PCS.TO - Platinum Communications Corporation

[mikazo]

Hi everyone,

 

I came across a Canadian micro-cap trading around a market cap of $5M. Platinum Communications - "independent provider of high-quality wireless Internet and Broadband solutions". They mainly provide wireless internet services to rural customers in Alberta.

 

It's not a net-net, but taking a look at their latest balance sheet, total assets of $13.26M minus total liabilities of $5.67M = $7.59M. I'm not really sure whether to value this company on the basis of assets or revenues. Their revenues have grown by at least 10% per year over the past 4 years, however, net income can be pretty erratic. In terms of assets, they have made several acquisitions over the past few years.

 

From the latest quarterly report - http://www.platinum.ca/files/file/mda-2015-q2.pdf

 

                                                    Assets or shares    Date closed         Purchase price  Customers aquired
Pathcom Wireless                                    assets              January 10, 2014    $ 783,334       14
Hybrid (Southern Alberta residential operations)    assets              October 31, 2013    $ 300,000       208
Community Networks Inc.                             shares              March 1, 2013       $ 2,460,312     2600
1082861 Alberta Ltd. (operating as AlbertHighSpeed) shares              May 1, 2012         $ 1,191,899     1300
MyCanopy                                            assets              March 1, 2012       $ 428,418       460

 

There are a handful of complaints about the company on the BBB website:

 

http://www.bbb.org/calgary/business-reviews/internet-service-providers/platinum-communications-corporation-in-calgary-ab-41911/customer-reviews?cacheit=y

 

I also found a good map of internet speed and coverage on the Government of Canada website. It's useful for seeing where Platinum might expand in Alberta and neighbouring provinces. You can also compare it against Platinum's own coverage map in their quarterly report.

 

http://www.ic.gc.ca/app/sitt/bbmap/hm.html?lng=eng

 

Platinum describes their competitive advantage (taken from latest quarterly report):

 

Platinum has unparalleled synergies between the residential and commercial facets of its operations,

offering a unique competitive advantage as the company expands its markets. Moving into the remote

commercial market allows for opportunistic residential expansion as well, accommodating Internet access

for small communities on infrastructure built for commercial clients where possible. This diversifies

sources of recurring cash flow while adding very little additional infrastructure.

 

Lastly, and most significantly, I found this in their latest quarterly report as well:

 

The Corporation has tax loss carryforwards of $501,000 and tax

pools of $13,200,000 to use against future taxable income.

 

I'm no tax expert, so I don't know how to value this or where it could be legitimately applied. It appears the company's goal is to grow their subscriber base through acquisition of companies and infrastructure (at least partially), so would those situations be opportunities to take advantage of $13.2M in tax loss pools?

 

Any input is much appreciated!