiples of the other companies in the industry mentioned previously.
Alloy on the other hand, based on a $0.83 per share price, is valued at an enterprise value of just $2.7 million, or a multiple of 0.4x EBITDA!
If you think it should be valued at half the multiple of Bisalloy, due to the past communication issues, than Alloy would be valued at $25 million, or 3x EBITDA, implying a share price of $2.09, a 152% increase from current prices.
I plan on posting the tables showing the various Alloy share prices based on multiples later this evening…
I've spent a good amount of time the last few days trying to triangulate what the fair value of Alloy is given the company's latest financial results.
During that process, I put together some additional tables that I plan on sharing here later this evening that show the value of AYSI's shares based on a variety of multiples.
Specifically, I have a table that looks at what AYSI's share price would be if you value the company at 1x EBITDA, 2x EBITDA, 3x EBITDA, etc... I also put together a table that looks at what AYSI's share price would be if you valued the company at a variety of revenue multiples and P/E multiples.
In terms of valuing companies, I tend to focus on Enterprise value, and in particular, Enterprise Value to EBITDA multiples. This is typically what Wall Street investment banks use when valuing companies, especially in the industrial sector. By using Enterprise Value to EBITDA multiples, you’re essentially looking at earnings that exclude any non-operating items (EBITDA) that are available to all stakeholders in the business (debt holders and equity holders) to value the entire business (enterprise value).
To get from the enterprise value to the company’s share price, you need to adjust for items such as debt, cash, and other non-operating items which have value, but are not producing earnings that would be included in EBITDA.
So one would subtract debt from enterprise value, because it is the debtholder’s claim on the business. You would add cash on the company’s balance sheet, because it is a non-operating asset and is not generating earnings that are included in EBITDA.
In the case of Alloy, you would also add in the value of the Indonesian land and investment, which is value that AYSI could realize if it decided to sell the asset. The Indonesian land is not currently generating earnings that are included in EBITDA.
So what multiple would you apply to AYSI’s EBITDA? Similar to a P/E approach, the best way is to look at similar companies in the industry and space and see what multiples they trade at. The companies that I’ve looked at are mostly Australian based: Austin Engineering Ltd. (ASX:ANG), Bisalloy Steel (ASX: BIS), Bradken Limited (ASX: BKN), and Joy Global (NYSE: JOY). Joy Global and Bradken are much more diversified and are significantly larger than Alloy. They trade at 7.2x EBITDA (Bradken) and 6.0x EBITDA (Joy). The other two comps are smaller like Alloy. Austin Engineering is a provider of off-highway dump truck bodies; hydraulic excavator and shovel buckets; wheel loaders; water tanks; lubrication service and fuel modules; tire handling equipment; and various materials handling products. They have a market capitalization of $250 million. Austin Engineering trades at an EBITDA multiple of 6.8x.
The most comparable company in terms of business and size is Bisalloy. Bisalloy sells quenched and tempered steel plates under the BISPLATE brand name. That is all they do, similar to Alloy. Bisalloy has $80 million of revenue and $8 million of EBITDA. Alloy has $28 million of revenue and $8 million of EBITDA. Alloy has always enjoyed higher margins due to its high quality, proprietary product. So if both companies are earning the same amount, then shouldn’t the value of the businesses be similar?
Well there are a few differences. Bisalloy trades on a national exchange. They also report earnings semi-annually, versus Alloy’s current annual release. One would expect Alloy to potentially be valued at a lower multiple due to those factors.
However, in reality, based on current prices of both companies, there is a huge disconnect between the two valuations. Bisalloy trades at 5.9x EBITDA, or approximately a $50 million enterprise value. This multiple is similar to the multiples of the other companies in the industry mentioned previously.
Alloy on the other hand, based on a $0.83 per share price, is valued at an enterprise value of just $2.7 million, or a multiple of 0.4x EBITDA!
If you think it should be valued at half the multiple of Bisalloy, due to the past communication issues, than Alloy would be valued at $25 million, or 3x EBITDA, implying a share price of $2.09, a 152% increase from current prices.
I plan on posting the tables showing the various Alloy share prices based on multiples later this evening…
I've updated the AYSI ibox to reflect the updated financials for the 2013 fiscal year.
