34 MamaMancini’s Holdings (MMMB:OTCQX), a marketer and distributor of a line of food products & C-Com Satellite Systems Inc. (CMI:TSX-V), a developer and manufacturer of commercial grade mobile satellite- based technology
We have another busy show for you this week. We are getting so many questions, we have 2 stocks to review in our Your Stock, Our Take segment. The first is on MamaMancini’s Holdings (MMMB:OTCQX), a marketer and distributor of a line of food products, primarily meat balls – the company reported a record quarterly results this past week. The listener asks if it a BUY, SELL or HOLD? The second stock is one we are very familiar with having covered it in the past and sold for a strong gain – the company, C-Com Satellite Systems Inc. (CMI:TSX-V), a developer and manufacturer of commercial grade mobile satellite- based technology for the delivery of two-way high-speed Internet, VoIP and Video services into vehicles.
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Now, let’s dig into the show.
I would like to welcome again, myhost, KeyStone’s Senior Equity analyst, father of 2, and a man who, as reigning Canadian Dividend analysts of the year, as yet to commit to visit the White House, should he be asked.
Cannadias are under exposed to the US…all Canadain
2-4 new stock recommendations.
PODCAST – YELLEN AND INTEREST RATES
- On the topic of interest rates, Federal Reserve Char Jenet Yellen spoke on Tuesday and admitted that inflation may be weaker than recently anticipated which could cause the Fed to take a more gradual approach to increasing rates.
- Since last December the Fed has raised its benchmark interest rate 3 times to 1 and 1/4 percent. The target is to increase rates 3 times in 2018 but the target for 2019 was recently reduced from 3 increases down to 2.
- Yellen said “although unemployment is at a low 4.4%, the share of Americans ages 25 to 54 who are working remains low and the portion of part-time workers who prefer full-time jobs is still above the prerecession levels.”
- This is something that some people have been complaining about while other were applauding the improving unemployment numbers in the U.S. over the last 7 years.
- Just to provide a very quick explanation of what the Fed is trying to do.
- Both the Federal Reserve in the U.S. and Bank of Canada up here use their benchmark interest rate to influence inflation and try to get it to around 2%.
- If inflation is too low it indicates weak activity and can be a drag on investment and spending so the benchmark rate is lowered to encourage money flow.
- If inflation is too high it indicates an overheated economy and can cause a wide range of problems so the benchmark rate is increased to slow down activity.
- The trick is to get it just right and this is a very difficult thing to do.
- One of the things that the Fed looks at is the strength of the labour market because wage growth is a key driver of inflation.
- When the labour market is discussed in the media usually the focus is on the unemployment rate which currently sits at 4.4% in the U.S. and has been declining steadily from its recession high of around 10% in 2010.
- Even in the strongest economy is going to have some level of unemployment and 4.4% is quite good and indicative of growth.
- But this number doesn’t tell the whole story because it only accounts for people who are actively looking for work and does not include people who have given up on looking for work for at least 4 weeks.
- The labour participation rate measures the percentage of working age people who are actively looking for employment and this number has been declining since 2010 from about 65 to 66 percent to the 63% level today.
- This means that a portion of the strength in the unemployment rate is the result of people just leaving the workforce and the common belief is that this happens when people become disgruntled because they can’t find work.
- This is largely what Janet Yellen is talking about and why some people doubt the strength of the U.S. economic recovery and expansion and the credibility of the unemployment figures.
- But it is also interesting to note is that the decline in the labour participation rate actually started around the year 2000 when it hit an all-time peak of around 67%.
- People argue back and forth about why this is happening.
- There is more than one reason but a big factor is technological employment.
- Automation has eliminated jobs in some areas and created them in others but they aren’t the same jobs.
- So while there is a labour shortage in some high-tech areas there is a labour surplus in others and many workers either won’t or can’t retrain and relocate to where the jobs are.
Question from dale in Cold Lake Alberta.
CMI is a company we like – in fact we recommended it back in 2011 when the stock traed at $0.40 – and sold it subsequently in the $1.05 range.
Your Stock Our Take
C-Com Satellite Systems Inc. (CMI:TSX-V)
Current Price: $1.02
Market Cap: $37.4 million
Dividend Yield: 5%
C-COM Satellite Systems Inc. is a leader in the development, manufacture and deployment of commercial grade mobile satellite- based technology for the delivery of two-way high-speed Internet, VoIP and Video services into vehicles. C-COM has developed a number of proprietary Mobile auto-deploying (iNetVu®) antennas that deliver broadband over satellite into vehicles while stationary virtually anywhere where one can drive. The iNetVu® Mobile antennas have also been adapted to be airline checkable and easily transportable. More than 7000 C-COM antennas have been deployed in over 100 countries around the world in vertical markets such as Oil & Gas Exploration, Military Communications, Disaster Management, SNG, Emergency Communications, Cellular Backhaul, Telemedicine, Mobile Banking, and others. The Company’s satellite-based products are known worldwide for their high quality, reliability and cost-effectiveness.
The increase revenue in 2017 compared to 2016 is mostly due to a resurgence in sales in the oil and gas exploration, mobile banking and military sectors.
