Suffice to say, in brief, the company is a specialty chemical company which appears to have a wide moat product, Lubrajel, used in various end market products, namely; cosmetics, personal care, pharmaceuticals, medical lubricants, healthcare and industrial products.
Lubrajel comprised approximately 86% of revenue in 2014. The company sort of reminds me of WD40 in this way. The company's pharmaceutical product, Renacidin, comprised approximately 8.6% of revenue in 2014.
The company has no debt, and has about $3 per share of net cash (just cash + securities less total liabilities).
The CEO owns 30% of the shares and the company pays a variable dividend, currently $.82, so good for a 4.3% yield.
The company trades at just under 16x ttm eps of $1.22 (but ttm are inclusive of a spike in sales due to Yuan devaluation impact). If I apply a 15 x multiple to eps of $1.22 plus net cash of $3, I get $21.30 per share, about 10% above current.
Important update. It's likely that forward eps will not be $1.22. In their Q3 2015 report the company warned of softness for the final quarter as a result of sales to China. As the company has earned .91 for the 9 months ended September 30, 2015, I'm going to assume at least $.91 in eps for fiscal 2015. The company earned $.09 per share in Q4 2014. Assuming no growth, we get $1 in eps for 2015 if the compamy earns $.09 in Q4 2015.
Here are the last 5 quarters:
There are some key risks here which need to be addressed:
- Significant dependency on one product (Lubrajel) and economic dependency on marketing partners to distribute the products
- Tiny microcap with tiny float, will thus affect liquidity
- Variable dividend policy as noted above
- Significant proportion of sales to Asia
I believe that the investment thesis here is a function of possible future cash flows from sales of the company's Renacidin 30ml product (currently under FDA review).
Will chime in on further analysis over the next few days.