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Most Recent QIS Capital Independent Research
QIS Capital is pleased to present a brief overview and 2-page research report on the following companies. These company selections will change from time to time as new opportunities arise and as previous opportunities change. As the market changes every day, so should the information that investors receive. Investors are encouraged to complete their own due diligence.
Triton Energy is an oil and natural gas exploration, development and production company focused on growth primarily through internal prospect generation, as well as through strategic acquisition, farm-in, and farm-out opportunities. The company was incorporated on February 4, 2004. Triton’s three primary areas of operations include Newton, Sullivan Lake and Lanaway.
Despite challenging economic conditions in the oil and gas sector, Triton has increased production and is prudently managing its available cash flow on properties that provide the greatest economic return and value to its shareholders. The company is presently trading at a trailing price to cash flow ratio of only 1.0 times and at only 0.2 times its net asset value of $0.91 per share. Triton Energy, like other natural gas producers, saw dramatically lower cash flow during Q1/09 and will likely face even greater cash flow challenges in the second and third quarters. However, Triton remains ahead of the pack in virtually all fundamental categories in relation to its peer producers and appears poised to add considerable shareholder value upon a recovery in natural gas prices.
Questor Technology is an international environmental oilfield service company with operations in Canada, the US, Europe, and Asia. The company designs and manufactures high efficiency waste gas incinerators for sale or rental, and provides combustion-related field services.
The company has been profitable for several years and presently has positive working capital of $4.4 million or $0.19 per share with minimal long-term debt. Questor is currently trading at less than 7 times trailing earnings on a “net of working capital” basis. Revenues over the prior 12 months did not include any significant orders which are now a distinct possibility for 2009/2010. Questor presently has over $31 million in outstanding quotes. Revenues for the entire 2008 fiscal year were $4.5 million.
QHR Technologies is primarily involved in the development and delivery of human resource (HR) management, payroll, staff scheduling and financial software systems for the healthcare and social services sector as well as electronic medical records applications for physicians’ medical offices.
The company has recently completed several key acquisitions and posted record revenues in the fourth quarter. A strategic advantage to QHR's business model is its recurring revenue stream which reached an annual rate of $4.8 million at the end of 2008 and has since increased to about $6.0 million.
Management expects 2009 revenues and earnings to continue to improve, with revenues projected to exceed $10 million based on recent acquisitions and the growth of both of the company’s divisions. It is also anticipated that pre-tax earnings will improve to $0.06 to $0.08 per share in 2009 with the increase in recurring revenues and new growth initiatives that management has set out.
International Sovereign Energy Corp. (ISR) is active in the exploration and development of hydrocarbon reserves in Western Canada and internationally. A new board of directors was elected at the company’s annual general meeting on June 23, 2008. Since this time, the new management team has been instrumental in improving production domestically, while eliminating debt, reducing and controlling overhead expenditures, and placing ISR on a sound financial base from which to grow.
ISR is in the enviable position of having a stable balance sheet, growing production with additional production behind pipe, an unutilized $10 million credit facility, and significant growth opportunities both
domestically and internationally. The company
appears to be well positioned to weather the current economic turmoil while preparing for future growth once better economic conditions return. ISR is presently trading at only 1.5 times cash flow for 2008 and at only 0.25 of its net asset value. Furthermore, with current production of 1,100 boepd, the company has an enterprise value per flowing boe of $10,243,
one of the lowest in our research database.
Fortress Paper is a leading international developer, producer and marketer of security and other specialty paper. The company’s security papers include banknote, passport and visa papers and its specialty papers include non-woven wallpaper base products, and graphic and technical papers. Fortress operates two paper mills - The Dresden mill located in Germany and the Landqart mill located in Switzerland.
In the third quarter of 2007, Fortress completed major capacity increases at both its Dresden and Landquart mills. The improved capacity has resulted in significant earnings growth and a vastly improved balance sheet which boasts positive working capital (net of debt) of $20 million or $1.95 per share. Fortress achieved earnings of $12.7 million or $1.24 per share in 2008 and management is confident that it can continue to add shareholder value in 2009. The company’s shares are currently trading at less than 5 times earnings which falls to less than 3 times when working capital is subtracted. Fortress also trades at a significant discount to its book value of $7.13 per share.
