60North Investments

Just wondering if someone has an idea of what today's -25% is about? 38K shares traded early in versus daily average of 3K. I think this may have been the ex-dividend date last year, but couldn't find any info that today would be a dividend day for them this year?

Based on FY18 numbers, with today's market cap of 305M and 650M or so EV, you get in the balance sheet 500M Yellow House property, 470M Hengqin project, 100M cash and 350M or so debts. Obviously they aren't likely shutting this down, but just a quick way to look at valuation. If Yellow House and Hengqin are worth together at least 500M then today's market cap would be "covered". Still, the company doesn't seem to be able to make things happen and the comments on Hengqin weren't really encouraging either. Anyone with more positive thoughts?

Tried to find the amount of shares held by Tim Brog, but couldn't really locate a more precise number. I'd imagine that he has a big interest, but from what I could gather, he seemed to own less than 50k shares now and then some RSUs? Anyone with that information quickly at hand? Thanks!

Cool, reducing option strikes from $3.35 and $2.35 to $1.63.. Same shit that happened at Enterprise Group. Thought these Macro Ent. guys were less shitty, but apparently no?

Latest earnings report, from August, Q2 2016. 2016_2nd_QuarterReport.pdf

In the case of EMS/OEM businesses that aren't serving one huge customer, I don't know if there's really a way to grasp the demand for their customers' products. If you writser or someone else has an idea of how to get a grasp of Key Tronic's products and the demand for those I'd be happy to listen. I'm repeating myself, but absent the zero-ing of the large customer, they would've grown roughly 10% this year. And unless management has lied, they still have at least the same amount of ramping business in the pipeline. Inventory is at $107m, of which maybe $10-20m is problematic. It is an issue. I'll wait and see if they can solve it. I'm not saying they will, 100%, no doubts, grow 10%, solve the inventory issue, and grow margins to 9%. I think it looks like a reasonable option that they do, especially the growth and margins. Should growth, margins and somewhat better inventory level happen, ROIC improvement will happen as a result. I guess the disagreement is mostly on that I'd say the chances are decent instead of very, very small. I do apologize if I've come out harsh or cocky or something. I might very well be wrong as I've so many times been. But looking at this (applies everywhere I guess, and I'm often lazy to dig in) just by the headline numbers, without seeing any further below, and one will miss the details that I think are important.

Thanks jawn619, I appreciate the post and thoughts. I agree with most of your points. EV/EBITDA 8, EV/EBIT 13, P/E 13 are all multiples that I'd say are on the upper end of "fair". And I'm not assuming it trades at a higher valuation, I don't think it deserves it unless they get their ROIC well into double digits. What I am arguing though is that it will be considerably higher within the next 12 months due to sales increases and better margins. Last year (FY16), gross margin improved from 7.1% in Q1 to 8.7% in Q4. For the year this meant 8% GM. Next year, assuming no catastrophe occurs, with sales increasing $40m or more (plus other factors such as learning curve on new productions that they've had a lot of lately), gross margin should be around 9% for the year. These would lead to +$15m EBIT and +$1 EPS for FY17. I don't have big insights into their products and how they might fare. They just had one of their largest customers from years back going now into a zero (they say they replaced $40m of sales from that customer this year with new business), which has been a huge headwind. Mostly due to this customer, they also have the inventory issue. So yes, they have an issue with some part of the inventory, but I would not dare to draw a broader conclusion of saying that they have a hard time selling products in general. How big a problem is that problem customer's inventory going to be, I don't know. For the time being, I'll trust management to get the job done as they view the inventory levels coming to normal over the next year. I agree that this is not a high ROIC compounder, or in any way a great business as you mention. I do think the company is much more valuable than $90m though, as described above. $10m EBIT, $0.6 EPS is not what they'll earn in the coming year, absent a catastrophy, they'll earn considerably more. With the problem customer now being a zero, growth shows in the topline, and assuming they get at least somewhat better hold on the inventory, they'll get to double digit ROIC too. I think this is a situation where one needs to look beneath the headline figures to see what is happening behind them. Here, they had a very large customer going to zero and essentially masking growth.

