Retail trying to not be fooled by randomness.

Joined June 2020
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 (1/3)
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4) "We're in it for the long term. We don't think in 2-5 years, we think in generations. Where will we be in 20 years?" 5) New factory in Romania opening after the summer this year
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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?
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Financials ending in 2020 look like this ( x 1000 $)
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@OtterMarket is also a fan
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:
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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
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In Cedar Creek Q1 21 report, @eriksen_tim wrote they submitted a nomination to the board to improve corporate gov and a proxy fight was coming up
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In the meantime the company provided an update for the first 6 months of 2021. Sales dropped compared to 2020, a year they now describe as “clearly atypical”. But still an improvement over 2019.
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In August 2021, Eriksen & @TicePBrown launched their proxy contest.
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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
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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
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End of Oct: $PCHM launches tender offer for $3m: Dutch auction between 4.5 & 5$ (share price $4.26 at the time) Holding 5m cash
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End of Nov: tender results are in: PCHM bought all tendered at $4.6 or lower, which was 659k shares for a bit over $3m
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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.
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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.
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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.
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Positive catalysts: the company growing sales again (and investments in sales clearly paying off), uplisting, regular reporting/clear shareholder communication…
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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
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