5/03/2014

Deep Value Defensive Nano Cap.. Discount to Intrinsic value


AMCON Distributing Co. (DIT)

Amcon Distributing (DIT) is a wholesale distributor of consumer products (tobacco, candy, beverages, groceries, automotive and health care products) covering USA’s Central and Rocky Mountain regions. In addition, Amcon (DIT) operates sixteen retail health food stores in Florida and the Midwest.

The wholesale distribution segment serves approximately 4,500 retail outlets (convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops). Convenience Store News (October 2013) using revenue as their metric ranked Amcon Distributing (DIT) as the seventh largest United States convenience store distributor.

Amcon's (DIT) 16 retail health food businesses are located throughout the Midwest and Florida. Chamberlin's Market & Café (Chamberlins.com) operates six stores in and around Orlando, Florida. Akin's Natural Foods Market(Akins.com) ten locations are in Arkansas, Kansas, Missouri, Nebraska, and Oklahoma.



These stores carry over 32,000 different national and regionally branded and private label products.Additionally, items sold are organic and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise.Both Chamberlin’s Market & Café and Akin’s Natural Foods Market have 75 years of local market presence. Hence, Chamberlin and Akin’s are recognized leaders in natural products, brand dating back to 1935.






Why investigate or keep on watch list for further price weakness. 

1) :Consistent growing book value & gross profit per share 2): Discounted valuation to its industry and P/B history 3): Discount to intrinsic value,  P/CF = 4.10 , EV/EBITDA = 6.28, Book value 4) : ROIC of 11.25% for the average annual rate from 2009 to TTM  4) : Financially strong balance sheet 5): 5 Year Average Dividend Yield 1.00% 6): shareholder friendly management with stable share count  7):small real estate holdings recorded below market value. 8:)Insider ownership 41.81%

Quincy, Illinois; Bismarck, North Dakota; and Rapid City, South Dakota distribution facilities are owned. 1998 10k show these small real estate assets, thus likely recorded below fair market value.  




Additional observations:

Amcon is far from perfect with a small equity obligation from dual class shares, convertible preferred stock. GM% is in a slow long term decline. Furthermore, note valuation yes is cheap. But, profitability valuations are slightly higher compared to history other than price to book value. Debt (acceptable level) of 11.03 million issued over the past 3 years.   


Market Cap: 49.04M , Enterprise Value:  76.61M
Trailing P/E:   11.95
Price/Sales (ttm): 0.06 , Price/Book (mrq):   0.92
Enterprise Value/Revenue (ttm):   0.09
Enterprise Value/EBITDA (ttm): 6.28
Return on Assets: 5.75% ,Return on Equity: 9.18%
Revenue (ttm):  825.91M ,Revenue Per Share (ttm):  1,332.11
Gross Profit (ttm): 77.36M ,EBITDA (ttm):  12.19M
Current Ratio (mrq):  3.42 , Book Value Per Share (mrq):  87.27
Operating Cash Flow (ttm): 4.67M ,Levered Free Cash Flow (ttm): 2.94M
52-Week Change: 12.11%
% Held by Insiders: 41.81% ,% Held by Institutions: 8.10%
5 Year Average Dividend Yield: 1.00%

3 comments:

britintex said...

Unfortunately management don't seem particularly friendly if they're paying themselves much larger dividends than the other shareholders

ShadowStock said...

Unfortunately you’re right!

The post started out by looking for micro caps with net positive insider activity for the combined 2013 and 2014 periods.Then, I added constraints, negative or below market stock price returns, asset rich with stable strong balance sheet, clean capital structure, below market and industry valuations, cash flow cheap.

Towards the end after looking at 10k’s and 10q’s noticed the dual class of stock. It didn’t seem material enough to disregard posting the idea. The stable cash flow generation indicated discount to intrinsic value.
I owned the stock many years ago and did okay watching paint dry. No position now.
Thanks
John

Erpo said...

In addition, Amcon (DIT) operates sixteen retail health food stores in Florida and the Midwest. ... baumarktwarehouse.blogspot.de