Something good is coming for BRI-CHEM I posted this about BRY on the TLA blog:
RE:RE:RE:RE:Is this an anchor?
I would like to add my comments to your discussion and opinion about TLA's investment in BRY (Bri-Chem) and whether it should be sold or not.
I follow Bri-Chem very closely and have for a long time. And I can tell you something is up with BIG THINGS coming, probably this year, but certainly in the future.
I have an opposite idea. I would take some of TLA’s excess cash and make a further investment, a sizeable one, even consider taking over BRY outright (current market cap only $9 million), if you could but I doubt it.
Why do I feel this way? For several reasons. One of the main ones is how I compare BRY with CEU (CES Energy Solutions) in all the different ratios. They are both in the exact same industries but have some huge differences in how each is valued, and that has changed drastically over the years. CES is one of the industries (chemical solutions and oilfield supplies) leaders and a very big dog while BRY is a tiny mouse (but becoming a much better size).
Category CES BRY
Sales About 2 billion Over 100 million
Employees 2120 66
Market Cap Almost 1 billion Under 10 million
Working Capital Over $600 million Around $30 million
Net Debt About $137 million Under $7 million
Trading Margins Low but profit Very low (B/E) rising
Dividend Small None
Stock price New high $4.25 Varied up to 12:1 ratio (Fair 6.5)
So, as you can see by my comparative ratios above, BRY always seems to come up on the short end of the stick in most of the comparisons. This has mostly been reflected in the share price too as BRY has suffered more from industry downturns and previous losses.
However, if you have followed BRY closely and paid attention, you will see that they have made great strides and changes over the last three years. All for the good and to support increased future sales and PROFITS.
This has included a complete financial reorganization and change in bankers and debt holders. This is when they were able to get out from under the thumb of TLA’s high interest last resort financing and where Titan got to exercise its option shares.
They have also added key location warehouses, new equipment and products, while still keeping their employee count down and low. They get the highest output per employee in the industry.
This industry requires large capital to stock each warehouse with lots of inventory, always needed very quickly. This is something BRY never had before but now has much better access. The other key to success here is protecting your market share and existing customer base, especially in a declining drilling rig market. Tough on BRY but they have struggled through it and I see some sunshine ahead in sales, inventory sizing and adjustments, and future profits.
Bri-Chem has a great fully experienced management team that have been executing these new formulas and plans. Plus, I have never seen a company fuller of people so passionate about their customers and an industry.
So as we know, TLA could use some added sales and always more profits. If they increased their investment in BLM to over 20%, I believe they can consolidate that portion of sales and income, which would help tremendously while they increase their sale of their own new products. Bri-Chem could use the added capital to reduce their huge inventory financing and current expansion plans. Management of each company know each other well and I am sure would both welcome this idea.
BRY has traded between 1/12 to ¼ of the value of CEU and I feel it is worth a proper ratio of 5.5 BRY to 1 CEU shares. That sold put Bri-Chem shares at a price of $0.78 per share. However, wit their pending improvements I can only see that rising higher. The other thing to consider about BRY is given their undervalued statis, I can see someone exactly like CEU or another large industry player scooping them up. Not including TLA’s 9% interest there is about 25% insider current ownership, so unless it was friendly, that could be a roadblock. That is why I think TLA should make a further move with a bigger investment.
I am telling you BRY is going to be taken much more seriously in the future and not as a joke or the stock that went down to a nickel and then back up to almost two bucks again, bouncing around like a yoyo. Watch and see!
Angles