RE:RE:Anyone know what happened here? Fabrice Taylor just recommended it today in his news letter. That could explain the volume.
Cortex Business Solutions (CBX.TO;$0.10): This is one of the most interesting tax-loss candidates we’ve ever seen. It’s small, and therefore riskier, but provides a very attractive risk-reward proposition and a “pick axe” way to play a recovery in the oil price without taking on direct commodity risk. In fact, it should benefit from a low crude price.
Cortex operates a network that allows for the efficient processing of electronic invoices. It counts among its clients Apache Energy Corporation, Finning and Husky Energy, the big integrated oil and gas producer.
Cortex has saved Husky $30 million a year through the use of its network, adding $300 million in market value. Here’s how it works: In the old days suppliers would do a job for Husky and then mail in an invoice to get paid.
It would take weeks for the invoice to be processed (employees had to make sure it matched the work order, that the work had indeed been done to specifications, and that there was no duplicate invoice that had already been paid.)
By the time the verified invoice arrived on the decision-maker’s desk, weeks had elapsed. Big purchasers usually reserve the right to discount invoices by 2% if they pay them within 10 days, but Husky was taking too long to approve the invoices so it couldn’t apply many discounts.
With Cortex’s SAAS-based system, invoices are sent electronically and checked within days, allowing Husky and other customers to apply discounts and save large sums of money.
Suppliers typically don’t mind the discounts because they’d rather get paid in 10 days than in 90 days.
Cortex has been growing very rapidly, with recurring revenues up 45% and 49% in the past two quarters compared to last year.
It has $8 million in cash and about $10 million in annual revenue. Yet because it’s a retail stock it’s been selling off aggressively for tax reasons particularly, and the market cap is only about $35 million. Fast-growing SAAS companies can trade for as much as 10 times revenue.
While a lower oil price will cut into sales from existing customers, the company adds more customers so fast that it tends to grow even in a poor oil-price environment (in 2011, when oil prices fell hard, Cortex still posted revenue growth). The company expects to grow in 2015, albeit at a slower rate.
In fact, oil-price corrections are typically good for Cortex in some ways because when oil is lower producers look for ways to save money, and this is an easy way to do it. Suppliers will like it too because they’ll have less work so they’ll be pleased to get paid faster. And of course the oil price will recover - some analysts think by late-2015.
But there’s another angle that makes Cortex amazingly attractive at this value: the company is working on a partnership with the biggest U.S. factoring firm to the oil and gas industry to begin financing receivables for industry suppliers.
Here’s how that works: Husky, to use one example, only applies discounts to about a quarter of its payables, or about $1 billion worth. Why not to all of them given the massive savings? Because that requires cash, and it’s just not efficient to allocate that much cash to the early payment of bills.
Cortex Payments, the proposed factoring joint venture, would involve bringing in a third party, the factoring firm, to provide the money. It would earn the bulk of the profit and Husky and Cortex would share the rest.
Here’s the amazing arithmetic: let’s assume that this part of the business uses $100 million of capital to “lend” to Cortex customers so they can pay their bills earlier at a discount (that’s an absurdly small amount of capital because Husky alone could use a couple of billion, and Cortex has many customers).
The money would earn about 36% annualized interest, or $36 million. Cortex’s take is still being negotiated but it would probably be at minimum 10% (perhaps as high as 20%). That implies $3.6 million, and that’s pure profit. There is no cost against this revenue. Husky and other customers would also earn significant profits from this endeavour, again with no cost and no investment. And suppliers would of course benefit from more rapid payments. You can imagine for yourself how much Cortex could earn as this business ramps up - it could be more than the current value of the company.
So the outlook for this unknown company is very attractive notwithstanding the oil price. The technology side of the business is growing rapidly and produces 75% gross profit margins (it burns cash now because as we learned from our SAAS primer, to grow a SAAS business means to lose money in the earlier days.)
The company hopes to launch this venture in the coming months. Few have ever heard of this stock but that will be changing very soon (and the stock is already starting to move higher.)
Try to get shares for 10 cents or better.
zerocool42 wrote: not a clue. huge volume today. no news that i know of, could be that the company is going to market for the employee bonus share plan.