Acme United Corp: Management's Supply Chain Preparation Helping Lead Record Sales And Earnings In 2021

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Acme United Corp: Management's Supply Chain Preparation Helping Lead Record Sales And Earnings In 2021

Acme United Corporation is one of the largest worldwide suppliers of innovative cutting devices, measuring instruments and safety products for the school, home, office and industrial markets. The company has facilities in the U.S., Canada, England, Germany, Hong Kong and China.

 

November 11, 2021

Price (as of close on Nov 10, 2021)

$36.60

Rating

BUY

Price Target

blocked

 

Acme United Corp. (ACU)

ACU reported strong Q3:21 results with revenue up 11% YOY and net income up ~30% YOY. The management noted that it anticipates record sales and earnings in 2021. The supply chain challenges will continue in 2022, however ACU noted that it is well prepared given inventory stock-up over the last 18 months. We increase our target price blockedblockedblockedblocked    and maintain BUY on the stock.

 

acme nov 2021

 

Q3:21 Highlights

Q3:21 revenues were $47.9 million, up ~11% from Q3:20. The performance was strong across US (+12% YOY) and Canada (+6% YOY), while Europe was flat YOY.

Gross Margin for Q3:21 was 35.5%, which was up 100 bps compared to 34.5% in Q3:20.

Operating profit up 39.4% YOY on account of higher revenue and improved gross margins.

Net income for Q3:21 was $2.0 million vs. ~$1.5 million in Q3:20. The diluted EPS was $0.50 in Q3:21, vs. $0.46 in Q3:20, an increase of ~8.6%.

The company anticipates record sales and earnings in 2021.

We marginally adjust our earnings estimate factoring in the latest management commentary. We increase our target price to blockedblockedblockedblockedblockedblockedblockedblocked

 

PRIMARY 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.

Failure to integrate acquisitions could adversely impact business operations.

 

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Singular Research's Private Client call with Olympic Steel (ZEUS) Wednesday 12/1 at 9am PDT

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Private Client call with Olympic Steel (ZEUS) Wednesday 12/1 at 9am PDT

 

REGISTER NOW

 

Join us for a private client webinar with CEO Richard Marabito and CFO Rich Manson of Olympic Steel (ZEUS) on Wednesday, December 1 at 9 am PDT.Olympic Steel is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel, aluminum, tin, pipe, and tubular products.Olympic Steel, Inc., a leading national metals service center, announced record quarterly financial results for the three months ended September 30, 2021. Net income for the third quarter totaled $44.5 million, or $3.87 per diluted share, compared with a net loss of $1.5 million, or $0.13 per diluted share, in the third quarter of 2020. The Company reported sales totaling $668 million for the third quarter of 2021, compared with $300 million in the third quarter of 2020.

After registering, you will receive a confirmation email containing information about joining the webinar.

 

Educational Development Corporation: Recent Stock Price Decline And Management Incentive Alignment Indicate Potentially Attractive Entry Point

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Educational Development Corporation: Recent Stock Price Decline And Management Incentive Alignment Indicate Potentially Attractive Entry Point

Educational Development Corporation (EDUC) is a publishing company specializing in books for children. EDUC is the American co-publisher of the UK-based Usborne Books and owns Kane Miller, which publishes children’s literature from around the world. Both Usborne and Kane Miller products are sold nationally by direct sales consultants, as well as in book, toy and specialty stores.

 

November 24, 2021

Price (as of close on November 24, 2021)

$9.41

 

Rating

BUY

 

12- Month Target Price

blocked

 

Educational Development Corporation (EDUC)

Educational Development is a publishing company specializing in books for children. It has a strong balance sheet and cash flows and pays consistent dividends. It has had strong revenue growth over the last 7 years. We expect this trend to continue. The stock has fallen recently, and we believe now is an excellent entry point. We are initiating with a BUY rating and a blockedblocked.     

 

EDUC 12 6 2021 img 1

 

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Investment Thesis

➢ Educational Development Corporation is a profitable publishing company which has demonstrated impressive revenue growth of nearly 1000% over the last seven years.

➢EDUC benefited from the stay-at-home environment. Active consultants increased significantly during 2020 (fiscal 2021) This caused a dramatic increase in sales during this year. While sales are expected to fall as children are back to school, sales remain up dramatically from fiscal 2020.

➢We believe the overall positive growth trend has been impressive and should continue. EDUC’s stock price has fallen due to an overreaction in its revenue falling during the return to more normal environment. We believe this is an overreaction and is a buying opportunity.

➢EDUC is undervalued at just 8.32 times our 2022 adjusted EPS of $1.13 and only 7.71 times our 2023 EPS of 1.22. Our price target is based on a conservative 15 times P/E relative valuation blended with a DCF model price.

 

Primary Risks

➢ EDUC’s recent fall in sales has been expected due to the change in the stay-at-home environment. If this fall is larger than expected or continues, it could have negative implications for the stock.

