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CLHI- Ridiculously low prices won't last for long
This is another Synergy deal. What's really interesting is that Synergy indicated to another poster today that they still hold shares in CLHI even after handing over control to TDS.
Only 24.4mm total shares and the float is considerably less. TDS is in a high growth, high margin business that is garnering high multiples and valuations (closest public comp ZoomInfo trades at over a $18bn valuation and over 40x forward revenue).
Shares just starting their re-rating process.
Agreed, this one is the best
TDS is a unique merger partner operating in a high growth market with comps trading at high multiples and valuations. I took a quick look at one of the other deals (announced by Synergy today) and the merger partner is in mining. Not a bad outcome if you're a shareholder that bought in recently, but the upside doesn't compare. Moreover, there's almost 400mm shares already outstanding with that company compared to CLHI only having 24.4mm.
Perhaps we finally got the wake up call today. Time for a significant re-rating.
Have a view on Q3 and Q4 revenues Wood?
After the seeming guide down to Q3 revenues versus earlier communications, do you have an update on your estimates for revenue? I know you typically maintain a forecast, hence my question.
Slide 6 in the presentation
That's what I was referring to in terms of Kent stating that it could be a multi-billion company in the next 5-10 years. He said 20% of the $11+bn market for small companies in the areas that they partake.
Again, it's aspirational. Would love to see it happen, but a fraction of that is just fine with me in terms of realizing a great outcome for the investment.
That's not what I heard
But not much point debating as it was an aspirational goal IMO. If he hit a fraction of that, the stock will rise enormously.
Have to register for the conference
Perhaps Ian (IR) will figure out a way to share it on YouTube.
He actually said a bigger number
But I thought I'd temper the enthusiasm a little bit.
Presentation today
Not sure if anyone else listened, but it was well done. Had a lot more time to delve into the business and the strategy. Threw out some big numbers in terms of targets including becoming a $1bn+ business in five to 10 years. Sees lots of growth for both QCA and the construction related businesses.
Proof will be in the execution, but if you have a medium to long-term view, I think you'll do very well. In the short-run, probably comes down to posting some upside to revenue guidance ($39mm in 2020 revenue) and improving EBITDA margins so they're solidly positive.
That's my take. If you have a different view, let me know based on what he said, let me know.
Great earnings call
This one is well worth looking into. Revenue growth in June was over 100%, which marked an acceleration from earlier in the quarter. They've sandbagged guidance too, which they basically admitted on the call. The current valuation at 6x EBITDA and 8x PE is ridiculously too low.
There were a few institutional investors on the call and a couple of analysts. My understanding is that more analysts will start covering the stock soon.
Dividend yield is 14% and is paid in USD.
We're seemingly all in agreement on this Board
There is huge upside potential and negligible downside risk (other than silly price volatility) at this valuation. The issue has been the series of tweets, which just whet your appetite and leave us investors wanting for a lot more. I hope that's about to change and we get substantive information. Yesterday's tweet would seem to suggest that.
I know management uses Twitter to reach not only investors, but employees, customers and potential partners. We aren't the only constituent that they are trying to communicate with.
I really hope that they can PR the funding round soon. That is the key in my view as very few if any OTC companies can claim to have executed a funding round of that size. It also gives us some idea of the private market value, which I discussed in my post from a while ago.
A PR announcing closing of the private funding round
Would be great too. That would help further validate the company and establish a valuation baseline.
Surprised the stock didn't react positively to that Tweet
I guess the market is worn out by the cryptic tweets. We need substantive information!
That was actually a follow up from last week
Proactive was the company that sponsored the presentation last week.
Kent said 3 companies under due diligence and 1 likely to be acquired by year end.
I like the way he framed the valuation debate. Market value of all the subsidiaries based on acquisition prices is over $60mm and the current market cap is only $6.5mm.
Is this finally going to re-rate higher Hokie?
At Jada Art Group's market cap, we'd be trading at $2.83...food for thought.
It should run
Significantly undervalued and should be trading at $35-$40 at least based on a reasonable PE (yes, it has significant earnings) and a target dividend yield of 5% (current yield is over 13%!). Stock has a thin float so any buying pressure will get magnified.
Earnings call is tomorrow morning, but they released excellent results on Friday morning.
