Is RF Industries, Ltd. (RFIL) an Attractively Valued Company?
Merion Road Capital, an investment advisor, released its first-quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, Merion Road Small Cap Fund fell 1.6% compared to a 2.7% return for the Russell 2000 Index and 2.7% for the Barclay Hedge Fund Index. Furthermore, MRCM Long Only Large Cap returned 14% compared to a 7.4% return for the S&P 500 Index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Merion Road Capital highlighted stocks like RF Industries, Ltd. (NASDAQ:RFIL) in the first quarter 2023 investor letter. Headquartered in San Diego, California, RF Industries, Ltd. (NASDAQ:RFIL) manufactures and distributes connectors and cables that operates through RF Connector and Cable Assembly, and Custom Cabling Manufacturing and Assembly segments. On April 21, 2023, RF Industries, Ltd. (NASDAQ:RFIL) stock closed at $4.1500 per share. One-month return of RF Industries, Ltd. (NASDAQ:RFIL) was -1.30%, and its shares lost 38.06% of their value over the last 52 weeks. RF Industries, Ltd. (NASDAQ:RFIL) has a market capitalization of $42.708 million.
Merion Road Capital made the following comment about RF Industries, Ltd. (NASDAQ:RFIL) in its Q1 2023 investor letter:
"The Small Cap Fund fell (1.2%) during the first quarter. As an example of the above dynamic, our position in RF Industries, Ltd. (NASDAQ:RFIL) fell almost 14% in the quarter. RFIL is a manufacturer and distributer of RF connectors and cables, and custom copper and fiber assemblies. New management came in 5 years ago and have grown the company through acquisitions. I think of the business in two buckets. The largest and most profitable has been their distribution business of more basic products into the telecom market. This includes things like coax cables, connectors, and hybrid fiber optic cables. The second bucket is their specialized product business which includes the production of thermal cooling control systems and small cell shrouds. While the “basic” business has produced relatively stable growth and profitability, the “specialized” business has yet to find the promised land.
The company is being overly penalized for losses in the “specialized” business. Their “RF Connector & Cable Assembly” segment is generating around $40mm in revenue at ~10% EBITDA margins, so $4mm in EBITDA. Their “Custom Cabling Manufacturing & Assembly” segment produced $54mm of revenue last year but only $2.9mm of EBITDA (a 5.4% margin). More importantly, revenue came in at just $9mm last quarter and EBITDA was a loss of $0.8mm. Simplistically we can say that the value of the RF business is being dragged down by losses in their Custom business. But the Custom business consists of their profitable hybrid fiber product line as well as the troubled cooling/small cell ones. We do not have a breakout of the two, but we do know that this segment produced $7.6mm of EBITDA in 2018 and $3.9mm in 2019 before they acquired Schroff Tech (the original cooling/small cell manufacturers) …” (Click here to view the full text)
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RF Industries, Ltd. (NASDAQ:RFIL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 3 hedge fund portfolios held RF Industries, Ltd. (NASDAQ:RFIL) at the end of the fourth quarter which was 3 in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
