Banco Latinoamericano (BLX:BUY) Successful reduction in the credit portfolio exposure to Brazil

24-AUG-16 – Banco Latinoamericano (BLX:BUY) Successful reduction in the credit portfolio exposure to Brazil (<20% target set in Q4:15) coupled with increasing credit share of growing economies (Peru, Argentina, Colombia and the Central American region) are expected to drive business to BLX and enhance its prospects over the coming quarters. We reiterate our last BUY rating with an increased price target of $33.00.

Q2:16 HIGHLIGHTS

  • Net interest income increased 10% to $38.2 million in Q2:16 from $34.7 million in Q2:15, primarily due to higher lending spreads and increased market rates.
  • Net interest margin came in at 2.06% versus 1.79% in Q2:15. Fees and commissions rose 43% to $4.4 million in the quarter, compared to $3.1 million in Q2:15 as the company completed five transactions in the loan structuring and syndication business.
  • Net profit surged 10% to $22.3 million in Q2:16 or $0.60 per diluted share from $20.2 million or $0.52 per diluted share in the year earlier quarter, as the company witnessed a healthy growth of 10% and 43% in its net interest income and fees & commissions respectively.
  • The average interest earning assets under Commercial Loan Portfolio segment fell 8.7% over Q2:15 levels to $6.8 billion.
  • Brazil represented 18% of the overall (Commercial & Treasury) outstanding credit loan portfolio, down from 27% in Q2:15.

Multi-Color Corp (LABL:BUY) Q1:17 Adjusted EPS of $0.95 beats our estimate of $0.88 on a higher than expected gross margin

10-AUG-16 – Multi-Color Corp (LABL:BUY) Q1:17 Adjusted EPS of $0.95 beats our estimate of $0.88 on a higher than expected gross margin, partly offset by a higher than expected SG&A. We maintain our FY:17 EPS estimate, our price target of $67.00, and rating at BUY-Long Term pending review of the 10-Q.

Q1:17 HIGHLIGHTS

  • Total revenues grew 8.5% driven by $18.6 million of revenue from acquisitions not yet annualized. Internal growth was +4% totally offset by foregone low margin beer label sales (2%) and F(x) of (2%).
  • Gross margin was up to 22.0% vs. 21.5% due to contribution from acquisitions as gross margin on revenue from acquisitions was 24.2%.
  • Adjusted operating margin was down, 12.5% vs. 13.0% in the prior year, due to increased compliance costs.
  • Q1:17 GAAP EPS was up to $0.93 vs. $0.79. Adjusted EPS was up 4% to $0.95 vs. $0.91, well ahead of our estimate of $0.88.
  • Simply adding the earnings beat to our prior FY:17 estimate of $3.47 would produce a new estimate of $3.55; however we will wait to update our estimate and price target of $67.00 and rating of Buy-LT until after reviewing the 10-Q.

RISKS

  • The company has completed a series of acquisitions funded by debt in the last few years. A significant shortfall in sales and earnings could endanger its ability to stay within debt covenants.
  • High customer concentration in top customer (Proctor and Gamble – 17% of sales) and top 25 customers (49% of sales).

Acme United Corp. (ACU:BUY) ACU reports record revenue and EPS for Q2:16 that significantly beat expectations.

9-AUG-16 – Acme United Corp. (ACU:BUY) ACU reports record revenue and EPS for Q2:16 that significantly beat expectations. The company showed strength across numerous product lines, and a very strong recovery in Europe. We reiterate our BUY rating and raise our price target from $21.00 to $24.50.

Q2:16 SUMMARY

  • Sales of $41.0 million were up 21.0% over Q2:15, with EPS of $0.91, an increase of 23%. Revenue growth was strong across numerous product lines, and aided by a significant increase of European sales of 36% led by increased market share in office products.
  • The pace of office products stores in the US slowed on the back of the justice department’s decision to halt the merger of Staples and Office Depot. This prevented further decrease of inventory in the office
    superstore channel, and bolstered sales of office products in the US.
  • The pathway is set for continued organic growth with the expansion of first aid sales, the Cuda product line, and the new DMT product line in both international and domestic markets.
  • We maintain our BUY rating, and increase our price target to $22.50.

