Thursday, May 3, 2018

#Energy, #Infrastructure Stock News: Enterprise Group (TSX: $E.TO) Good Things Can Happen to Great Stocks

#Energy, #Infrastructure Stock News: Enterprise Group (TSX: $E.TO) Good Things Can Happen to Great Stocks

Do you invest in resource, industrial or technology stocks? Here’s one that is all those and has set itself up for major growth

ST. ALBERT, Alberta - May 3, 2018 ( Newswire) When the Canadian resource decline made the sector analogous to the St. Valentine’s Day Massacre, Enterprise Group’s (TSX:E) eps dropped from $0.24 a share FY2013 to ($0.40) FY2015. Revenues peaked at $80 million FY2014 and were cut in half the following year. The shares hit $3.50 mid 2014.

The Company posted eps of $0.01 and $0.02 for Q3 and Q4 2017 respectively. FY2017 revenues of $38 million versus FY2016 of $29 million The shares are trading at $0.55.
Book value is $1.01.

And Enterprise is net debt free.
Enterprise Group is a consolidator of services to the energy sector; focused primarily on specialized resource and infrastructure equipment rental.

See Where This is Going?
Not sure why investors aren't all over Enterprise. A costly opportunity loss at least, as the shares have a 2018 YTD high/low of $0.62/$0.28. And a book value of $1.00. A stand up double so far.

I'll put some metrics at the end of the piece, but the drivers that will bring E into the investors' headlights are the recently announced proprietary asset management software STARCHAIN. Second is the cash position earmarked for potential acquisitions.
The Company has a solid track record of acquiring companies, racking up major revenues and then sell them for more than they paid.

The purpose of StarChain is to monitor location, usage and address repair issues in real time to maximize revenues and lessen equipment downtime from extensive pool of rental assets. If a piece of equipment fails or experiences a mechanical deficiency on a remote
project site, StarChain independently alerts Enterprise and the fleet manager acts immediately so that a replacement can be deployed, asset brought back online; minimizing downtime, which in turn increases revenues, efficiency and asset life.

The Company sees this technology accomplishment as the baseline for future developments within 'Industry 4.0': The current industrial transformation caused by automation, data exchanges, Big Data, A.I. and IoT," stated Des O'Kell SVP of Enterprise. "Enterprise has no plans to sell or license what it sees as an incredible competitive advantage. The technology will be extended to the operations of future acquisitions; this will allow for the significant growth, in size and geographical reach."

STARCHAIN software is the evolution of several technologies. The hardware is similar to the Raspberry Pi. Evan at this stage, the custom module not only does exactly the tasks it was designed for, but negates the need for GPS, which represents a substantial monthly savings.

Financial results of the software are measurable and impressive:
·        Proprietary platform for future development and refinement
·        Task and monitoring capabilities saves two significant salaries
·        Allows management to plan to deploy company-wide through 3 subs
·        Plans to generate a significant annual cost savings
·        Also, to produce margin improvement
·        Represents (one of) the Company's fundamental value propositions
·        No plans to license; remains a corporate asset.
·        Not aware of any competitive software

Take a Break

Before we discuss acquisitions, let's look at the stock charts: Left is the 2013-2018 historical and the long period of consolidation that ensued.

These data points would all be pretty meaningless if E management hadn't taken the decision early not to be cowed into inaction. That decision was the right one as the 2018 YTD chart right shows not only that the malaise has lifted, but that E's initiatives are bearing fruit.

Management is informing investors of their aggressive plans for the future, which will include some impressive and accretive acquisitions.

Acquisitions Trail
As a result of the recent $20.6 million sale of subsidiary Calgary Tunnelling & Horizontal Augering (CTHA), Enterprise has no debt, a clean $25 million line of credit and a further $15 million for acquisitions. No reason to think that the future ones won't mirror E's two past endeavours:

As a result of the recent $20.6 million sale of subsidiary Calgary Tunnelling & Horizontal Augering (CTHA), Enterprise has no debt, a clean $25 million line of credit and a further $15 million for acquisitions. No reason to think that the future ones won't mirror E's two past endeavours:
1.    CTHA was purchased in 2013 for $12 million. It generated $60 million in revenue under E's stewardship and was then sold for $20.6 million as noted.

2.    TC Backhoe was purchased in 2007 for $12 million. Revenues generated until sale; $154 million. TCB was sold in June 2016 for $20 million

Management owns 21 percent of the outstanding shares and acquired stock all through the previous downturn.

The Company is also in the midst of a roughly 5% share buyback announced in June 2017.

From 2016 Q3 discussion:
... The Company is committed to certain service standards for its existing clients, which management believes to be critical for fostering the Company's longer-term growth. As the Company better understands the economic outlook for 2017 and the likely level of demand for its services, it will adjust its internal infrastructure accordingly.

And it did. And it has, and it will. As management owns over one fifth of the shares, you can be sure shareholders are in extremely motivated and competent hands.

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Disclosure this news article is a paid for news release on the newswire by Enterprise Group, Inc. (TSX: E) and was not created or originated by Investorideas. Learn more about costs and our newswire service

Enterprise Group, Inc. (TSX: E) is a previous featured monthly company on Investorideas expiring on May 1 2018 .More info

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