10/10/2010

Nano cap selling below reproduction and liquidation value

IKNX : IKONICS Corporation (IKONICS)


Significant downside protection given the balance sheet strength, patents, real estate recorded on the books substantially below market value, 54% held by insiders, CEO is 69, profitable, large 2010 insider buying from 10% owner, improved cash conversion, recently improved top line YOY results.
Price = $6.91

Market Value= 13.64 million

Enterprise Value = 12.3 million

% held by insider = 54%

Institutional ownership = 3.10%

Float value = (891,250 shares) ( Price 6.91) = $6,158,537

Industry = Photographic Equipment & Supplies

IKNX: IKONICS Corporation (IKONICS) has been in business since 1952. The company has been successfully managed through many recessions. Recent financial results support a continuation of a strong recovery from last year's recession.R&D continues to develop new patents supported by a portfolio of trademarks.

“IKONICS Corporation (IKONICS) develops, manufactures and sells light-sensitive liquid coatings (emulsions) and films, and abrasive etching. The Company operates in three business segments: Domestic, Export, and IKONICS Imaging. Domestic sells screen printing film, emulsions and inkjet receptive film, which is sold to distributors located in the United States. IKONICS Imaging sells photo resistant film, art supplies, glass, metal medium and related abrasive etching equipment to end user customers located in the United States. It is also entering the market for etched ceramics, glass and silicon wafers; and is developing and selling inkjet technology. Export sells primarily the same products as Domestic and IKONICS Imaging to foreign customers.”

Per Share Data:

EV = 6.35

Cash = 1.47

AR = 1.12

BV = 5.87

Property Plant and Equipment = 2.62 per share or 5.134 Million note the company has been around since 1952 and the current market value will be greater than the historical cost on the balance sheet .

EBITDA = .90

Sales = 7.74


Shares outstanding = 1.97 million

Float only 891,250 shares

Ratios:

SGA/Rev = 29% (senior management greed factor is reasonable)

FCF/EV = 8.32% (owners earnings)

Average EBIT 07 to TTM/Current EV = 9.71%

Share count 2007 – TTM /TTM share count =1.05 indicating a reduction in share count from 2007

EV/Price = .90 (quick measure of cash and total liabilities relative to market price)

P/S = .90

P/B = 1.2

P/CF = 10.40

5 comments:

Anonymous said...

Hi
Very nice Pick
But there is no Trading volume to this Share
I dont think its possible to buy it

ShadowStock said...

Hello

The stock is a low float nano cap but the introduction has value for those willing to wait for a good price or those that are building their own nano cap value index fund with the intention of waiting a few years to hopefully monetize a market beating return.

The stock is a long term boring hold but the odds look favorable at this time.

Good Luck
John

Anonymous said...

1) There seems to be no sales/earnings growth from 2004

2) Assuming company earns 0.50 per share for 2010, $7 per share means 14 times earnings. Doesn't it seem to be fully valued ?

Anonymous said...

Hi
Looking at the segmentwise revenue breakup, there is a segment called "Other". Do you know what that refers to ?

Thanks

ShadowStock said...

Sales and earnings have not been stellar but they have been profitable. Ikonics is cyclical but book value was 3.74 in 2004 and now stands at 5.88. They’ve been creating some value and the share count has been stable over this time period. Insider buying with real estate in my opnion makes the stock worth either adding a small amount to a nano cap value portfolio and wait for a better price.

Good luck