Peak Positioning Technologies Inc. (PKK.V)
Grand Power Logistics Group Inc. (GPW.V)
Recent articles:
Peak's $40 billion annual revenue opportunity
How ICBC will fund Alibaba's growth through LongKey
Alibaba's growing shipping needs and Grand Power's involvement in China's logistics industry
Breaking down Grand Power's 4 (now 3) P/E ratio
Peak Positioning Technologies and Grand Power Logistics have been two TSX Venture listed microcap stocks which I have written about extensively over the past several months. I remain extremely bullish on both companies given the rise of Chinese eCommerce and rise in popularity of stocks like Alibaba Group Holding Limited (NYSE:BABA) and Vipshop Holdings Limited (NYSE:VIPS).
In some ways, Peak and Grand Power are on opposite ends of the spectrum:
1. PKK seeks to stimulate growth for Alibaba's Taobao.com retailers through its partner LongKey Software in China, which provides financial data recording and retention solutions for small online merchants wishing to get a loan from the Industrial and Commercial Bank of China Limited (OTCPK:IDCBY) in order to expand their businesses. GPW works at the opposite end of the eCommerce (and other commerce) process as it provides logistics services and warehousing infrastructure in Hong Kong and China.
2. PKK isseeking financingto provide LongKey with working capital to grow and complete the acquisition of its Chinese partner. GPW has enough cash in order to enact astock buyback program, a rarity for a TSX Venture listed stock. I hold a good shareholder-to-management relationship to both companies (partially because they are thankful I write about them so much), so I introduced a dialog between members of the two management teams. I believe they can offer a mutually beneficial relationship, but I have distanced myself from those conversations and I don't know if anything will come of it.
3. PKK'scorporate presentationmakes it very clear that LongKey's IFS platform will have a direct positive impact and is dependent upon Alibaba's Taobao marketplace. GPW tries to downplay its potential role in Chinese eCommerce even though its business is to ship cargo.
4. PKK has enjoyed recent popularity in the small cap investing world and is seeking to bring LongKey to the Canadian markets. GPW has languished, undervalued for years on low volume, and has considered moving the opposite direction to the Hong Kong Stock Exchange to try to maximize shareholder value.
While there are differences between these two companies, the common link between them is that I believe they are extremely well-positioned upstream (Peak) and downstream (Grand Power) of China's growing eCommerce business. Taobao has millions of small merchants who rely on loans from the ICBC in order to fund their growth. Grand Power's business may be focused on shipping industrial and commercial over consumer goods right now, but any differences between those two forms of logistics will erode. Alibaba is pouring billions into theChina Smart Logistics Networkand that will greatly increase demand and revenue opportunities for any company holding logistics and warehousing networks, infrastructure and projects.
The Chinese eCommerce market and logistics opportunities driven by that eCommerce are in the billions. Both PKK and GPW trade at market caps of around $5 million (although PKK's float will grow due to the financing). Investors should be able to do the math on both to figure out upside potential is tremendous. Until the financing and acquisition is complete, I quantify PKK as the higher risk, higher reward type of opportunity. That designation can quickly change once the acquisition closes and Peak/LongKey makes good on the immediate "low hanging fruit" revenue opportunity of ~$70 million in the next several quarters. GPW's financials are stable and growing with no need for financing (reiterate the stock buyback - the opposite of dilution), but the business is more mature and GPW doesn't have the largest bank in the world as its partner so I quantify it as the lower risk, lower reward opportunity, though the "lower reward" is still many multiples of the current stock price.
Additional disclosure:I am long PKK.V and GPW.V on the TSX Venture Exchange.