Not sure it makes it easier to relist
I think TDS being subsumed into a Delaware entity certainly helps. There's work to be done in terms of making TDS' accounting US GAAP compliant too, which I hope given the time lag, they've been able to accomplish.
No doubt they want a Nasdaq listing to have stock as currency to do deals and augment their market position even further. I would assume they have some US targets in mind to buy and take advantage of the NOLs too.
Lots of possibilities and catalysts, but we need some of the basic dominoes to start falling!
Capital raise will help a lot
Depending on the valuation that Stephenson is getting on the raise, it is more than sufficient to boost the book equity to levels well above what's required to uplist to the Nasdaq. The shares will most likely be restricted for some time too, so they won't add to the float. If he's smart (no reason not to think so), he'll create a share structure that allows him to easily exceed the minimum bid price requirement (believe it's $3 or $4). I'm not sure if there's a minimum time required to remain on the OTC before uplisting, but I think this will be one of the more rapid uplist stories we've seen.
Hope the dominoes start falling soon..
Comparable valuation
This company compares very favorably to MercadoLibre, which trades at 16x revenue and is EBITDA negative. Both companies are growing revenues at similar rates, but BWMX has much better margins and cash conversion. It also has a dividend yield of 13+%!
At 8x revenue, BWMX would be valued at $57 per share. That would be a PE of ~40x.
Any way you look at it, BWMX is extraordinarily undervalued and should have great downside support.
CLHI- August should be a big month
Merger partner TDS is closing a private funding round that was targeted to raise ~$37mm. Based on similar transactions, this should value TDS at least at $150mm ($7 per share pre-merger adjustments), but potentially higher than $350mm. Keep in mind that this is a private round, so it's at a discount to where comps like ZoomiInfo trade ($16bn+ market cap). TDS also has AI technology that is being applied to lead generation and can potentially be expanded to use in other areas.
Closing the funding round, which was expected to occur at the end of July, is a critical step to getting filings done and "officially" announcing the merger. Management has signaled through Twitter that it's anxious to move forward and officially list TDS. August should mark an important month for the company.
The share structure here is exceptionally good. Only 24.5mm shares outstanding and the float is somewhere between 10-18mm shares. Once the filings hit, this stock will move quickly higher. There won't be many shares available.
Not about uplisting
The company isn't pursuing that at this time. Kent re-iterated that again during the conference presentation last week. I'm sure he'll do it again this week (presentation on Tuesday). Uplisting isn't even feasible until the market cap is well above $50mm or until the price is well above $0.45.
They were just updates to an existing registration statement for the shares that COULD be issued to LPC under the existing equity line. Not a big deal. Kent didn't even talk about that deal during the presentation last week. I'm almost 100% certain that he wouldn't consider issuing stock at anything close to current prices unless there was a great acquisition opportunity. The PPP loan (which will convert into a grant) gave them ample cash to run the business for a while and the company is generating some cash from operations already.
Nice job eliciting a response with your tweet
Good to see management engaged. I think August will be an important month for announcements.
I have to laugh when I see some of the other shell plays trading at $40+mm market caps and this is trading at $2.5mm. No one knows the merger partner in those cases and we have an exciting data company that is positioned in many of the most important growth segments. It's also rapidly growing revenue in a high margin business that can function well even in a Covid restricted environment.
Significantly undervalued
This is a very new listing on the Nasdaq that I believe few people know about as evidenced by the low trading volume prior to Friday. Not sure why the company didn't PR the earnings results, which were excellent, but I've communicated to them that they should.
The company generated 82% revenue growth, with 27% EBITDA margins EPS of $0.35 in the June 2020 quarter. If you annualize the EPS, the stock is trading at a PE of only 9.3x. The company is also proposing a dividend that equates to an annualized yield of over 13% at the current price. I believe there are ~34.45mm shares outstanding, but am waiting for confirmation from management. I think the free float is probably a few million, but need to confirm.
At a 25x PE, which is arguably very conservative given the growth rate and dividend yield, the stock would be priced at $35. That would represent a 5% dividend yield. The risk/reward is highly favorable in these shares.
