I’m a big proponent of Moneyball thinking. That is, the theory, espoused most famously by the Oakland Athletics baseball team, that you can make a great living look for undervalued assets that the market has, for whatever reason, completely missed.
The Athletics use it to find ‘island of misfit toys’ players that will hit about as well as anyone else, but for far less money, because of some perceived disadvantage that, in reality, makes little statistical difference.
I’ve been looking at a company that I know only because, as a father, I’ve seen their product all over the place when I’m out with my kids.
Iplayco (IPC.V) designs, manufactures and installs kids playground and entertainment complexes. And they do it a lot, and for not a small amount of money.
But their most recent financials showed an $800k loss, primarily because they did business in US dollars, which hurt them to the tune of $575k down the drain when the Canadian dollar marched up a bit early in the year. The stock price duly tumbled, and stayed down.
That taught them the value of currency hedging, which they say will remove the bulk of that loss next quarter.
Also showing up next quarter: A bad ass slate of new contracts with a giant kids entertainment complex company that is in mega growth mode.
“In the past three and a half months we’ve announced larger sales orders amounting to $9.6 million in Canadian dollars, of which $6.9 million is to our largest customer Billy Beez,” said CEO and President Scott Forbes in a news release.
Not mentioned in that release is exactly how huge a $9.6m quarter is compared to the two quarters previous. Q2 sales were $3.3m, which was down from $3.6m in Q1. Frankly, Q2 looked bad. The sell-off was warranted.
But in the past three months? $9.6 million in sales. They’re up almost 300%. And the stock hasn’t moved.
Added to which, they picked up an acquisition out of the Philippines, grabbing one of their suppliers for the bargain basement price of $197k in cash, thereby securing preferred supply going forward.
So what’s the catch? Well, they’re terrible at promoting themselves. In fact, of dozens of Youtube videos I watched with a point of putting one into this story to help illustrate what they do, I ended up having to use a BDC Capital video because those put out by the company are TERRIBLE.
Added to that is two years worth of ProactiveInvestors directed content CEO videos which have apparently been going out to deaf ears as the share price shredded under their watch. In 2013, this company was tripling in share price and listed as one of the TSX’s fastest growers, but in the last 12 months it has cratered.
But that’s great for us, right now, as Iplayco appears to have actually turned the ship around. They’re selling to big clients who are growing fast using their designs. They’re selling heavily in the Middle East where profitability is strong. They’re closing deals.
To be clear, I haven’t talked to anyone at this company. I don’t have any insight beyond a current $10m market cap for a company that just did $9M in sales in three months.
THOSE NUMBERS ARE NUTS.
Taking a cynical viewpoint, the stock won’t go up because management is promoting it strongly. Rather, it’s going to go up on the back of strong financials which I’d expect to see in early August judging by previous results posted.
In all likelihood, about $3m of those sales will have landed outside the Q3 financials cut off, so expect to see about $6m racked up, or almost 100% more than last quarter. That’s actionable.
There’s also the question of whether their biggest client, Billy Beez, will continue buying up big contracts. Let’s just put it this way – BillyBeez’s parent company owns 51% of Iplayco. It’s going to churn sales through the company like butter.
For mine, this is the Moneyball moment. Watchlist it.
FULL DISCLOSURE: I have no commercial interest in Iplayco. Yet.