Enterprise Group (TSX. $E.TO) Q1/2018
eps $0.06 vs. Q1/2017 eps ($0.02)
This
should be good.
May 15, 2018
(Investorideas.com Newswire) Enterprise Group has experienced
almost four years of share price consolidation, following the vicious 2014 resource sector decline. The
Company is now stronger and leaner than pre-2014, and management’s aggressive
initiatives have seen the stock price rise to new 52-week highs. The Company
remained cashflow positive throughout and profitable Q3, Q4 2015 and Q1 2018.
Background Facts:
·
Book Value $1.01
·
Current share price $0.55
·
No debt
·
NCIB of 5% of E stock ongoing.
·
$40 million in bank lines available for
funding acquisitions
·
Net income Q1 2018 $3.2 million versus
Q1 2017 ($50,627)
·
Q1 2018 Revenues down 3% from Q1 2017
·
Development of proprietary ‘Star’
inventory tracking software system will cut costs and significantly enhance revenues.
One-quarter of profits can be a fluke;
two, lucky but three a reasonable trend. For Enterprise, it is the result of
planning and execution. From the depths of the resource malaise, the shares are
now debt free, cash flow positive and profitable. Not to mention on the
acquisition trail with $55 million of cash.
Management has positioned the Company
to be the premier resource for industrial equipment rental; initially in the
West, ultimately North America and possibly further afield.
Just as the shares received an unfair shellacking
as the oil price fell, there seems to be a renaissance afoot that sees oil,
currently $70 plus, hitting $100 by 2019. Not that would drive the shares back
to their all-time high of $3.50 in 2014, but one has to figure there is
excellent potential to regain a good chunk of that decline should oil, and the
sector continues to improve.
Given the initiatives put in place and
arguably to come, the price may also benefit from proper, old fashion
management.
Yes, management is still a thing.
|
Consolidated:
|
Three months ended
March 31, 2018 |
Three months ended March 31, 2017, restated (2)
|
Change
|
|
Revenue
|
$6,810,906
|
$7,015,278
|
($204,372)
|
|
Gross margin
|
$2,126,160
|
$2,695,739
|
($569,579)
|
|
Gross margin
%
|
31%
|
38%
|
(7%)
|
|
EBITDA
(1)
|
$1,487,253
|
$1,835,990
|
($348,737)
|
|
Income
before tax
|
$290,616
|
$210,495
|
$80,121
|
|
Net income
(loss) and comprehensive income (loss)
|
$3,190,242
|
($50,627)
|
$3,240,869
|
|
EPS
|
$0.06
|
$0.00
|
$0.06
|
Revenues Down 3%? Should investors Care?
“In the first quarter of 2018 no construction
work was completed on a major construction project in Northeastern B.C,” states
Desmond O’Kell, SVP of Enterprise. “Otherwise
the Company continues to see increased
activity. The increased activity
experienced by other customers did not fully offset the loss of revenue earned
in the first quarter of 2017 associated with that project resulting in a slight
decrease in revenues for the quarter. At March 31, 2018, after adjusting for
goodwill and deferred taxes, the Company has assets more than total debt of
approximately $54,000,000. Enterprise
will continue to look for and secure opportunities that improve its financial
position and opportunities that will allow the Company to diversify and expand.”
Management owns 21 percent of the outstanding shares.
StarChain
While maximizing revenues and reducing costs is
often espoused by the management of most companies, Enterprise has developed StarChain
technology, proprietary software, and attendant hardware.
Modules will be attached to each piece of rental equipment.
Simply put, Star technology enables its
customers to automate and schedule the utilization of the equipment which
delivering several benefits that include reduced fuel expenses, lowering onsite
maintenance costs and real-time reporting. Several features will be available
to the customer in Q3, Q4 2018.
The Company has a history of developing
solutions for its customer and has fifteen plus patents in its IP portfolio.
One of the initial cost savings is several
thousand dollars a month the technology gains by rendering individual GPS. Other
benefits are utilizing the SaaS tech as a base platform for future applications,
improves margins and of course maximizes revenues.
Not to mention the incredible
competitive advantage afforded Enterprise as it has no plans to sell or license
StarChain at this juncture. There appears to be no competitive software.
So, What Now?
As business continues to build, Enterprise has
been able to raise its pricing in line with demand. One of the first things it
did when the sector imploded was to reduce costs to remain competitive. It also
became a resource
to customers and prospects to ensure not just its viability
but that of its customers. That practice has served the Company well as the
business builds.
Enterprise also recently sold its infrastructure
subsidiary Calgary Tunneling (CTHA), to focus on the industrial rental business that brings its
subsidiaries’ strength to the fore and provides a stable base for growth. The
last four years meet as the culmination of two cycles. First, it heralds that
the Company is ready and capable of exceptional growth as it enters this new
phase with a clean balance sheet. Second, it proves that the planning,
execution as well as pain and suffering since June 2014 has been constructive.
There are many acquisition targets
currently being evaluated by the Company. Each will be acquired with not only growth
in mind but immediately accretive and strongly complement its existing
subsidiaries.
YTD 2018 Enterprise Group (E: TSX)
For questions or additional information, please
contact:
Leonard Jaroszuk: President & CEO or
Desmond O'Kell: Senior Vice - President
780-418-4400
Article source – Baystreet.ca
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