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Schmitt Industries, Inc. (SMIT)

NasdaqCM - NasdaqCM Real Time Price. Currency in USD
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3.8700-0.1100 (-2.76%)
At close: 4:00PM EDT
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  • R
    Robo
    Suspect the quarterly loss leaves them technically in a negative net cash position (cash-debt), at least until and unless the PPP loans are forgiven. Seasonally strongest quarter of the year now behind them. Something has to give, and soon.
  • R
    Robo
    Time to go private?
  • R
    Robo
    Now the overhang has created a nightmare
  • R
    Robo
    Cash burn continues unabated in fiscal 4Q. That's problematic for the go-forward. Upfront start-up costs may be behind them, but they are still funding significant quarterly operating losses of over $2 million on a consistent basis. Tick tock.
  • R
    Robo
    Can't hold any intraday gain. That tells you there is probably still a substantial overhang from the pump'ndump that needs to be cleared. Any move above $4.00 is sold off.
  • S
    Shalev
    Six dollars, do I hear six...?
    Bullish
  • R
    Robo
    There is no way this stock can rebound until they reverse the negative cash flow trajectory.
  • S
    Shalev
    What a spike in market and aftermarket. . Beware though: it is a VERY VERY LOW FLOAT MOM AND POP LOW FLOAT
  • R
    Robo
    Isn't going to the ice cream shop for a scoop or sundae the ultimate re-opening trade?
  • B
    Bob
    $0.05 EPS loss. Even excluding FX impact and legal, earnings were definitely not excellent. Cash declining and inventory increasing to over $6.0M. Staying the course is not working.
  • R
    Robo
    Some are likely thinking: Just liquidate it and give shareholders $4.00-$4.50 share---even though it is probably worth $6.00-$7.00/share in intrinsic value.
  • R
    Robo
    So, the elephant in the room is: can SMIT get Ample Hills to cash flow positive before they run out of cash? Or will they have to sell real estate, do debt (assuming the PPP loans get forgiven, leaving them essentially debt-free and then having room to take on debt) or failing those alternatives, a private placement. A public stock offering is out of the question as it would obliterate share price---which gives anyone involved in a potential private placement a fair amount of leverage. Right now, IMO, the stock trades close to its net asset value and fair value. The Measurement division has probably declined in value over the past couple years as it has not performed well and a value of 1.5X annualized sales of about $4 million gives you $6 million. The real estate is probably roughly worth $5 million depending on your view of Portland. Cash plus the recent second draw on PPP is probably around $5 million as of early April. Ample Hills has had money put into it since its acquisition but given the aggressive cash burn it has experienced, it is hard to value it at more than $3 million #$%$ million---although ultimately it could be multiples of that ( and that is indeed the bet here). I assume all the PPP loans will be forgiven, in part due to their small size. So we are talking about $20 million total value give or take a little which equates to $5.30/share give or take a little. Cash will continue to be burned, but in a way that should increase the long term value of Ample Hills. So this is a moving target reflecting ROIC more than a static NAV valuation. The NAV provides a point of reference at a point in time, namely now. So again it comes down to a race to get to positive cash flow by investing in the business even as the cash is being burned to do so. That is, by the time you run out of cash on the Balance Sheet, the company is generating sufficient positive cash flow to continue to grow the business organically. If they miss that mark, the share price will be lower and they will have to do some sort of financing (perhaps under pressure) which could lower the share price further. If they hit that mark, the share price will be higher and no financing will be required and we will find out what the true intrinsic/realizable value of Ample Hills really is. Guessing the timeline for sussing that out will be about 12-15 months, or two summers worth of peak demand (summer of 2021, and summer of 2022). They need to slow/manage the rate of cash burn to allow that all to play out.
  • R
    Robo
    Gotta scale up to compete in the ultra-premium ice cream market, even if you arguably have the best-tasting ice cream in the world, and get those unit costs lower. That scaling up will take investment at the same time you are trying to limit the cash burn. But the bottom line is you have to get to positive operating cash flow to fund organic growth, including the step out of ice cream shop clusters. Gotta soak up that excess fixed spaced capacity (via co-packer and wholsesale distribution). As we are still in winter, gotta wonder if the current quarter ending February can experience much less of a cash burn than the just reported November quarter (marked by a relatively mild fall in the NY/NJ region where the standalone shops are mostly located). Bootstrapping growth while simultaneously limiting cash burn is a tricky navigation, and selling the Portland property would provide a cash cushion infusion--but you can't count on that. Acquiring assets for next-to-nothing seems like a great deal, and it is. Managing cash use/flow from operations will determine whether it pays off or is an albatross (like that ol' Porgy and Bess song: "I got plenty o'nuttin"). Management needs to transition from the same problems as the previous Ample Hills owners who likewise possessed the best ice cream in the world. At the current quarterly cash burn rate they would be out of cash on hand within about a year if they do not sell the Portland property. So I suppose the clock is ticking since the math is relatively easy to do.
  • R
    Robo
    Investors starting to bail as the share price moves further and further from the Rights Offering price, and assets have been only written down, not sold to raise cash. Expect a move into the $1s as frustration builds.
  • R
    Robo
    Overhanging shareholder's sale of all his stock, primarily back to the company, (and directors) is a significant positive. Intrinsic value gets a further boost as the company's recently authorized share repurchase plan remains in place. Consider it an early Christmas gift to SMIT and its shareholders. Thank you Santa Claus, I mean Mr. Pistor. All the old company allegiances are now severed and Mr. Zapata can swing for the fences w/the shares in strong hands.
  • R
    Robo
    Apparently no one wants to own an unlisted security-- no matter what the intrinsic value may be. SMIT is taking a very significant haircut to go semi-private, maybe as much as 20-25%. Could trade in the $2s right before the de-listing day?
  • R
    Robo
    anti-takeover measures are almost always a sell signal
  • R
    Robo
    Fiscal 3Q results released. $2.90 per share in cash plus a small amount of restricted cash, no debt, positive EBITDA in the latest quarter, improved pricing for the Xact business, and a shareholder opportunity being evaluated. Share repurchase program suspended in light of the evaluation of possible shareholder value opportunity----IMO gotta be thinking acquisition (either an opportunistic one by SMIT or SMIT being acquired, i.e. reverse merger). Nice job by SMIT management.
  • A
    Augustine
    The 8-K was helpful in the valuation. I think the big money was made over the last month. The two remaining lines of business are "eh." Revenues are mostly trending downwards. I'd estimate value a little lower at ~20 mil so around $5 a share, but that would require a total liquidation to reach that amount. Since they plan on investing into the remaining business lines they will burn through a portion of that cash.
  • C
    Comet
    As predicted, they have way too much inventory which results in a lot of it becoming obsolete. With still way to much inventory, how do they ever produce a good ROI.
    Ann Should be invited to leave. Terrible performance.
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