There's going to be an earnings call on Aug 4th if anyone is interested:
Management will hold a conference call with investors on August 4th, 2020 at 9am Central Standard Time (CST)/10am Eastern Time (EST). For anyone who wishes to join live, the dial-in information is:
Toll Free: 1-877-451-6152
Toll/International: 1-201-389-0879
If you wish to listen to the replay of the conference call, please see instructions below:
Toll Free: 1-844-512-2921
Toll/International: 1-412-317-6671
Replay Pin Number: 13707625
SNN conference
I signed up and looked through the list of presenting companies. It seemed like the vast majority are already on the Nazz. Good for ALPP to be associated with that list.
Kent will get more time to present (30 mins instead of 10 at the one this week) so I think it will be even more beneficial.
Connecting the dots
Not exactly the strength of the vast majority of OTC traders that have extremely short attention spans. Management needs to help them along to maximize valuation.
Current valuation less than what they paid for Deluxe
That was one of the better points that Kent raised yesterday to frame the current low valuation. Essentially, you're getting Excel, MSM, QCA, APF, Spectrum and Altia for free at this price.
QCA stands to benefit a lot from more electronics manufacturing coming back to the US. He basically said they are doing work for companies like Tesla though he was limited from explicitly stating it due to confidentiality reasons.
I think more presentations like yesterday will help a lot in terms of broadening awareness. Given they are online instead of the typical in-person events, Kent should be able to reach more potential investors.
Roadshows are a process, not an event
Not sure what you expected, but it was a good start today. Takes some time to build investor interest, particularly given the economic backdrop.
I think it's much better to climb stairs than have a parabolic move, which only results in overhead resistance.
Good presentation
Kent didn't have a lot of time, but covered a lot of topics. Worth listening to.
It does sound like he has some acquisitions in the pipeline, but might take his time to act, which makes sense. Would be nice to buy a "driver". That would really help the stock (in addition to greater visibility surrounding the launch of Spectrum).
Share structure
If they're smart, they'll keep the OS at or below 100mm to obviate the need to adjust the share count to meet the minimum price for uplisting. They're cognizant that investors have accumulated shares of CLHI to participate in TDS as evidenced by the fact that they hashtag their tweets with otcqb and investorshub.
My guess is that closing the private funding round is holding up other steps. Let's hope that closes soon and they can move forward.
CLHI- Under the radar artificial intelligence play
In addition to its core data business, TDS (entity reverse merging into CLHI) now has artificial intelligence technology. This is being applied not only to the core business (lead generation), but to other areas.
Company recently tweeted the following:
"The Data Source
@thedatasourceuk
·
50m
Very productive meetings today in regards to the AI, meetings to be held with world wide organisations, industry leading companies, and last but not least one of our world leaders in the upcoming weeks and months! The future of TDS is bright."
The current market cap is absurdly low at ~$2.5mm.
Get all that...
For a current market cap of ~$2mm with the current share structure!
Certainly in the right themes
I'm still shocked at the valuation, but it's the OTC, so reason doesn't prevail that often.
Hope we see some substantive updates soon.
CLHI Update
Huge opportunity here. Comps such as ZoomInfo trade at $17bn market caps and 40+x forward revenue. CLHI is currently trading at a $2.4mm market cap.
1. TDS (merger partner and surviving entity) confirmed its working on docs and completing regulatory hurdles. Management has been very engaged on Twitter and "liking" comments and retweets from CLHI shareholders.
2. Signed an exclusive deal with an artificial intelligence technology provider to utilize their technology in support of their data business. Data is the source power in global business both for B2C and B2B transactions.
3. Stock hasn't gone parabolic but has been accumulated steadily and responsibly. No overhead resistance from "bagholders". Once filings are completed, this will have a step function re-rating to much higher levels. True growth story here with shareholder friendly share structure. Company will also certainly uplist to Nazz as soon as possible.
Check out TDS twitter page and company website for more info.
https://twitter.com/thedatasourceuk
Price prediction by CEO
I would add that the CEO's price prediction was before ZoomInfo went public. The company was marketing its private placement much earlier in the year with a $1/share valuation. As you know, ZoomInfo has certainly raised the private market valuation of TDS by a significant amount.
I do think the float is closer to 10mm shares than the 18mm shares that Synergy indicated based on the transfer agent.
Price predictions
I don't make price predictions, I focus on assessments of value. On a valuation basis, it can certainly justify a price of $0.40+. If Kent can generate some new business momentum and get back to a $50-$60mm revenue run-rate by Q3, that will certainly help. Getting some visibility on Spectrum and perhaps some reference customers would certainly help too.
