KGIC Inc LGLTF

RE:RE:Timing

[investX]

Agreed. I did a comparision on the numbers to update my model quickly. Basically, if you look at Gross Profit and Gross Profit margin it is flat at 36.7% in 2014 to 37.7% in 2013 (strip out amortizaion in direct costs as those are non-cash). Once you strip out student housing, it is 35.0% on the lower revenue base in 2014 versus 37.7% in 2013 with the bulk of the increase coming from commissions and promotions. As a % of revenue, teacher salaries are flat so while there does not appear to be student-teacher leverage occuring, at least these costs are not increasing. Under gross profit, the most substantial increases are salaries (head office, school admin and profesional fees). My thoughts on these are as follows: Salaries under G&A - at 14.2% in 2014 vs. 10.0% in 2013 (key questions are that we hired more people and got rid of some so need to take out one-time serverance, etc. from the numbers). Professional Fees - On a gross $ basis, were at $900K vs. $200K from 2014 to 2013. We know this is due to the delayed audit, etc. These probably normalize out to somewhere in the middle if you are forecasting next year. All in all, if you strip out student housing and normalize costs as a % back to 2013 levels with some buffer for cost increase, you get to an approximately $7.0M EBITDA run-rate business. That does not include student housing which can be spun-out separately as the new CEO alluded to in the press release. While I agree it will be 12 months - 18 months as a map to get there, on an EV / EBITDA basis, this stock is actually quite undervalued. Without getting into the full analysis, I am not as rosy as the external analysts but I think a share price closer to $0.50 would represent fair value. Let's also look at the shareholder base here - Seymour Schulich owns a huge chunk of the stock as does the now stepped down CEO, Andrew Ryu. Do you think Seymour Schulich who bought it at a much higher price or the Montreal Investment fund invested here (Montrescu Bolton) is going to sit quiet when they control over 30% of the stock together? I believe that the management change and this shareholder base will push for either: (i) cost changes to be made to get the run-rate EBITDA I noted earlier of $7M absent student housing; or (ii) sale of the business to a small private equity or educational business. Both those situations I see a share price at $0.50. Note that the above does not constitute investment advice and is merely my view based on my analysis. I do hold the security. You are responsible for conducting your own analysis of the stock and should in no way rely on my post to make this or any other investment decision(s).