Facedrive reports but is it too Late?

On May3 Facedrive reported it’s Q4 and annual results.But it’s almost one quarter too late.They didn’t exactly hit the bullseye with this report either.Some details on the financial performance of Q4 were skipped.And almost no detail on all acquisitions including their latest called Tally. Although not stated it appears that Q4 revenues were about $11 million.This is the amount predicted by my blog on WordPress (EconothonII) on April 22,2022. Somewhat surprisingly their Q4 results were not as upsetting as the annual results which showed a net loss of $29.3 million( $10 million innon- cash) compared to a $17.3 million($8 million in non – cash) in 2020.Their results for Q4 were not stated but this blog feels that even with the incomplete information given in their report it appears the loss is narrowing. Although not breakeven yet, FD would be a lot closer with more regular accounting. The accounting is irregular because almost 35% of the loss is due to accounting.This blog suggests that a more normal amount of non cash expenses for a young company would be 8-10%.For example, depreciation and amortization should be much less. Reasonable accounting would reduce expenses and the net loss by $7-$8 million.As Facedrive continues since 2020 to make it’s situation look worse with questionable accounting.Another sketchy strategy is to issue shares to pay off debt when the share price is exceedingly low.As Facedrive tells it’s shareholders that it intends to issue 89,000 new shares(at$.78 per share) to pay off debt.These questionable strategies that put downward pressure on their shareprice only make shareholders want to have a shareholder meeting and try to oust some or all of the existing shareholders.

A Special General Meeting

On May2 Facedrive issued a press release stating that it would have a shareholder meetinfg in a couple of weeks to discus a name change to Steer.But in the Q4 report the CEO told shareholders that the name has now been changed.Now shareholders are angry because we want a chance to air our anger at the irregular actions of the CEO.The question is do we have to wait for the Annual General Meting to make changes?Or can we have a Special General Meeting?Because of the tremenduous drop in ther share price some board members were dismissed from the board.But this was done by fiat not by a vote odf shareholders.And this is the problem.4 board memebers own almost 60% of the shares.So they,especially the CEO,act unilaterally and don’t consult shareholders or even the board of directors.A Special General Metting needs to be called to change the direction of Facedrive.First the 3 board members that backup the CEO need to be replaced.This will be difficult to do without the agrement of the CEO because there is only 40% of the shares in free float.

A more Reasonable Board

It appears to this blog that the management and board are almost trying to artificially keep the price lower than it need be.Maybe Suman Pushpajah and his friends are trying to take this company private and get a windfall.But this needs to be discussed at a General Meeting and then changes made that benefit all shareholders.This blog believes that a change in the board of directors of Facedrive could easily send the share price to$3.00 by summer.https://www.zacks.com/

Payfare does well with Gigs but needs more Grub

Payfare)Payfare (PAY) was covered in one of my blogs (Google Workathon-Blogger) on December17,2021.PAY stated that it had made 3 new partnerships and that had increased it’s active user count and hence revenues.Their most important partnership was with Doordash.Payfare reported that it’s active user count was up 37% over 2020.Furthermore they showed a $606,000 profit in Q3 and paid off their loan facility.

My blog,at that time, forecasted that a further 25% in active user count was needed to breakeven on an annual basis or even show a healthy net income for the year.That blog further forecasted that revenues could hit $15.5-$16 million for Q4.This would produce annual revenues of $45-$50 million and send the share price towards $10.The conclusion of this blog was that Payfare would have to expand it’s customer base beyond the gig economy to reach $50 million in sales and eventually $10 per share.

Q4 Highlights

On March 23 Payfare reported it’s Q4 results and shareholders got a pleasant surprise.Revenues increased by 400% over 2020 to $17 million. Q4 revenues also increased by 36% over Q3.Consequently annual revenues increased to $44 milion for 2021.So Payfare was well ahead of my forecast in the December 17 blog.Payfare told it’s shareholders the increase in avtive user count was primarily due to their business with Doordash and Lyft.And that is because mobile food delivery is here to stay.This is a very healthy nutritional trend for PAY.

Their active user count in Q4 was well ahead of 2020 also.Payfare reported in Q4 that active user count was 834% greater than in 2020 as well as 42% greater than in Q3.Consequently gross profit showed a 390% increase to $1.3 million.

The Gig Economy

My conclusion in the December17 blog was that Payfare needed to find a way to serve customers beyond the gig economy.Payfare responded by having unexpected increases in users using Doordash and Lyft.Undoubtedly this has moved them well up in the growth curve.And Uber is another door that yet remains to be opened. By using these specialised companies and offering a service to Doordash and Lyft that they cannot easily match elsewhere Payfare has expanded it’s customer base beyond the gig economy.Yet it is true that their customer base is still with the gig economy.

What About Q1?

On April 28 Payfare issued a press release in advance of their Q1 results.It issued new guidance for 2022.Now PAY expected that revenues for 2022 would be $90-$100 million or double that of 2021. It also guided $21-$23 million for the first quarter.And It announced that it was developping new products to drive revenue growth.Furthermore it reported a 35% increase in active user count over Q4 of 2021.It seems that Payfare has both beaten analysts earlier estimates and done better than forecasted in my December blog.And it still has the possibilty of making new partnerships with Uber and Grubhub.As there is no doubt that mobile food delivery and ride sharing have allowed Payfare to both serve the gig economy well and to expand beyond it.If PAY meets it’s new guidance for Q1 and Q2 then this blog sees it gradually moving to the $9 level before the yearend. https://www.zacks.com/

Dale Mcintyre is a freelance writer working with Zacks Investment Research

Facedrive prepares to tell investors the way it is

In roughly two weeks(about February28) Facedrive (FD) will releae it’s Q4 and annual report for 2021. Investors are waiting expectantly to see which way revenues and adjusted EBITDA will go.As the stock price has been as low as $.60 and as high as $60 within the last year.Q3 was not that mediocre as revenues at $8.5 million were up 60% from Q2.But can FD continue this upward trajectory?This blog believes that will depend on 3 of it’s recent acquisitions,namely,FoodHighway and Steer and Foodora Canada.All have been purchased in the last 15-18 months.Nothing is expected from their latest acquisition called Tally.So ,in general,this blog expects an increase in revenues but not by the same increment(60%) as seen in Q3.As FD has benefitted from the pandemic and mobile food delivery.In particular,revenues of $11-!2 million are forecasted which is up from $8.5 million in Q3.This is the same forecast as made in Decemer11,2021 on WordPress(Econothon).

