4/23/2012

Deep Value Nano Cap

DIT: Amcon Distributing

This tiny very well managed closely held company surely merits a much closer look. DIT improvements have yet to be fully reflected in the market value. Over time operations have significantly improved and they simultaneously increased cash,  reduced debt and share count.  The enterprise value to sales, book value, GP have all greatly improved.

DIT: AMCON Distributing Co is engaged in the wholesale distribution of consumer products such as tobacco products, candy, beverages, food service, groceries, paper products, automotive and health and beauty care products.  In addition, the Company operates fourteen retail health food stores in Florida and the Midwest.
Based on their performance over several years clearly demonstrates these managers/owners understand value creation. In the latest annual letter to shareholders management has strategic objectives that focus on the operational benefits of a strong balance sheet.  

From the 2011 letter; "short term our strategic objective is to maximize balance sheet liquidity We believe this balance sheet liquidity enhances our ability to take advantage of both merchandising and strategic opportunities. One of the critical elements of executing an acquisition strategy is to have the financial wherewithal to close the transaction in a condensed time frame. Moreover, having readily available financial resources enables our management to put more time and resources into actually evaluating and organizing the closing, as well as the integration of the newly acquired business."

"Our focus on liquidity also provides the flexibility to best position AMCON to develop merchandising opportunities that will directly impact our Customers’ bottom line profits. We work closely with highly respected consumer product companies to develop these promotional opportunities. The capital requirements to facilitate these programs are large and need to be implemented on short notice. Hence, keeping plenty of dry powder is a critical element of this strategy."
In the medium term, we seek to generate free cash flow which we can use to reduce debt. We established this objective as a medium term goal because we frequently leverage our credit facility as a profit enhancement tool. Thus, on a short term basis, borrowings on the credit facility may increase as opportunities manifest themselves. However, over time, through profits, we seek to reduce the total amount of debt outstanding. Similarly, we seek acquisitions or may open new stores, which will require cash. We were especially proud of our debt management performance
We focus on return on assets and capital employed from a financial perspective as we believe this is an appropriate way to manage our business for long term capital appreciation. 

Frequently shareholders inquire as to our philosophy with respect to share repurchase. Our view is that we examine ,and rank, all of our various opportunities whether they are acquisitions, inventory purchases, capital expenditures, share or debt repurchases. When a share or debt repurchase is the highest and best use of our cash, we will not hesitate to act on it. This, again, is why our short term strategic plan is to maintain liquidity. With liquidity comes the ability to execute on any or all of these options."

DIT:
2008 Yr End Current Change Change %
Market Price $23.48 $63.10 $39.62 168.74%
Cash 457,681 1,389,665 931,984 203.63%
Liabilties 82,340,164 65,727,040 -16,613,124 -20.18%
Book Value 10,965,194 41,708,593 30,743,399 280.37%
Revenue 860,451,122 1,080,237,781 219,786,659 20.54%
Gross Profit 64,676,342 75,193,995 10,517,653 16.26%
SGA 51,631,324 58,037,243 6,405,919 12.41%
Float 391,090
Shares Outstanding 851,298 778,914 -72,384 -8.50%
Market Cap 19,988,477 49,149,473 29,160,996 145.89%
EV (MC-Cash+Liab) 101,870,960 113,486,848 11,615,888 11.40%  little chng in EV
Price 23.48 63.10 39.62 168.74%
EV Per Share 119.67 145.70 26.03 21.75%  small EV chng
Sales Per Share 1010.75 1386.85 376.10 37.21%  Positive
GP Per Share 75.97 96.54 20.56 27.06%  Positive
SGA Per Share 60.65 74.51 13.86 22.85%
BV Per Share 12.88 53.55 40.67 315.76%  Positive
EV/MC 5.10 2.31 -2.79 -54.71%  Positive
EV/BV 9.29 2.72 -6.57 -70.72% Positive Improvement
EV/Sales 0.12 0.11 -0.01 -8.33% Positive Improvement
EV/GP 1.58 1.51 -0.07 -4.43%
GM % 7.52% 6.96% -0.01 -13.30%
Float/Shares Outstanding 50.21%
Current Div Yield 1.10%
52 wk change -13.26%
Insider Acivity Neutral
YOY Qtrly Rev Incr 30.10%
Avg ROIC 2008 to TTM 3.81%
3 year Avg Rev Growth 6.58%
EV/EBITDA 3.74
% Held by Insiders 45.70%
% Held by Institutions 7.10%

2 comments:

Anonymous said...

Do you expect them to delist (they appear to be considering from a recent 10-k)? I think the price will get even cheaper if they do.

If the price more than doubles, is not this a 100% plus gain. I think you need to re-check your math.

Very interesting company - Thanks.

ShadowStock said...

Thanks, pasted the wrong % changes. updated
i agree that there is little reason at this to be public but they are committed to expanding. may be worth watching and adding on weakness