Great report, I think it is just a matter of a week or so till people start taking up interest in this company. There is no reason why this is at such a low price, just IMO that losts of people have been burnt on other pennys lately.
I received some private messages requesting a complete coverage on IBCX so I took an in depth look at it, as you can read on this article. At first I was skeptical, like anyone else when looking at a Pink Sheets traded stock for the first time, but then I was amazed by what I saw. Over the last few days we actually bought some shares for the 3 Stocks on Fire Portfolio (well, just 1% of capital due to the specific stock liquidity scarcity).
2. Profile
IBAC Corporation is a New York-based holding company operating through its subsidiaries within the Hotel, Food Service & Restaurant industries. IBAC now has operations in Florida, Tennessee & Arkansas. For more information, please visit: www.ibaccorp.com.
3. Technical Analysis 3.1. All history chart
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This has been a dormant penny stock since inception, but just over the last month or so, average trading volume surged. A sharp increase in trading volume precedes a big advance phase on the share price.
3.2. Short term chart
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As you can see on the chart above, the stock rose a lot and then fell back almost to the original point. This was due to confusion over the ex-dividend date for a 25% dividend the company will give to shareholders on record at December the 15th. The company and most shareholders still ignore the NASD rule for dividends equal or higher than 25%, for which you can find information here.
Anyway, technically the stock is at a sweet spot to buy, after the second "valley" of a double bottom formation was built. Now it will probably rise and breakout to a new high above $0.021.
But let's make some fundamental tests before we jump into conclusions.
4. Fundamental Analysis 4.1. Number of shares outstanding
The company recently reduced its number of authorized shares to 350 million, as you can read here: IBAC Corporations Board Approves Reduction in Its Authorized Shares by 150 Million
Since the company will pay the 25% dividend with treasury shares, the maximum number of shares outstanding now can only be 350 million/1.25 = 280 million.
So, the current market cap can't be higher than 280 million*$0.0055 = $1.54 M.
(actually, on the pro forma balance sheet it shows 188,937,483 shares issued and outstanding, so the market cap is probably less)
4.2. Balance Sheet
Most Pink Sheets traded stocks don't publish any balance sheet or income statements, but since IBCX wants to quickly move to the OTCBB, it released pro forma financial statements on October 23rd, which you can also find on the company's website:.
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The company's total assets are worth $10.54 M and total stockholders' equity is $7.76 M, yet, the market cap is just $1.54 M. So this company is trading at a small fraction of assets.
Let's check the income statement.
4.3. Income Statement
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Revenues for the first 9 months of 2006 were $7.16 M, and the company expects revenues between $10.5 M and $11.5 M for the full fiscal 2006: IBAC Corporation Reports Record October Revenues
Net Income for the first 9 months was $1,070,382 so the net profit margin is 14%. If this margin is maintained in the 4th quarter, the company will show a $1.54 M net income for full 2006, so the earnings multiple is 1
4.4. Recent News
You can check the recent headlines and how the company has been active closing deals lately on Yahoo Finance: IBCX summary
5. General Overview
I'm always suspicious when considering Pink Sheets, but IBCX really looks like an undervalued company forgotten in the Old West. It would need to rise 20 times just to get to fair value, given the numbers and the company's assets.
Just using common sense you obviously see the stock is undervalued, how can a company that owns two hotels, two restaurants, a Country Club & Golf Course and that will show a profit of $1.54 M in 2006 be worth just $1.5 M?
Market inefficiencies like these never last long in the market place, not even in the Pink Sheets market. And since the company is just about to move to the OTCBB market ... I see this stock flying 10 to 20 times very fast.
But I urge you not to buy a significant portion of your trading capital, because liquidity in dollar terms is low and after all, this is a penny stock, so be carefull with the position size.
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