Q4 was on the upper end of management's guidance. FY $485m sales, $10.4m EBIT, $6.5m net income, $0.6 EPS. 8% GM for the year, 8.7% for Q4. Last year Q4 the gross margin range was dropped from 9-11% to 9-10%. Now, it was mentioned again as 9-11%. Capex was abnormally high this year due to some expensive equipment being purchased, management estimated it to be $7m next year. Maturing of new programs, some production efficiencies (closing inefficient Kentucky facility), and more sales to divide fixed expenses on hopefully lead to 9% gross margins for FY17. Q1 guidance is exactly the same as Q4 guidance was, so considering that Q4 still had some of the problematic customer in it + Q1 will get a small hit from closing of Kentucky facility, so it looks alright overall. What I'm hoping to see next is inventory going down (a nice boost to cash flow that they can f.e. use to pay down debt), sales increasing +$40m from FY16 (needs to happen in Q2-Q4) and net margin getting to 2.5% (GM 9%, opex 5.4%, for example). It's not a high ROIC (gets a deservedly low multiple for it) or sexy business, but the trajectory is looking nice and (good) change is what gets paid in the market.

Just to bring in some balance, they probably did not-so-amazing on for example on their $60m O&G investments in December 2013. Still, if you value timber above $100m and O&G at least @ book value, then it does look attractive. It's an interesting company to watch and see how it behaves as majority of the value is in timber.

In their latest report (attached), they state that $12.5M of their receivables were outstanding for over 90 days. Do you know if/when they will be collecting on that? I don't, and that was one thing that caught my eye. Doesn't look very good and I wouldn't wonder if they wrote down more in the coming quarters. Anyone else have a better view?

Ross will probably chime in with more updates, but this has continued being expensive in my eyes. January saw it being little less expensive but didn't set alarms ringing on my list.

Q1 wasn't pretty, as expected. $9m sales, expects Q2 to be materially lower. Since at least Q3 2015 they've said that 12-18 months forward may be very slow, and they continue saying that. Hope they don't run out of time with waiting to get into some LNG projects. Will be watching whether they can deliver on that expectation of being cash flow positive still this year.

Q3 results, EPS $0.16 beat analyst estimates again, on the upper end of their own guidance of $0.12-0.17. GM 8.4%, OPEX 6%. Closing some facilities that'll incur 250k$ cost, and have $0.9m after-tax ($0.08 EPS) benefit in terms of expense reduction. 3 customer wins this quarter, expecting $5-15m annual sales from those once ramped up. Tax rate guidance now 25%, did not hear any mentioning of that on the conference call. Has a relatively large impact of 25% is the going-forward rate instead of 30% or 35%. In the CC, gave quite a bit of confidence in reaching 9-10% GM next year. They currently estimate having $50-60m annual sales in ramp up phase, so hypothetically if they got no new business and the old business stayed as is, they'd be at $530-540m in sales (in 1-2 years?). Think a low case for FY17 would be roughly $1 EPS, and a good case would be around $1.3 EPS. Looks more promising again. In addition, Royce dumped almost 700k (30% of volume) shares in Jan-Mar, and probably is done with it by now. Should leave the road open to appreciation.

Q1 out and a decent set of results I thought. Notes I wrote down: Link ATS hurt by -24% trading volumes, consolidation of BDs. Market Data +30% non-pro users YoY (interestingly no rev growth). CS 44% growth entirely due to QB sales going from $1m to $2.3m (40% increase in corporate clients). Net sales +11%. Opex +8%, due mostly to comp & IT.

They've got 8.5m$ worth of PP&E at cost, which is depreciated into today's 1.7m$. Whatever their capacity expansion will end up costing it is interesting how they're able to get as much sales out of their depreciated assets as they are getting. Personal opinion and offtopic, but I would try to move away from the thinking "Buffett would love this company". It may work as a sales pitch but I think there's danger that you destroy your critical thinking capabilities. Other than being a sales pitch I honestly don't know why should anyone care whether some stock would be liked by Buffett. Anyway, an interesting company that I'll keep an eye on and see how things turn out. Currently not sure if it offers enough of return potential compared to potential risks.