The potential is certainly there, but making a definitive price prediction is foolish IMO.
Buy American
I would also add that both political parties are going to be pushing to buy American as part of their election agendas. I would also expect them to have competing infrastructure proposals. This should benefit ALPP, perhaps not this year, in future years given its capacity all resides in the US. This could be particularly important for QCA given concerns around IP theft and security issues pertaining to semiconductors and communications equipment (areas where there is high PCB content).
I think ALPP boils down to execution at this point. They have productive assets that need to be optimized to drive more operating profit. As the cash flow improves, the company can pay down debt. I would keep in mind that upwards of 40% of the debt is in capital leases that were mostly incurred to finance acquisitions (sale leaseback transactions). This type of debt will most likely remain a permanent part of the capital structure as it's low cost (low interest rate).
Agreed
I don't think more acquisitions are the answer. This should be a year to optimize the existing portfolio and focus on getting Spectrum to the market.
I am optimistic
It's a real company and they're building a good foundation, but there's fits and starts in terms of execution. Kent has work to do to fix a few things.
I'd like to see the company accelerate the rollout of Spectrum eBOS. The stock could use a catalyst in the form of a higher margin growth story.
I do like the fact that they're responding on Twitter
With likes to shareholder frustration regarding the time lag to get the filings done. I hope that means we're getting close to completing the critical steps to moving forward.
Street analysts were quite bullish on ZoomInfo despite some reservations about the valuation. I particularly like the size of the target market, which leaves room for competitors like TDS to carve out market share and generate perhaps hundreds of millions of high margin revenue in the future.
Some snippets:
The analyst expects demand trends to sustain ZoomInfo's "robust levels of revenue growth and operating margins."
Mizuho rates ZoomInfo at Buy with a Street-high price target of $63.
Morgan Stanley's Stan Zlotsky (Equal-Weight, $50 price target) sees a $27B TAM for ZoomInfo and "a truly unique growth/margin profile generating meaningful upside to estimate," but he sees these factors as priced in at the current levels.
Other initiations: Raymond James at Outperform with a $56 target, Stifel at Buy and $60, RBC at Sector Perform and $50, and Canaccord at Hold and 50.
CLHI
1. RM with very fast growing data supplier TDS (The Data Source UK). Space is being highly valued in the markets with ZoomInfo trading at a $17 billion valuation and 55x trailing revenue.
2. TDS is expanding rapidly with new offices in the UK and is setting up an office in the US. CEO recently published an update that revenues have quadrupled in the past three months during the pandemic!
https://twitter.com/thedatasourceuk
3. Small share structure. In contrast with most OTC stocks that have hundreds of millions or billions of shares outstanding, this one only has 24.4mm OS! The free float, according to the CEO of TDS, is ~10mm shares. Once the filings are completed, this will re-rate a lot higher.
There's a lot more to this story, so check out the company page and twitter feed.
Fair question
A few aspects to consider:
1. The "market" is just really retail traders that trade (or perhaps a few that actually invest) in OTC names. There are very few institutional investors that buy OTC stocks. The ones that do are typically vulture investors that provide VCD (ie. convertible debt) and have no long-term interest in companies. Capturing and retaining interest is difficult.
2. None of Kent's businesses are participating "hot" themes- EV, Covid-19, big data/AI/machine learning etc. Yes, he did have isolation room business tied to Covid-19, but never disclosed contract sizes, so the market never got excited about it. I understand why he refused to disclose the dollar amount of revenue, but from a shareholder's perspective, he didn't do us any favors. He needs to better draw connections, even if they are indirect, with some of these themes. For example, QCA has to be supplying PCBs to companies in these areas.
3. Every quarter relies on some type of pro forma adjustment. Kent needs to clean up the operations and produce straightforward numbers. I believe that will happen in Q3.
4. IR effort misses the mark. For example, Kent could have issued a PR for the funds received from the PPP program. One had to dig deep in the 10-K to find it. The funds received are basically half the current market cap!
5. Get filings done on time. I think confidence takes a bit of a hit, no matter the explanation, when filings are persistently late. Start producing them on time and investor confidence will rise.
Those are some of my thoughts.