Cortex Business Solutions Inc. CTPNF

Fabrice Taylor comments on CBX April 30 update

[mjc62]

Cortex Business Solutions (CBX.V; $.06) is a classic example of how a few hundred bucks can cut a company’s market cap by millions. One tired retail investor can sell 10,000 shares at market, say 6 cents, dropping the stock price by a penny. That’s a piddling $600 trade that cuts Cortex’ market cap by almost $4 million. Is it really worth $4 million less because one investor is fed up? Of course not. I think Cortex is a value stock that could turn into a growth stock. And I’m not alone: here’s a note from Cormark Securities from April 9: Yesterday, we held a number of investor meetings with Cortex Interim President and CEO Jim Barker and VP Sales and Business Development Mike Rose. These meetings reinforced our view that there is significant underlying value in the Company’s e‑invoicing network which has the potential to deliver strong revenue growth via new services and an expanding customer base while benefiting from the inherent operating leverage. Importantly, we believe the new management team has been active in surfacing that value by refocusing the Company on sales and streamlining costs through organizational realignment to drive toward profitability. Bottom‑line, we continue to believe the risk/reward profile on the stock is compelling at the current level given our view that the stock is trading well below the value of its existing base of business (without considering new customers) that is worth at least ~$0.13 per share. That’s a conservative note (in my view) that says the inherent upside is more than 100%. Will it happen fast like some of our other winners? No. But the downside is limited, given that the company is close to break even and has lots of cash, and eventually the energy market will be back (and Cortex has not yet entered the construction and mining spaces, which are underserved.) What drew me to Cortex was the upside once new management gets going (they’ve only been on the job 5 months) and when the energy industry comes back, as well as the liquidity. Oftentimes when we recommend stocks they’re hard to buy (think of Snipp: it went up fast but how many of us got to buy all we wanted?) Cortex was very easy to buy because there were LOTS of sellers. There aren’t many sellers now. There just aren’t many buyers either. But that will change and in the meantime it will drift along, maybe lower, on low volume. I own a LOT and pick away at it on weakness. If you don’t own any, bid. It will take time but the upside is potentially breathtaking and the downside is limited and at this stage of the market cycle I'd rather own stocks with limited downside. Plus I think the factoring opportunity is huge. I introduced the company to Accord Financial, which is very interested in exploring the opportunity. They were supposed to meet in mid April but the meeting has been delayed. It will happen soon and any announcement would move the stock sharply higher in my view. The two companies could create a lot of value for both their shareholders in my view. BUY (higher risk). Warmest regards, Fabrice Taylor, CFA | Publisher