8/26/2011

Tiny (nano cap) Deep Value Companies

Tonight  I will start with MPAD.OB  

Your commitment should be long term as the market's immediate recognition of their potential value is unlikely. Future value may be realized several ways; the company declares a special dividend, goes private for a premeium, takeover or just a rise in the stock price as the markets slowly recognizes the future value of a well run shareholder friendly company.

These other nano capitalization stocks may qualify and may be introduced with further details ; Some were introduced in prior posts. VSNT,MMUS,AIRT,ISIG,UG,FLL,SIF,TRMS,OFI
MPAD.OB ; MICROPAC INDUSTRIES

Micropac Industries provides microelectronic and optoelectronic components and modules. Contract electronic manufacturing services are also provided. The company products are sold in the industrial, medical, military, and aerospace markets.  The company was founded in 1963.

Intrinsic value: MPAD has been a consistent cash machine. TTM FCF = 3,370,000 : 2010 = 2,534,000: 2009 = 1,538,000: 2008 = 356,000: 2007 = 2,083,000: 2006 = 721,000
Using a basic discounted cash flow and assuming an annualized 1 million in FCF (far less than average over the past 5 years) with a large discount rate of 9% and assuming zero growth still give us a present value of  10.7 million. This amount far exceeds the current enterprise value of 3.3 million providing us with a large margin of safety.

TTM EBITDA=  3.9 million
TTM Gross Profit = 8.47 million

All of these valuation metrics compare favorable to the current enterprise value of 3.3 million.
Profitability
Free Cash Flow/Sales %:  TTM FCF/Sales = 14.20%, 2010 = 10.98 2009 = 8.75% 2008 = 1.77%, 2007 = 11,24% 2006 = 4.20%

High earnings margins; TTM EBT = 17.06%, 2010 EBT = 17.84%. 2009 = 7.21%, 2008 = 14.70%, 2007 = 13.83%, 2006 = 4.98%
Trailing P/E (ttm): 5.44
Price/Sales (ttm): 0.58
Price/Book (mrq): 0.75
Enterprise Value/Revenue (ttm): 0.15
Enterprise Value/EBITDA (ttm): 0.88
Productivity
Consistent high return on invested capital: TTM = 15.49%, 2010 = 16..59%, 2009 = 5.54%,2008 = 14.06%, 2007 = 13.34%,2006 = 12.97%

Closely held with 75% held by one insider.
Mean Reversion: Stock Performance: 3 month stock return = -41%, 1 year 0%, 3 Years = -.831%

Strong Capital Structure: share count was  2,757,315 for 2006 and is still 2,757,315 for the most recent financial report.
Book value has been increasing from 2.27 for 2003 to the current  book value of 7.11

Consistent small annual dividend of about .10 per share or a current 1.8% dividend yield.

Market Cap: 13.79M
Enterprise Value 3.33M

Small Long Position: MPAD.OB

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