➢The increase of active consultants and sales was impressive from 2020 – 2021. We expect the number of consultants to fall this year – but remain elevated. If consultants return back to the levels of FY2020, this will impact future growth expectations.

 

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Esports Entertainment: Recent Acquisitions Further Symbolize Managements Strategy

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Esports Entertainment: Recent Acquisitions Further Symbolize Managements Strategy

Esports Entertainment is an online gambling company that offers esports entertainment, esports wagering and igaming and traditional sports betting. The company offers odds wagering, fantasy and pools on various esports events on its licensed and secure Vie.gg wagering platform and owns and operates an online sports book at SportNation.bet. In late 2020 Esports Entertainment became the first esports-focused gaming business to acquire a US gambling license.

 

November 18, 2021

Price (as of close on November 17, 2021)

$6.13

 

Rating

BUY

 

12- Month Target Price

blocked

 

Esports Entertainment (GMBL)

Esports Entertainment revenues improve 86% sequentially and rise $16.2 million YOY. The Company guides for 490% revenue growth and FY:22 revenues exceeding $100 million. blockedblocked.     

 

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Q1:22 Highlights

➢ GMBL operates esports gaming platforms and event venues and owns proprietary esports infrastructure and technology. The Company is securing marquee partnerships with professional sports teams that are bringing new players to its gaming sites and supplementing its digital assets with on-site Helix game centers.

➢The Company’s Q1:22 revenues improve 86% sequentially to $16.4 million and gross margin improved 200 basis points to 61% from 59% one quarter ago. Operating loss narrowed to $8.6 million from $10.5 million one quarter earlier.

➢GMBL recently closed the acquisition of Bethard, which provides gaming licenses in Sweden and Spain and another $30 million in annualized revenues. The Company has closed six major acquisitions in the last 12-14 months and will focus in FY:22 on integrating, cross-selling and realizing synergies from its acquired businesses.

➢The Company anticipates securing its New Jersey gaming license before year-end and plans to pursue gaming licenses in Ohio and the Canadian province of Ontario in 2022.

➢GMBL is guiding for FY:22 revenues exceeding $100 million and positive adjusted EBITDA in late FY:22.blockedblockedblockedblockedblocked.

 

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Salem Media Group: Continued Specialization In Christian And Conservative Content Serving Them Well

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Salem Media Group: Continued Specialization In Christian And Conservative Content Serving Them Well

Salem Media Group is America’s leading Christian and conservative multi-media company. The Company operates through Radio Broadcast, Digital Media and Publishing segments. It owns and operates radio stations in many of the top 25 media markets, and produces several of the largest nationally syndicated radio shows on the air today.

 

November 8, 2021

Price (as of close on November 5, 2021)

$3.88

 

Rating

BUY

 

12- Month Target Price

blocked

 

Salem Media Group (SALM)

Revenue growth across Broadcast, Digital Media and Publishing segments. Land sales add $0.29 net of tax to Q3:21 EPS. We reiterate our Buy rating and increase our price target blockedblocked.     

 

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Q3:21 Highlights

➢ Total revenues increase 8.8% YOY to $66.0 million reflecting growth across the Broadcast, Digital Media and Publishing segments.

➢Broadcast revenues improved 9.3% YOY to $49.6 million and station operating income rose 9.2% to $12.1 million.

➢Digital Media revenues rose 8.5% YOY to $10.6 million. However, segment operating income declined 10.8% to $2.4 million due to higher marketing costs and acquisition-related expenses. Publishing revenues increase 5.6% YOY to $5.7 million and operating income was $0.5 million.

➢Recurring operating expense increased 8.1% to $55.2 million. Revenue gains, higher operating profit and a $10.6 million gain on a land sale resulted in operating income of $15.8 million, versus $4.8 million last year and adjusted EBITDA of $10.8 million, up 12.5% YOY. Net income was $22.1 million or $0.81 per share, up from 0.3 million or $0.01 per share one year earlier. The land sale contributed $0.29 to Q3:21 EPS.

➢Salem ended Q3:21 with $23.8 million of cash and $208.6 million of long-term debt, down from $213.8 million in December. Increased EBITDA and reduced debt resulted in a decline in leverage to 5.5x from 8.6x one year ago.

➢Digital revenues are experiencing double-digit growth and helping to boost marginsblockedblockedblockedblockedblocked, which values SALM at 7x our FY:21 EBITDA estimate.

 

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GOGO Inc: Long Term Potential Upside Proven By Management's Updated Guidance

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GOGO Inc: Long Term Potential Upside Proven By Management's Updated Guidance

 

October 19, 2021

Price (as of close on October 19, 2010)

$16.70

 

Rating

BUY

 

12- Month Target Price

$20.00

 

 

Gogo Inc. (GOGO)

Based on management’s recent updated guidance, we are revising our estimates higher. We increase our target price to $20.00 per share (earlier $18.00) and maintain our Buy rating.