The Company’s operations are subject to some quarterly seasonality due to the timing of vacation periods and statutory holidays. Typically, the Company’s first and third quarters will be negatively impacted as a result of Christmas season and summer vacation period.
2016 was an exceptionally challenging year – not just for niche manufacturers like C-COM – but also for many of the larger players in the SATCOM (Satellite Communications) industry. The various headwinds (low oil prices, strong US Dollar, economic & geopolitical uncertainty) slowed down sales for C-COM; but there is evidence that there has been a more significant effect on the company’s competitors, with some retrenching from the market place and others departing completely. In the first half of 2017, C-COM saw a slow but steady rebound of new orders from both existing and new customers for the Company’s key line of Comm-on-the-Pause (COTP) products. Specifically, Oil & Gas, Military, Mobile Banking and Emergency Response verticals saw new demand.
The company is finally seeing better uptake from recent product launches and expects incremental sales in the second half of 2017 and into 2018. Game changers for C-COM may be the company’s investments in two upcoming products. The first, in 2014, C-COM entered into an agreement with ViaSat to jointly develop a low-cost, vehicle-based, Comm-on-the-Move (COTM) Ka-band antenna system for the commercial market (iNmotion®). Assuming successful completion this year, C-COM expects to have be able to sell this new in-motion antenna system through its distribution channels worldwide. In 2018, the iNmotion® system is expected to be integrated to work with other Ka-band services around the world. This new COTM product is expected to make it possible for passenger and commercial vehicles, buses, trains, barges as well as stabilized oil platforms to receive and transmit at speeds of 20Mbps down and 10Mbps up while in motion. C-COM intends to deliver this product through its international reseller network of 700+ resellers/integrators based in over 100 countries worldwide.
The Company is also involved in extensive R&D of next generation antenna technologies in conjunction with the University of Waterloo. Several patent applications have already been filed. This project should provide C-COM with revolutionary, patentable Ka- band antenna technology to be used with the growing number of HTS being launched in the next several years. This intelligent antenna technology is designed to be mass producible at a reasonable price and be compatible with 5G and other developing technologies which require low cost/high performance conformal solutions.
The company has a very strong balance sheet – there is currently $15 million in cash or roughly $0.40 per share – 40% of the company’s total market cap.
But in what has been a tough environment for its business, the company only managed to post $0.023 per share in earnings over the last 12-months – so it trades at 44 times trailing earnings – not exactly cheap. Even if we remove the $0.40 in cash and just value the $0.62 remaining for the operating business, the business trades at a relatively rich 27 times earnings.
While we see management committed to its dividend given the historical profitability, the company has not covered its dividend from cash flow over the last stretch of tough quarters. We do see this turning around however, as the outlook is more positive.
We see the shares as fairly valued at present – the 5% dividend yield is attractive and may be enough for some investors but we would wait for an uptick in cash flow from new products to be an aggressive buyer. C-Com is certainly a company to watch and offers a good deal more value than most micro-caps on the TSX-Venture. We continue to Monitor it. For those who currently own it, it would rank as a HOLD if you are satisified with the 5% dividend.
YOUR STOCK OUR TAKE
- MamaMancini’s Holdings (MMMB: OTC)
- Price: $1.12; Market Cap: $30.7 million.
- MamaMancini’s is a marketer and distributor of a line of natural food products.
- The company sells its products through several major retailers and distributors.
- First quarter of fiscal year 2018 revenue increased 37% to $5.4 million compared to $3.9 million in prior year period.
- Net income for the first quarter was $128,000 versus net loss of $(226,000) in prior year period; a $354,000 increase.
- Cash flow from operating activities was $526,000 compared to ($438,000) in the year ago quarter.
- The Company has sold into approximately 38,600 SKU’s in 11,700 retail and grocery locations at April 30, 2017 as compared to approximately 35,000 SKU’s in 11,400 retail and grocery locations at April 30, 2016.
- Gross profit for the first quarter of fiscal 2018 was $1.9 million, or 35% of sales, compared to $1.5 million, or 38% of sales, in the year ago period.
- Last year, the company reported revenue of $18 million, up 43% from the previous year.
- The company has grown revenue every year since 2011.
- Outlook: Additionally, in the Company’s earnings release issued on June 13, 2017, the Company stated that its strategy of developing larger customers and exiting underperforming accounts that do not generate attractive returns has achieved improving operating results. The Company expects a continuation of revenue growth for the foreseeable future as it continues to develop larger accounts and introduce new product lines. As a result, the company is anticipating fiscal 2018 revenues to increase substantially over prior year and report continued profitability.
- “Breaking into profitability has been an important strategic goal. We now have now achieved profitability in each of the last three consecutive quarters. Our sites are now focused on achieving our first full year of profitability at the conclusion of the next quarter.”
- “Looking ahead, our goal is to get to a $40 million run rate by late summer of calendar 2017. This is not our internal projection but our goal.”
- Outlook: The Company’s strategy of developing larger customers and exiting underperforming accounts that do not generate attractive returns has achieved improving operating results. The Company expects a continuation of revenue growth for the foreseeable future as it continues to develop larger accounts and introduce new product lines. As a result, the company is anticipating fiscal 2018 revenues to increase substantially over prior year and report continued profitability.