10/25/2015

Market Ignores Black Diamond (BDE), Non Traditional Deep Value


Black Diamond designs, manufactures, and markets outdoor performance equipment and apparel for climbing, mountaineering, backpacking, skiing, cycling, and other year round outdoor recreation activities. Black Diamond's products are sold in approximately 50 countries around the world.

Black Diamond trades at deep historical and industry valuation discounts. The recent sale of its equity interest in POC for 65M strengthened the balance sheet and focus. An 8K released 10/08/15 updated the pro forma financial statements to reflect the transaction. Enterprise value per share is now 3.30 per share including all liabilities and 2.81 excluding current liabilities. Cash per share = 3.22, EV/Revenue = .68 or .58 excluding CL, Non cash assets = 6.61 per share, EV to non cash assets = .53, Gross profit per share = 1.77 or EV/GP = 1.59.
Summary:
Price $5.23 on 10/23/15, MC = 171.51M, EV = 107.61M
Pro Forma Financial Statement reported on the 8K(10/14/15); Working Capital per share = $5.23, BV per share $8.18:  WC per share = Current Assets (187,483,000/32,714,000)=$5.73 Current Liabilities = (16,203,000/32,714,000) = $0.495 WC=CA(5.73)/CL(.495) = $5.235 WC per share versus price of $5.23
NOL carryforwards for U.S. federal income tax purposes are approximately $167 million or 5.10 per share. per the 8K reported on 08/10/15 
Corporate headquarters ownership with a 4,175,900 tax value assessment.
Executive chairman is Warren Kanders, 22% owner. Kander's capital market history indicates BDE value will increase and monetized. He has extensive investment, capital raising, acquisition and operating expertise. "From January 1996 until its sale to BAE Systems plc ("BAE Systems") on July 31, 2007, Mr. Kanders served as the Chairman of the Board of Directors, and as the Chief Executive Officer from April 2003, of Armor Holdings, Inc. ("Armor Holdings"), formerly a New York Stock Exchange-listed company and a manufacturer and supplier of military vehicles, armored vehicles and safety and survivability products and systems to the aerospace and defense, public safety, homeland security and commercial markets." Click for source
52 week price change is -32.73%, the stock price is close to a 5 year low. P/B (.68)and P/S (.75) are near its 10 year low.
Value based institutional ownership includes KENNEDY CAPITAL MANAGEMENT adding 553,435  additional shares for the quarter ending 06/30/15, Royce and associates are shareholders ,  Insiders own 29%
Black Diamond (BDE ) reported on 10/08/15 sale of its equity interest in POC for $65.0 million.
"For the twelve months ended December 31, 2014, POC recorded sales of approximately $34.8 million, implying a revenue multiple of approximately 1.9x. Black Diamond originally acquired POC in July 2012 for approximately $44.9 million. The divestiture completes the Company's strategic review process initiated in March 2015. Black Diamond plans to maximize shareholder value by focusing its attention on the profitability of both the Black Diamond Equipment and PIEPS brands while redeploying the proceeds of the sale to potentially unrelated and diversifying investments. The Company will provide a full strategic and financial update on its third quarter earnings call in early November 2015.Black Diamond expects to realize net proceeds of approximately $60.0 million after purchase price adjustments, fees, expenses and taxes. Post-transaction, the Company expects to have approximately $100.0 million in cash, $22.6 million in debt and around $167.0 million in net operating loss carryforwards". Source

Note these numbers were reflected in my updated WC and book value calculations above.

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Include all liabilities, BDE is selling a high margin prestigious international brand sporting equipment maker for less than $28 million that generated 160M in sales. It's likely management will begin to aggressively buy back shares to be discussed November 8th conference call. None of this includes the 167M NOL or fair market value of real estate. The stock appear to be oversold.
                                                                                

2 comments:

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ShadowStock said...

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