I've also included all of the financial information for the company going back annually to fiscal year 2001 and added some financial performance charts to highlight the company's growth and consistently improving performance over the past 4 fiscal years.
There is also a breakout of the quarterly financial information going back through fiscal year 2010.
I continue to add to AYSI as well and feel that the value will eventually be realized.
Good luck to all...
AYSI - I've updated the AYSI ibox to reflect the updated financials for the 2013 fiscal year.
I've also included all of the financial information for the company going back annually to fiscal year 2001 and added some financial performance charts to highlight the company's growth and consistently improving performance over the past 4 fiscal years.
There is also a breakout of the quarterly financial information going back through fiscal year 2010.
http://investorshub.advfn.com/Alloy-Steel-Inc-AYSI-9225/
I continue to add to AYSI as well and feel that the value will eventually be realized.
Good luck to all...
Significant volume coming in at $0.75 this morning. There seems to be a bit of resistance here in the $0.75 - $0.80 range, which is not surprising given that its been the top end of the trading range for the past 2 years. I think once we clear this level, the next major resistance will be at the $1.20 level.
Its odd, NITE has been on the ask all morning at $0.745 and $0.75 showing a 1,000 share size, but has sucked up over 150,000 shares...
The investor relations section was taken down sometime last year. I'm glad to see it back up!
I also scooped up a bunch of shares today. I had 10k orders in at $0.44, $0.47, and $0.50 each. Somehow they all went off at $0.44 - $0.445... Go figure
T - I'm with you on this one and will do whatever I can to get this company to start communicating more regularly. It seems that they've added personnel, such as Sam D. that could fill in where Barry used to spend time and return to publishing regular financials...
If you take into the company's cash balance, its trading at a P/E of .625x at $0.70 per share... I'll take a P/E of 2x ($0.32 x 2 = $0.64 + $0.50 = $1.14) at this point...
A P/E ratio of 3x - 4x (which is at least half of what it deserves to trade at if released quarterly financials), puts the share price at $1.50 to $1.75, including $0.50 per share in cash.
AYSI continues to be undervalued, and even more so with the huge 2013 financials. A $2.00 share price would begin to approach fair valuation, but I would say $3.00 is where this should be trading based on fundamentals alone and potential growth. They now have all the cash they need to finish off Indonesia, which they are likely doing given the hire of an Indonesian based project manager with experience in those types of builds (see AYSI's Linkedin page...). They hired an experience sales guy to head their international sales. Australian dollar is weak, which should help their export business significantly. A lot of tailwinds for this company...
Thanks KIK, now I just need the market to realize the value of AYSI...
Second quarter results can be found through the link below:
http://alloysteel.net/wp-content/uploads/2013/01/AYSI-Q2-2013.pdf
9 month results were never released. They had only posted the six month figures through March 2013 previously.
Sure, they had sales of $16.985 million through the first six months and EPS of $0.08 adjusted to account for the uptick in royalty rate.
The company now has over $8.7 million of CASH on its balance sheet! That's over $0.50 per share in just cash! Add a P/E of 3 or 4 to the earnings of $0.32 and you have a stock trading well over $1.45 to $1.75! Wow, this is undervalued...
I got 30k at $0.50 and below. Just started buying like crazy when i saw the results!!! WOW!!!
AYSI - 2013 Earnings of $0.32 per share!!!!
http://alloysteel.net/wp-content/uploads/2013/01/AYSI-2013-Annual-Financial-Statements.pdf
AYSI - 2013 Earnings of $0.32 per share!!!!
http://alloysteel.net/wp-content/uploads/2013/01/AYSI-2013-Annual-Financial-Statements.pdf
I don't think the press release has been posted through any news service yet. If you check any site for news for AYSI, you wont see the release there. I would assume they would post the actual financial before they release the news item to the press.
Financials to be posted. The investor relations section of the site is back up. A press release has been posted. I would expect a PDF of the financials to follow.
http://alloysteel.net/alloysteel-international/investor-relations/
Crossing my fingers for some good news finally...
R59 - Joined you in EPL yesterday as I agree that the stock is undervalued at this point given the high asset quality and expected production growth. Glad that Canaccord Genuity agrees...
TTHI - $6.09 - Snagged a few more here for trading purposes at $5.75 once I saw the volume coming in. This one has been a pleasure to trade before the run-ups...