RISKS

  • ACU’s results can be negatively impacted by weak economic activity; rising commodity input costs; timing of customer orders; foreign exchange fluctuations; and competitor pricing.
  • There are significant competitors in the firm’s operating segments, including J&J and Fiskars, and barriers to entry are relatively low.

 

A-Mark Precious Metals, Inc. (AMRK:BUY) Double-digit increase in gold and silver volumes was more than offset by declines in prices during the quarter.

13-JUN-16 – A-Mark Precious Metals, Inc. (AMRK:BUY) Double-digit increase in gold and silver volumes was more than offset by declines in prices during the quarter. However steady increase in precious metal prices over the long term and favorable macroeconomic environment along with an increase in the size of loan portfolio will drive earnings growth going forward. We are maintaining our BUY rating and a price target of $25.00.

Q3:16 Highlights

  • Net sales decreased 7% to $1,512.7 million in Q3:16 from $1,624.5 million in Q3:15, primarily attributable to a 3% decline in the average spot price for gold and an 11% decline in the average spot price for silver. However, increase in Gold ounces & Silver ounces sold by 15% and 21% respectively partially offset the drop in revenue.
  • Gross profit increased 22% to $5.7 million in Q3:16 from $5.6 million in Q3:15, primarily attributable to increased performance of its higher margin custom coin products. AMRK also experienced higher volatility and demand for its primary products, which drove a 5% increase in trading tickets compared to the corresponding period last year.
  • Net income declined to $1.2 million or $0.17 per diluted share, from $1.7 million or $0.24 per diluted share. The drop in bottom line was primarily due to various non-recurring state tax provision benefits recorded in Q3:15 which did not recur in Q3:16, as well as higher interest and SG&A expenses, offset by the increase in gross profit and interest income in Q3:16 as compared to Q3:15.
  • Cash and cash equivalents increased in Q3:16 to $12.9 million from $3.3 million in Q2:16 due to increase in lines of credit and product financing arrangement amount.

Trecora Resources (TREC:BUY) Despite higher sales volume and record revenues at Trecora Chemical, TREC recorded a muted topline growth

31-MAY-16 – Trecora Resources (TREC:BUY) Despite higher sales volume and record revenues at Trecora Chemical, TREC recorded a muted topline growth due to sharp declines in average sales price of petrochemical products. However improvement in gross margins sequentially and a larger than expected ($5.4 million) in equity income from investments in AMAK helped TREC to deliver strong bottom line. We are maintaining our BUY rating and our $18.00 price target.

Q1:16 HIGHLIGHTS

  • Total revenues decreased 5.3% to $52.2 million in Q1:16 from $55.1 million in Q1:15, primarily driven by a 19.6% decline in the average sales price of petrochemical products due to a 16.6% reduction in petrochemical feedstock prices. However petrochemical sales volume rose 12.4% to 20.4 million gallons from 18.1 million gallons in Q1:15. Trecora Chemical reported record sales of $8.1 million, up 26.4% from $6.4 million in Q1:15.
  • Gross profit margin improved to 22.5% in Q1:16 from 19.6% in Q4:15 but lower than 27.5% in 1Q’15.
  • Adjusted EBITDA (excluding equity and AMAK earnings/losses and share based compensation) decreased to $9.2 million in Q1:16 from $12.7 million in Q1:15.
  • TREC reported net income of $7.2 million or $0.29 diluted EPS in Q1:16, compared to $5.8 million or $0.23 diluted EPS in Q1:15. The increase in net income is due to $5.4 million profit in equity in the Al Masane Al Kobra Mining Company (AMAK).
  • Cash & equivalents decreased to $14.2 million at quarter end compared to $18.6 million in Q4:15.
  • Book value per common share increased to $6.14 in Q1:16 from $5.27 in Q1:15.

