2/19/2013

Nano Cap Value Driven by Improved Capital Structure

For this post I was looking at multiple factors to find some deep value. One angle was the aggressiveness of share count reduction especially over the past 5 quarters for tiny companies. But if there was meaningful insider selling it was excluded. Also stocks that performed poorly over the past 6 or 3 months were given extra attention to exploit mean reversion coupled with hidden shareholder value improvements. But metrics like EV to sales, book value and a sound balance sheet were also required before additional work. Okay this will be my quick bullet point introduction. Other ideas exist but I can’t put out tonight.

ISIG: Insignia Systems Inc. listed on the OTCBB

“Insignia Systems, Inc. markets, sells and supports in-store advertising and promotional products, programs and services designed to provide retailers and consumer goods manufacturers with highly effective in-store programs and point-of-purchase display materials.”

ISIG was able to dramatically reduced payroll costs to reach profitability.

Current share count is 13,602,000 versus prior year at 15,121,000 . This was an impressive aggressive 10.01% share count reduction.
Outstanding balance sheet
Quick Ratio = 4.99

Double digit YOY sales improvement
Historical low valuations

Current Price = 1.93
Cash per share = 1.45, Book value = 1.94

The current quarter was profitable as managment promised versus losses for multiple previous quarterly results. 

Market Cap :26.25M,Enterprise Value:7.29M  

52 week return was -13%

The current market price may be approaching less than liquidation value

Needs more wor

DAIO: Data I/O Corp. (DAIO)
 
Data I/O Corporation founded in 1969 creates programming solutions for semiconductor devices.
DAIO has a history of treating shareholders fairly.
2008 diluted shares outstanding were 9,053,000. It now stands at 7,870,000.
Two actions I found particularly interesting was aggressive positive insider activity and share buybacks during 2012. Note that insider purchases were at significantly higher prices from today’s close of 1.59. Some open market purchases were at 2.79.
To put the share buybacks in context recognize the average share price was 5.30 from 06/30/11 to 12/30/10.Then for the one quarterly period ending 06/30/12 they reduced the share count by 11.86%. The average share price during this 3 month period was 2.92. The immediate quarterly period before ending 03/31/12 share count was reduced by 5.80% when the average price during this 3 month period was 3.47.
No long term debt.
Market Cap:13.61M,Enterprise Value : 2.50M
 
Price/Book :0.75, Enterprise Value/Revenue :0.13
 
Cash per share = 1.42 or 11.92M in cash
 
Qtrly Revenue Growth (yoy): -38.90%
 
Slow down in sales was due to over capacity but in time that should be fixed. Management changes and a history of responsibly managed could help this deep value idea. Super Nano Cap Value investor Lloyd Miller holds a position.

PTSI: P.A.M. Transportation Services, Inc

“P.A.M. Transportation Services, Inc., through its subsidiaries, operates as a truckload transportation and logistics company in the United States, Canada, and Mexico. The company engages in transporting general commodities. Its freight primarily consists of automotive parts, expedited goods, and consumer goods, including general retail store merchandise, as well as manufactured goods, such as heating and air conditioning units. The company also provides brokerage and logistics services, which include transportation scheduling, routing, mode selection, transloading, and other value added services related to the transportation of freight. As of December 31, 2011, it operated a fleet of 1,770 trucks, including 79 owner-operator trucks; and 4,696 trailers comprising 53 leased trailers. “

Ending June 2011 share count was 9,102 that was reduced to the current balance of 8,703. The aggressive current share buybacks coupled with recent additional above average capital expenditures could indicate operating improvements.

Current price is 10.28 with a per share book value of 15.11
YOY revenue growth of 7%
52 week price return was -12.14%

Market Cap:89.45M, Enterprise Value:155.00M
Price/Sales:0.23, Price/Book:0.67,Enterprise Value/Revenue:0.41
Enterprise Value/EBITDA:3.84

Click to get quotes all 3 stocks above

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