Post by
TallerCraig on May 30, 2019 5:43am
Q1: 23% Rev Growth w 75% EBITDA Growth – Buyback Machine!!!
Great Quarter across the board, one day this name will get its day in the sun.
Key Takeaways;
Strong Revenue Growth with 3 acquisitions that were done late in the quarter that should still add over $2M USD on an annualized basis to revenue.
Analysts have to play catch up here, with estimates for Fiscal ’19 of $75.49M USD when I am closer to $78 – 80M USD for Fiscal ’19. Just annualizing Q1 you get to a Fiscal ’19 Revenue figure of $80.4M USD
EBITDA margin running real hot at 41.29% I challenge you to find any other company with that kind of profitability that is trading at 2.5x EBIDTA and under 1.0x Sales.
Cash Opex Cost control is running <10% of Sales which is great and if you net out one-time acquisition related costs you get to a figure running <9% of Sales.
Cashflow Cashflow Cashflow of $5.91M USD or $8M CAD in the quarter less NCI leaves $4.31M USD or $5.82M CAD. Annualize that figure to get 23.28M less minimal CapEx and then I don’t know what else you could want.
Buybacks & Acquisitions
This is financial engineering wizardry right here. Personally, with an accounting background I love to see this;
The best acquisition you can make sometimes is your own stock if it trades at such a deep discount and management recognizes this. Lets lay out the scenario;
You are the management of ACES.V you are generating millions of cashflow and you are looking at how to deploy your cashflow and you are looking for accretive acquisitions.
Historically, you can pay aprox. 1.5 – 2.0x Sales for additional in state licenses and terminals OR you can buy back your own stock which is currently trading at 0.85x Sales and 2.5x EBITDA with no execution risk or acquisition related costs.
It is more accretive to buyback your own shares then to pursue further acquisitions!!!
Especially when you consider the ridiculous compensation structure of Manu around the incentive program tied to acquisitions just buy back every share you possibly can is in the best interest of all shareholders not just you Manu.
I believe Manu has finally got the message, they have bought back 1M shares in the last 2 months and completed no further acquisitions;
April – 410,500 shares cancelled @ ACB 0.754/share
May – 550,000 share cancelled @ ACB 0.8146/share
So in the last month they have reduced the outstanding share count by 1.3% at <1.0x Sales and <3.0x EBITDA.
Continue to buy every stock that you can everyday under 1.00/share. You can look at the trade history as Cormark Securities (House 073) the executer of the buyback program has been the main buyer on the name the last two months.
In summary, still my favourite name and my highest conviction name in these uncertain times.
Follow the cashflow.
LONG