I was reading the annual report and noticed they made a loss of -$2m and so far their equity base has fallen from $15m to just under $4m. Taking a look at the balance sheet I also wonder if their non-tangible assets PPE you could actually realise $2.5m in a sale. Does anyone know when they are likely to become profitable? Based on the current price the market cap for the company is around $32m.
Just by fluke today I was reading a berkshire report from 1991 and noticed this segment and based on the market cap etc I thought it was an interesting comparison to Gage Roads. I highlighted the parts in bold which mainly relate to it
Twenty Years in a Candy Store
We’ve just passed a milestone: Twenty years ago, on January 3,
1972, Blue Chip Stamps (then an affiliate of Berkshire and later
merged into it) bought control of See’s Candy Shops, a West Coast
manufacturer and retailer of boxed-chocolates. The nominal price
that the sellers were asking – calculated on the 100% ownership we
ultimately attained – was $40 million. But the company had $10
million of excess cash, and therefore the true offering price was
$30 million. Charlie and I, not yet fully appreciative of the value
of an economic franchise, looked at the company’s mere $7 million
of tangible net worth and said $25 million was as high as we would
go (and we meant it). Fortunately, the sellers accepted our offer.
The sales of trading stamps by Blue Chip thereafter declined
from $102.5 million in 1972 to $1.2 million in 1991. But See’s
candy sales in the same period increased from $29 million to $196
million. Moreover, profits at See’s grew even faster than sales,
from $4.2 million pre-tax in 1972 to $42.4 million last year.
I thought it was an interesting comparison just based on the market cap considering Gage Roads has $4m tangible assets and negative sales yet is worth $31m in the market. I am assuming though the market is expecting it to be profitable with the new alliance with Woolworths. I am not trying to say the stock is bad I am just interested on what people think of its current prospects and if they are already factored into the price.
Let me know what you think and good work if you got in at 1-2c