 

gogo oct 2021

 

 

Long-Term Financial Update

➢ Through 2025, management revised their expected compound annual growth rate of revenue to be 15% from 10% previously.

➢ Management is now targeting 2023 free cash flow to be $125 million ($100 million previously). GOGO is also forecasting free cash flow in 2025 to be $200 million.

➢ The Company also revised their adjusted EBITDA margins from 35-40% to 40-45% which matches our original investment thesis.

➢ By 2025, management assumes only 47% of North American business aircraft will be connected with in-flight connectivity, still representing a large unsaturated market.

➢ GOGO’s AVANCE platform combined with their OEM manufacturer relationships are the key to their success in that GOGO provides a superior product with superior customer experience.

➢ We increase our estimates based on management’s long-term financial update and their commentary. We maintain our Buy rating and increase our target price to $20.00, implying a price appreciation potential of 20%.

 

RISKS

➢ Potential entry from SmartSky (their closest competitor) could cause GOGO to spend more on customer acquisitions or force GOGO into a price war.

➢ Low Earth Orbit (LEO) satellite companies may have lower than expected margins in a partnership with GOGO, may not partner with GOGO or may take customers from GOGO.

 

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Armada Hoffler Properties: Strong Industry Dynamics Coupled With Strong Management Indicate Upside Potential

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Armada Hoffler Properties: Strong Industry Dynamics Coupled With Strong Management Indicate Upside Potential 

 

October 15, 2021

Price (as of close on Oct 14, 2021)

$13.70

 

Rating

BUY

 

12- Month Target Price

blocked

 

Armada Hoffler Properties Inc. (AHH)

Armada Hoffler Properties is repositioning its portfolio for growth and represents an opportunistic way to play a reopening trade. AHH’s diversified portfolio with high occupancy rates, coupled with strong industry dynamics and a healthy development pipeline, should result in a growing NAV and stock price. In addition, AHH’s dividend yield of 4.7% is attractive. We initiate with a BUY rating and a blocked price target.

ahh oct 2021

 

Investment Thesis

Armada Hoffler Properties is a self-managed REIT with four decades of experience in developing, acquiring, and managing high-quality office, retail, and multi-family properties.

The stabilized property occupancy rate for AHH was 94.1% as of Q2:21, which reflects AHH’s high-quality portfolio.

We are encouraged by a strong development pipeline which should support NOI growth. AHH expects its portfolio NOI to climb by over 40% from 2020 levels when current development projects are fully stabilized.

A diversified portfolio with high occupancy rates, coupled with strong industry dynamics and a healthy development pipeline, should result in a growing Net Asset Value (NAV) and stock price. In addition, the dividend yield of 4.7% is attractive.

The Company is poised to grow its earnings over the near to medium term. We initiate coverage with a BUY rating and a price target of blocked.

 

PRIMARY RISKS

The Company is dependent on timely completion of its development projects. Failure to remain on schedule can lead to cost overruns, which can impact profitability.

The Company is dependent on external capital to fund its asset purchase. There is risk of dilution from any future equity offerings.

 

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Esports Entertainment: Mispriced And Misunderstood Future By The Market Equates To Potential Upside

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Esports Entertainment: Mispriced And Misunderstood Future By The Market Equates To Potential Upside

 

October 21, 2021

Price (as of close on October 20, 2021)

$6.28

 

Rating

BUY

 

12- Month Target Price

blocked

 

 

Esports Entertainment (GMBL)

Esports Entertainment delivers 63% sequential revenue growth during Q4:21 and guides for FY:22 revenues exceeding $100 million. We reiterate our Buy rating and  blocked price target. 

gmbl oct 2021

 

FY:21 Highlights

 ➢GMBL operating esports gaming platforms, event venues and owns proprietary esports infrastructure and technology. The eSports gaming market is valued at $750 million and projected to grow to $3 billion over the next five years.   

➢ Q4:21 revenues improve 63% sequentially to $8.8 million and GMBL delivers full-year revenues of $16.8 million via a combination of acquisitions and organic growth.     

➢ GMBL closed the acquisition of Bethard during the June quarter, which gives the company gaming licenses in Sweden and Spain and adds roughly $30 million to annualized revenues. Over the past 12 months the company has closed six significant acquisitions, including Bethard, Lucky Dino, ggCircuit, Helix, FLIP, EGL and Argyll.       

➢ The company has opened and is staffing a New Jersey license in anticipation of securing its New Jersey gaming license. Ohio is the next state where GMBL plans to apply for a license and several additional states are targeted for 2022 as well as the Canadian province of Ontario. 

GMBL is guiding for Q1:22 revenues ranging from $16-$16.5 million and FY:22 revenues exceeding $100 million. We reiterate our Buy rating and blockedblockedblockedblockedblockedblockedblockedblockedblocked

 

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