IntelGenx Technologies Corp. (IGXT:BUY) Q4:15 Results above expectations on revenues slightly better than forecast

11-MAY-16 – IntelGenx Technologies Corp. (IGXT:BUY) Q4:15 Results above expectations on revenues slightly better than forecast, and expenses below forecast. Forfivo XL net sales were up 23.5% sequentially. We are increasing our 2016 EPS estimate a penny and maintaining our BUY rating while reducing our price target to $0.80.

Q4:15 Results Above Expectations on Better Revenues and Expenses

  • IGXT reported revenues of $1.50 million, above our expectations of $1.38 million. Forfivo XL net sales were $3.02 million, up 23.5% sequentially from Q3.
  • Total expenses were below our expectations. SG&A was below expectations while R&D was inline. Operating income was $0.28 million vs. our estimated loss of ($0.18) million.
  • Net income was a profit of $0.27 million. Tax provision was zero, reflecting use of carryforward losses.
  • We raise our forecast EPS in FY:16 to $0.01 from $0.00, and reduce or forecast for FY:17 to $9.21 million revenue and EPS of $0.05. We reduce our 12-month price target to $0.80 and maintain our BUY rating.

RISKS

  • Dependence on sales via marketing partners. The company does not maintain its own sales force, and depends on marketing partners to distribute product. It also is not manufacturing its only product on the market.
  • The company is dependent on one product for sales revenue. The company’s common stock trades at less than $1.00 per share.

 

Harte-Hanks, Inc. (HHS:BUY) Mixed Q4:15 results with a slight revenue miss, better than expected operating income and EBITDA

17-MAR-16 – Harte-Hanks, Inc. (HHS:BUY) Mixed Q4:15 results with a slight revenue miss, better than expected operating income and EBITDA, and in-line EPS. Raising our FY:16 and FY:17 revenue estimates; lowering EPS projections. The Company closed a new credit facility. However, it also eliminated its dividend. HHS is making progress on its turnaround. Maintain BUY rating with a $4.50 price target (revised from $5.00).

Q4:15 & FY:15 HIGHLIGHTS

  • Q4 and FY:15 total revenues slightly below our estimates; operating income and EBITDA better than expected. EPS for the quarter and full year in-line with our projections.
  • HHS closed a new $100 million 5-year credit facility. Given the new financial covenants, the Company announced elimination of its $0.34 per year dividend, which we did not expect.
  • Management guided for flat revenues and operating margin in FY:16; topline growth in FY:17. We increased FY:16 and FY:17 revenue estimates; lowered EPS as the Company will be paying higher interest going forward.
  • After being up 12.7% for the year, HHS has declined 22% since the dividend news. We believe this has created a buying opportunity as the Company remains profitable and is making progress towards completing the turnaround by the end of FY:16. We maintain our BUY rating on HHS with a new price target of $4.50.

RISKS

  • HHS’ businesses are dependent heavily on the overall state of the economy in the U.S., Europe, and Asia. Marketing and ad budgets of its clients are generally discretionary in nature.

Salem Communications Corp. (SALM:BUY) Top-line growth across all business segments. Broadcast business delivers double-digit income growth.

17-MAR-16- Salem Communications Corp. (SALM:BUY) Top-line growth across all business segments. Broadcast business delivers double-digit income growth. Cost-cutting aids bottom line. Reiterate $8 price target and BUY rating.