Sangoma Technologies is engaged in the manufacturing, distribution and support of PCI cards for the telephony and wide area network industry. The company's products are used across the world with applications in various industry segments that primarily include PBX, call center, voice monitoring systems, Internet services, government and military, banking, retail, entertainment, medical, and manufacturing.
Sangoma is currently trading at an attractive price to trailing earnings multiple of less than 4 times. Given that Sangoma has minimum long-term debt and positive working capital of $0.25 per share (including cash of $0.21 per share), the company is trading at less than 2 times earnings net of debt and working capital. Sangoma has a strong cash position and is poised to capitalize on the downturn in the economy through accretive acquisitions, development of new products, or possible shareholder rewards.
Asia Bio-Chem is involved in the manufacturing, packaging, and sale of corn starch, germ, fibre, and gluten sourced from raw corn using various chemical processes. The company has 333 employees and produces approximately 270,000 tonnes per year of corn starch and related by-products from its facility located in Liaoning Province, China.
Effective September 13, 2008, Asia Bio-Chem acquired a 100% interest in Daqing Biochemical Company Ltd., a development stage corporation in the process of constructing a 600,000 tonne per year corn processing plant in Zhaoyuan County of Heilongjiang, China. The Daqing plant is expected to be completed by mid-2009, tripling Asia Bio-Chem’s processing capacity to 900,000 tonnes per year and making the company one of the largest producers of corn starch in China.
For the 9 months ended September 30, 2008, Asia Bio-Chem generated revenues of $62.8 million and net income of $8.0 million or $0.18 per share. At the end of Q3, the company had $23.4 million in cash and positive working capital of approximately $30 million. The company is presently trading at less than 3 times expected earnings for 2009 and at only 0.6 times book value.
Humboldt Capital is an investment company with holdings in a number of Canadian focused energy companies, international oil and gas companies, and exploration mining companies.
As a result of the deteriorating financial situation and negative outlook for the Canadian and US economies, management of Humboldt actively liquidated a large portion of its energy and mining portfolio during the third quarter of 2008. As at September 30, Humboldt had a cash position of $22.6 million or $1.85 per share representing 49% of its asset value. In addition, the company has a portfolio value which should currently sit around $10 to $12 million or $0.80 to $1.00 per share.
While Humboldt has shown negative earnings and a decline in shareholder value over the past three years, the market is valuing the company below cash value and has completely ignored any value in Humboldt’s current stock portfolio. With cash now representing half of the company’s asset value, Humboldt is in an enviable financial position to weather the economic downturn and possibly benefit from it. The company is presently looking at a number of new investment opportunities.
RIFCO has become one of the fastest growing automotive lending companies in Canada with a focus on providing motorists with non-prime auto financing. The company derives its revenues from interest charged on loans and gain-on-sale of revenues from securitizing groups of loans for amounts greater than their aggregate book value. RIFCO has approximately 250 of the over 16,000 auto dealerships in Canada presently enrolled to utilize its services.
RIFCO is projecting revenues of $11 million for the year ended March 31, 2009, and is targeting a 60% growth rate in loan originations and a 50% growth rate in managed assets. While many investors may dismiss RIFCO due to its involvement in the loan industry, the company is making significant financial strides with its conservative lending style and increasing market share due to the recent exit of companies such as Americredit Canada, Wells Fargo Auto Finance, and HSBC Canada. RIFCO currently trades at only 0.8x times book value and 4.1 times projected eps.
The independent research section is presented for information purposes only. While this information is believed to be accurate, the correctness of such information in not guaranteed. This information should not be construed as offering investment advice and is not intended to solicit the buying or selling of any stocks mentioned. Investors should complete their own due diligence before making any investment decisions.
Disclaimer: These companies were independently selected by QIS Capital on the basis of fundamental or other investment criteria. This information should not be regarded as providing investment advice. Investors are encouraged to complete their own due diligence before making any investment decision.
