IBAL- International Baler

[ragnarisapirate]

Since people were talking about micro caps, and people posting their better ideas in the HALL thread; here is the one that contends with UWN for my favorite holding at the moment.

 

International Baler is a SUPER small company, a net net that is earning money, has a great manager, and provides a good product...

 

It is majority owned by a pretty shrewd guy (Leland Boren of Avis Industries) who also owns American Baler.

 

It is trading for $2.8 million, has $4.2 million in good current assets (their inventory is super liquid), and just over $1 million in liabilities- basically, only accounts payable. They also own their manufacturing facility. Their trailing P/E is about 13, which, I believe will be getting better. Management has done a good job of reducing SG&A as revenues took a hit with the recession. The did just get hit with a lawsuit, but, their insurance should cover everything.

 

Check it out. I have written about it several times on my blog, so, rather than regurgitate what I have said there, I will simply say that it is pretty darned cheap. And yes, I am long.

[biaggio]

Ragna, where do I find your blog

 

Thanks!

[ragnarisapirate]

Ragna, where do I find your blog

 

Thanks!

 

www.ragnarisapirate.blogspot.com

 

though, here is the specific post where I talk about it: http://ragnarisapirate.blogspot.com/2010/07/international-baler-quarterly-filing.html

 

Looking back on it, I am surprised that I didn't go into more detail... May need to do a new post. :)

 

Here is another blogger's take on it: http://robertpiomolloy.com/blog/?cat=11

 

 

[biaggio]

thanks, I am going to have a look

[nodnub]

When I first started reading about this company I assumed it made hay baling machines. The truth is more interesting.  They manufacture machines that compress and bale recyclable or scrap materials: scrap steel, PET plastic bottles, rubber, etc. 

 

When I consider that

1)some recycling is actually economic to do, and

2)we are still throwing a lot of useful material into landfills in many urban areas

I imagine there will be growing demand for these baling machines as recycling increases. 

 

Ragnar, other than American Baler, who are the other competitors in this field?

 

[ragnarisapirate]

When I first started reading about this company I assumed it made hay baling machines. The truth is more interesting.  They manufacture machines that compress and bale recyclable or scrap materials: scrap steel, PET plastic bottles, rubber, etc. 

 

When I consider that

1)some recycling is actually economic to do, and

2)we are still throwing a lot of useful material into landfills in many urban areas

I imagine there will be growing demand for these baling machines as recycling increases. 

 

Ragnar, other than American Baler, who are the other competitors in this field?

 

 

The industry is incredibly fragmented. This will give you an idea of who some of the main players are: http://www.directindustry.com/industrial-manufacturer/baling-press-61758.html

 

Frankly, I would love to see some consolidation in the industry. It is made up of a ton of small players, which, if consolidated could be a lot more efficient/profitable.

 

As an interesting side note, the IBAL is kind of a universal baling company. They make balers that bale synthetic rubber (typically, the most expensive ones they make), as well as general balers... for example, Goodwill (the thrift like store) will bale clothing that goes unsold, using IBAL's balers to ship it to third world nations. They also custom make balers for special needs.

 

Additionally, you hit on a good point with the recycling. As the economic incentives to recycle improve, balers become more important. Furthermore, as lawmakers give incentives to go green, I balers will play a part in that (whether at landfills or recycling plants).

 

 

[ragnarisapirate]

The new 10K is out. The results are not over whelming, but, certainly ain't bad bad, either.  It's looking like their tax assets will be used up in the next 2 years, which, in my mind would make it much more attractive to be taken over by the controlling shareholder.

 

http://www.sec.gov/Archives/edgar/data/781902/000107261311000054/form10k_17006.htm

[netnet]

Ragnarispirate,

 

are you saying that a roll up of these companies would be profitable?  What are the economics of the business that a roll up of small manufacturers would work.  Are they under any import pressure? Is it a razor blade type business?  What is the moat.  It just seems to me that a roll-up to get customer lists might not be the best way to go, unless customer acquisition is that costly.  (Pardon my ignorance, but I don't know anything about it.)

[ragnarisapirate]

Ragnarispirate,

 

are you saying that a roll up of these companies would be profitable?  What are the economics of the business that a roll up of small manufacturers would work.  Are they under any import pressure? Is it a razor blade type business?  What is the moat.  It just seems to me that a roll-up to get customer lists might not be the best way to go, unless customer acquisition is that costly.  (Pardon my ignorance, but I don't know anything about it.)

 

A roll up of these businesses would be profitable, if they were acquired at the right price; there is way too much competition for the industry's own good. Mainly, savings would come from cost cutting (you wouldn't need 2 CEOs). Roger at International is a top notch guy, and, in my mind, would do a great job of running any combined company.

 

In regards to the controlling shareholder; Leland Boren already owns American Baler, and a host of other small industrial companies via Avis. It certainly makes sense for him to take it over, with or without the NOLs.

 

Right now, there are Asian manufactures of balers, which do hurt International. However, I like the fact that if inflation does hit here, it would make their balers more affordable (relatively). Plus, they work in a pretty niche' market, which also helps.

 

Did that cover it?

[bookie71]

IBAL has made a nice jump the last couple of days

[writser]

Ragnar, do you still own this? I see insiders are still buying at these levels but it doesn't look extremely cheap anymore.

[ragnarisapirate]

Ragnar, do you still own this? I see insiders are still buying at these levels but it doesn't look extremely cheap anymore.

 

I represent a single share.

 

I am weary of such a cyclical company at this sort of price, however, their backlog does look juicy- and I can't say nearly enough good things about the management team. I would kill to get it at the prices that I originally paid for it!!!

[writser]

Yeah, the juicy backlog also was one of the things that got my attention. Besides that, ROE for the past 5 years was 20%, ROA 12% and they have compounded book value at an impressive rate. Mgmt appears competent, insiders are buying shares. So at first glance it looks nice. But not extremely cheap. On the flipside I am totally clueless about the industry and its pitfalls. I have a very small position, will keep an eye on it.