Local newspaper had a small interview with Luc Tack about Picanol $PIC$PIC.BR
1) They hired 300 people last year (after ending 2020 with 2085 employees). Big increase!
2) Building a new head office in Ieper, BE
3) Have plans to expand & build more
Forgot this one regarding being a publicly traded company:
6) "We value transparency as a company. That's also the reason why we stay public. We could have gone private many many times."
Heard before that $PIC said staying public had advantages. Does this make sense?
The tricky thing about investing is that everything is a judgement call. Very rarely is a stock provably "undervalued" or "overvalued". Still, I try to stick with investments that don't require me to predict far into the future. See, for example, my holding $PCHM, vs $DMTK:
So what are the problems?
- Tiny, illiquid company
- Minimal reporting/disclosure - poor communication
- Product & customer concentration
- Capital allocation: lazy balance sheet & cash build up (almost 7m net cash early 2021)
- Possible changes to national policy on drug use
Sept 2021: results of annual meeting: the activists win
Previous board kicked out, replaced by @eriksen_tim , @TicePBrown & @rtclark
New CEO & CFO appointed
Settled lawsuit with old mgmt regarding outrageous exec compensation
Oct 2021: Q3 update from the new mgmt
They believe the path towards long term value creation is done by increasing sales & marketing spend
They hold less cash on the balance sheet: spend money on share buybacks and increasing SG&A
By settling with previous mgmt, the new board reduced diluted s/o from 6.9m to 6m.
After the tender offer, it drops down to about 5.34m with $1-2m net cash left.
So at the current price of $4.89, this is a fully diluted mcap of 26.1m, with 1-2m net cash.
Even if 2020 results are extraordinary, PCHM had earnings of 1.7m in 2019
At current price, that's a 15 P/E for a capital light business. Earnings could be depressed for a while with extra investments in sales, but if they can get this thing growing again, magic can happen.
I don’t feel like in expert in this business, but it’s more of a spot where investors I respect already liked the company + activists swooped in to fix some of the existing bear arguments.
And we’re not really paying up for the activists getting a win here.
What can go wrong?
Completely new board & mgmt comes with friction.
Investment in sales not paying off (capital light, high ROIC works best while growing 🚀)
Could demand in drug testing be secularly declining?
Product & customer concentration