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.

Avid Technology (AVID:DROP) We are TERMINATING coverage in order to re-focus resources.

22-AUG-16 – Avid Technology (AVID:DROP) We are TERMINATING coverage in order to re-focus resources. We note that AVID stock has reached our previously announced price target of $8.50 per share.

Notes

  • We are terminating coverage in order to focus resources elsewhere.
  • We note that AVID stock has reached our previously issued price target of $8.50 per share.

Century Casinos, Inc. (CNTY:BUY) Continued execution on a growth strategy based on new gaming venues and expanded capacity appears to be delivering continued growth

22-AUG-16 – Century Casinos, Inc. (CNTY:BUY) Continued execution on a growth strategy based on new gaming venues and expanded capacity appears to be delivering continued growth in sales. We reiterate our Buy rating and $9.25 price target for Century Casinos.

HIGHLIGHTS

  • Sales in 2Q:16 declined 7.1% compared to the same quarter last year, due to extraordinary items, namely, termination of concession agreements. Excluding these items, sales grew 2%.
  • Profit margins improved 2.5 percentage points over the prior quarter on better coverage of fixed costs by higher sales levels. We believe this bodes well for overall earnings in the balance of the year and beyond.
  • Our earnings model has been updated to reflect 2Q:16 results. The model still reflects top-line growth of 5.7% in FY:16 and 12.5% in FY:17, but we now anticipate earnings in FY:16 down to $0.42, and then strong growth in FY:17 to $0.57.
  • The second quarter reflected good local currency revenue performances from the Company’s three operating segments. Canada was up 4%, Poland was up 10% and the U.S. was up 7%,
    reflecting underlying strength and stability in its geographically diverse portfolio of casino assets.
  • Century Casinos successfully converted 16% of sales in 2Q:16 to operating cash flow. We expect continue strong cash flow generation in FY:16.
  • Total debt outstanding was $37 million at the end of June 2016, a reduction of $7.7 million from 12 months earlier.
  • In June 2016, the Company entered into an agreement to acquire the Apex casino in St. Albert, Edmonton, Canada. Apex is a 34,500 square foot facility that includes 382 slot machines and 11 live table games. The acquisition is expected to close in the fourth quarter of 2016.
  • We continue to view CNTY as undervalued based on valuation of the stock through comparisons to a large group of casino managers. Our price target remains $9.25.

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).

NV 5 Global (NVEE:BUY) Q2 Revenues increased 62% over the prior year, boosted by acquisitions.

15-AUG-16 – NV 5 Global (NVEE:BUY) Q2 Revenues increased 62% over the prior year, boosted by acquisitions. Organic revenue growth for the quarter was 9%. With our Adjusted EPS estimate for the year at $1.66, we maintain our BUY rating and $39 price target.

Q2:16 HIGHLIGHTS

  • Gross Revenues increased 62% to $55.9 million, the highest for any quarter in NV5’s history. Organic revenue growth was 9% for the quarter, with the rest of the increase coming from acquisitions. Related acquisitions are a cornerstone of the Company’s strategy. The most recent acquisition was Dade Moeller, completed in May 2016, which is now a part of the Environmental vertical within NV5.
  • The Company continued to bring new, higher-margin work into all service lines in the second quarter, which resulted in gross margins increasing to 47% from 45% in the prior year and a 12% sequential quarterly increase in backlog to $195.5 million. Backlog increased 67% from a year ago.
  • EBITDA for Q2:16 was $6.0 million or 14% of Net Revenues, an increase of 71% over $3.5 million or 13% of Net Revenues for the same quarter of last year.
  • Adjusted EPS for the quarter was $0.38 per diluted share, an increase of 23% from $0.31 per diluted share in the second quarter of 2015.
  • During Q2:16, NV5 completed an offering of 1.955 million common shares for net proceeds of $47.2 million.
  • Our Full Year 2016 estimates show Gross Revenues increasing 50% to $232.5 million and Adjusted EPS at $1.66. We continue to maintain a BUY rating and a price target of $39.

Trecora Resources (TREC:BUY) TREC revenues plummeted as the drop in South Hampton Resources revenues more than offset those of Trecora Chemical gains

12-AUG-16 – Trecora Resources (TREC:BUY) TREC revenues plummeted as the drop in South Hampton Resources revenues more than offset those of Trecora Chemical gains. However, income related to bargain purchase acquisition and AMAK helped earnings to reach a record high of $12.1 million. We are maintaining our last BUY rating and $18.00 price target, which will be updated following our review of the 10-Q.

Q2:16 HIGHLIGHTS

  • Total revenues fell 17.7% to $48.9 million in Q2:16 from $59.4 million in the same quarter of previous year, as the South Hampton Resources segment net revenues plunged 22.7% (more than offsetting 31.8% gain in revenues of TC segment) due to reduction in both petrochemical sales volume and average sales price of petrochemical products which declined 13.3% and 13.1% respectively.
  • Gross profit margin deteriorated to 22.5% for the quarter compared to 25.6% in Q2:15, following the slump in revenues. But it remained flat with respect to Q1:16.
  • Adjusted EBITDA (excluding equity in AMAK earnings/losses, share based compensation and bargain purchase gain) dropped to $8.8 million in Q2:16 from $12.3 million in the year earlier quarter.
  • TREC net income jumped 89.6% to $12.1 million or $0.48 per diluted share in Q2:16 from $6.4 million or $0.25 per diluted share, primarily attributable to the benefit realized from bargain purchase acquisition (BASF) and equity income from earnings of Al Masane Al Kobra Mining Company (AMAK).
  • Cash & equivalents decreased to $9.4 million at the quarter end compared to $14.2 million in Q1:16.
  • Book value per common share increased to $6.65 in Q2:16 from $6.14 in Q1:16.

Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA.

12-AUG-16 – Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA. Company increases FY:16 dividend guidance by one cent to $1.53. We maintain our BUY rating and $16 price target.

Q2:16 HIGHLIGHTS

  • Investment portfolio grew 14.6% in H2:16 to $305.8 million.
  • SBA 7 (A) loan funding increased 40.7% in Q2:16 to $75.8 million. NEWT reaffirmed its guidance for 32% funding growth and loans totaling $320 million in FY:16.
  • Loan referrals rose 62% in Q2:16 to $3.7 billion and the loan pipeline grew 78.4% to $228.3 million, signaling the continuing strength of this business.
  • Acquisition of bank-serv Partners expected to add $30 million to SBA loan funding in FY:17. Bank-serv has relationships with 350 lending institutions and extends NEWT’s footprint in the Midwest.
  • Average net premium on loan sales improved to 12.28% from 11.72% one year earlier, contributing to stronger gains on sales.
  • NEWT originated 100 loans totaling $75.8 million and solds 90 loans for $51.2 million in Q2:16, resulting in realized gain on sale of $7.5 million.
  • G&A increased 40% to $4.2 million as a result of $1.5 million loss on lease liability from old office space and $400k of audit and stock valuation charges that won’t be repeated in H2:16.

Emergent BioSolutions (EBS:BUY) BioThrax sales disappoint in Q2:16, leading to revenue decline and net loss.

12-AUG-16 – Emergent BioSolutions (EBS:BUY) BioThrax sales disappoint in Q2:16, leading to revenue decline and net loss. Current BioThrax contract expires in September and CDC confirms intent to award EBS follow-on five-year contract for 29.4 million doses. EBS completes spin-off of bioscience business, thus making company the only large pure play in biodefense. We reiterate our BUY rating and $40 price target.

Q2:16 Highlights

  • Biodefense revenues down 36% to $48.3 million due to lower BioThrax sales. CDC indicates it will procure less than the 4.2 million doses remaining (approximate value of $122 million) on the current BioThrax contract expiring this September.
  • New follow-on BioThrax contract commencing in September covers procurement of 29.4 million doses over a five year period.
  • HHS issues RFP for next-generation anthrax vaccine, calling for purchase of initial 2.0 million doses and potential additional procurement of 12 million up to 25 million doses.
  • Bioscience business spin-off positions EBS for significant EBITDA pick-up from elimination of G&A, R&D and marketing costs related to this business.
  • EBS has approximately $333 million cash and recently authorized a $50 million share repurchase.
  • We reduced our estimates due to poor near-term visibility for BioThrax sales, but maintain our BUY rating and $40 price target.

PRIMARY RISKS

  • EBS has relied on its anthrax vaccine BioThrax for more than 50% of sales and derives nearly all of its Biodefense revenues from U.S. government contracts.

 

JMP Group (JMP:BUY) With the equity capital markets still at very depressed levels through Q2:16, JMP’s diversified business model delivered operating earnings of $0.10

12-AUG-16 JMP Group (JMP:BUY) With the equity capital markets still at very depressed levels through Q2:16, JMP’s diversified business model delivered operating earnings of $0.10, in line with our expectations, while GAAP earnings showed a loss of $0.02 for the quarter. We maintain our BUY rating, and update our price target to $7.50.

Q2:16 Summary

  • While IPO and follow on activity at JMP Securities remained extraordinarily depressed for the quarter, with JMP Securities delivering an operating loss, JMP was able to deliver meaningful operating earnings through principal transaction activity.
  • Our outlook for the balance of FY:16 anticipates an uptick in the equity markets later in the year. While the major equity indices have recovered, and we have seen the start of a turnaround in IPOs and follow on equity offerings, it is yet to be seen whether this part of the business will return to normal levels by the end of the year.
  • While the industry is in a cyclical downturn, JMP has been able to capitalize on this type of situation by gaining market share in similar market cycles in the past. We see this being carried out by hiring talent and developing these new areas organically, and also possibly through M&A activities if the price of a potential target is attractive. While these types of growth initiatives will likely not have an immediate impact on earnings,
    they should increase the value of the company over time.
  • We maintain our BUY rating and adjust our price target to $7.50.

Supreme Industries Inc. (STS:BUY) Robust demand for trucks coupled with superior execution capabilities is driving strong growth in revenues

12-AUG-16 – Supreme Industries Inc. (STS:BUY) Robust demand for trucks coupled with superior execution capabilities is driving strong growth in revenues, which in turn is aiding Supreme to enhance gross margins through improved plant utilization. Going forward, we believe Supreme is well positioned to capture growth opportunities through its various strategic initiatives including sales team expansion, focus on leasing, lean manufacturing, and new product innovations. We initiate coverage with a BUY rating and a $20.00 price target.

Investment Thesis

  • Supreme Industries is one of the largest truck body manufacturers in the U.S., producing 20,000 units annually from eight manufacturing and component facilities strategically located to serve major geographic
    markets.
  • Completion of a restructuring exercise over 2011-13 that included lean manufacturing practices, refinancing debt and divesting non-core business, coupled with robust truck demand has helped Supreme to
    report a strong financial turnaround both in terms of revenue growth and margin improvement over the past couple of years.
  • We believe Supreme is well positioned to capture growth opportunities in 2016 and beyond, and outpace overall industry growth through various strategic initiatives including sales team expansion, focus on
    leasing, continued deployment of lean manufacturing techniques, and development of new products.
  • We initiate coverage with a BUY rating and $20.00 price target.

RISKS

  • A number of smaller, regional players could create significant product pricing pressures and adversely impact the company’s financial performance.