Q4:15 HIGHLIGHTS

  • SALM reported 4.9% growth in revenues to $69.1 million compared to Q4:14 revenues of $65.9 million and above our estimate of $67.2 million. Net broadcast revenues increased 5.2% to $51.3 million and represented 74% of revenues.
  • Adjusted EBITDA improved 11.9% to $13.3 million from $11.9 million one year earlier and EBITDA rose 34.4% to $15.2 million from $11.3 million in Q4:14.
  • Operating income jumped 33.4% to $9.3 million from $6.9 million as revenue growth more than offset modestly higher operating expense. Operating expenses increased 3.3% to $55.8 million in Q4:15 from $54.0 million one year ago.
  • Q4:15 EPS rose to $0.20 from $0.00 in Q4:14. The big EPS gain reflects topline growth, margin expansion and some impact from one-time items which included a $0.03 gain on bargain purchase, a $0.02 decline in the value of the contingent earn-out consideration and $0.01 impairment to goodwill. Broadcast station operating margin improved 270 basis points year-over-year to 30.9% from 28.2%.
  • We increase our FY:16 EPS estimate, introduce our FY:17 estimate and reiterate our BUY rating and $8 price target.

RISKS

  • The radio broadcast industry is subject to rapid technological change, evolving industry standards and the emergence of competition from new media technologies and services.

INTL FCStone (INTL:BUY) INTL continues to report robust results driven by strong transactional volume across business segments.

18-DEC-15 – INTL FCStone (INTL:BUY) INTL continues to report robust results driven by strong transactional volume across business segments. The combination of a steady improvement in market conditions, acquisition synergies, and steady improvement in operating leverage helped the company to reach its milestone ROE target of 15%. We are maintaining our BUY rating and increasing our price target to $39.00 from $36.00.

Q4:15 Highlights

  • Operating revenues jumped 37% to $178.7 million in Q4:15, driven primarily by robust performance in the Securities segment (+84.0% YOY) followed by the Global Payments (+64%) segment.
  • Revenues from Commercial Hedging, the company’s largest segment, grew 12.0% YOY to $67.1 million. Exchange traded revenues rose 20% to $34.6 million, while revenues from OTC increased 7% to $27.0 million.
  • The Securities segment witnessed the fastest growth in Q4:15 with revenues growing 84.0%, driven by strong growth in equity market making (+58.0%) and debt trading (+162%).
  • Revenues from Global payments zoomed 64.0% to $25.3 million, driven by a 52.0% jump in the volume of payments made due to increased use of electronic transaction order system by financial institutions.
  • Compensation expenses were $98.1 million, up 24.0% YOY and accounted for 55% of total operating revenues.
  • Diluted earnings per share rose 260.0% to a record $1.09 in Q4:15, well above our estimate of $0.66. Strong transactional volume growth in all the business segments led to a higher growth in earnings.
  • Annualized ROE was 15.0% in Q4:15, in line with the internal target of 15%.

Reed’s, Inc. (REED:BUY) REED had a very poor quarter with both revenue and EPS being hampered by operational issues.

16-DEC-15 Reed’s, Inc. (REED:BUY) REED had a very poor quarter with both revenue and EPS being hampered by operational issues. The positives are that demand remains strong with the company having its best month ever in October at $5 million in revenue, and that two new co-packers were brought online to mitigate future production risks. We maintain our BUY rating, and maintain our price target of $9.50.

Q3:15 HIGHLIGHTS

  • Revenue of $10.7 million for Q3:15 misses our estimate of $13.9 million due to sever supply disruptions with an east coast co-packer, a decrease of 13% from Q3:14. To mitigate this risk going forward and reduce shipping expenses, the company brought on two additional co-packing facilities in the quarter. Demand remained strong for the quarter, and there were numerous stock-outs. If the company met demand, management estimates that sales would have been approximately $15.0 million.
  • Gross Margin was severely impacted by supply chain issues including quality issues at the company’s primary co-packer, and came in at 15%. Management estimates that without one-time supply chain issues, gross margin would have been 28% for the quarter.
  • The fountain drink program is progressing, and the company currently has a pilot installation at the headquarters of the national fast casual chain mentioned in the Q2:15 report. It was also indicated that this potential partner had REED develop reduced calorie versions of several of their products. Sales of these fountain products could start as early as Q1:16.
  • We maintain our BUY rating and $9.50 price target.

RISKS

  • Failure to keep production on pace with demand for the product.
  • Failure to generate consistent and improving profits on strongly rising sales.