Overstated Expenses

The previous blog on Facedrive dated December11,2021 on EconothonII attempted to show readers that FD management was too conservative in stating expenses.In particular, impairment charges of $3.6 million reduced net income and e.p.s. unnecessarly.In addition, Facedrive took an amortization charge of $700,000,an unusually high charge for one quarter.Consequently FD reported a loss for e.p.s. of ($.24) for 9 months and ($.10) for 9 months.Some of these charges were considered as startup costs and so should be much smaller this quarter.FD also took a charge for end-user discounts that many would be dismissed by many startup businesses.This blog saw that e.p.s. might easily have been stated as ($.05) for Q3 and as low as (.15)-($.18) for 9 months.That was the amount forecasted by thus blog.This is important because with the forecasted increase in revenues in this quarter the loss could be as low as ($.02) to ($.03) for Q4 and then ($.26)-($.27) for 2021- a startup year.

A good Year Ahead?

As the pandemic winds down Facedrive will have to refocus some of their business on the upcoming sit-down restaurant business. Facedrive will also lose some of their contact tracing business although it is only a side show to their main businesses-mobile food delivery and ride sharing.This blog feels that Q3 was the quarter that it turned the corner operationally speaking.Revenues were $8.3 million and this blog and others only foresaw revenues of $6.5-$7.5 million.So it is possible that FD beats estimates of $10-$12 million in this quarter coming. A small increase in revenues coupled with the fall in the price of the stock could have been terminal for FD.But it bounced back with a 40% increase in revenues.This blog feels that because management is so conservative investors should place less emphasis on net income yet and look instead at adjusted EBITDA.This is earnings before many discretionary charges.Also FD must try to keep the growth in operational expenses flat or almost flat in Q4.Hopefully the impairment charges will be much less than in Q3 and amortization at a more normal level.Then the goal for FD shareholders will be to get adjusted EBITDA to zero or maybe even positive.And as management spends less on activities like contact tracing operational expenses will see more restrained growth.This will pave the way to $3 a share by March 21-spring. Dale Mcintyre is a freelance writer that works chiefly with Zacks Research and Moneysense websites www.zacks.com

Data Communications’ price (DCM) moves up in Pandemic

My last blog on Data Communications Management (DCM) on WordPress was dated January30,2021 on EconothonII.It stated that DCM was marching steadily towards $1.00 per share.But now it is trading at about $1.25.The Q3 report came out November10 but it was not showing a stellar performance.Still it had some highlights. My blog on Jan.30,2021 entitled DCM Marching towards $1.00 gave a target price of $1.00.And now it is marching slowly towards $1.50 per share.In Jan. the P/E ratio was 3.5 and now it is 10 times earnings.This is because DCM used to be totally involved in printing and office products while now it is much more involved with electronic and digital products.Investors believe that there is more growth in this area than in office products which is a very competeitive business to be in. Q3 Details

Revenues and adjusted EBITDA showed marginal gains over Q3 2020 while net income was flat.They refinanced and made $1.5 million of savings over 2020.In addition, total debt decreased by $3 million in the quarter and $12 million from December31, 2020.Consequently now their debt/capital ratio is a healthy 80%.This has improved since Q1 when the ratio was above 1.My blog on this website dated Mar.23,2021 stated that an increased focus on their technology companies would likely increase the P/E ratio.And it has moved from 3.5 to it’s present 10 times.Consequently revenues have only gained slightly and net income is flat but the share price has moved up.So investors believe that their new company streucture has greater potential for growth once the pandemic has lifted.This blog agrees.

The Coming Year

Since 2018 DCM has made several acquisitions including Informetrica likely.During the period since 2018 DCM has diligently paid down debt.In fact, it paid off $12 million since Dec.31.2020 and another $3 million in this quarter.Now it’s debt/capital ratio is a safe .8 or 80%.And unlike other small cap companies it has relatively few outstanding shares. This is the time to pick up a young technology company with a small amount of goodwill and a new,interesting product.If this impresses investors it may raise their P/E ratio and their share price.But the acquisition must fit into their stable of subsidaries.This blog fels that NEXJ might be a good fit.Nexj Systems or another technology small cap would certainly move DCM towards $1.50 a share. https://www.zacks.com/ Dale Mcintyre M.S.Sc. (Econ) is a freelance writer associated with Zacks Reseaech and several other brokers

https://www.woodbridgegroup.com/

AGF Funds searches for the Right Mix

AGF Funds has been around for a long time.But it has not grown excessively in revenues,earnings nor market cap.However last year it did make gains in all 3 categories for the first time in 5 years.Part of this gain came from the sale of part of their British firm called Smith and Williamson.That aside AGF has only increased their assets under management (AUM) from $38 billion to $41 billion over the 5 year period. These matters were covered in my blog on February 5,2020 of EconothonII which stressed that AGF needs new and more marketing staff.And it needs new and more distinctive ETFs.It has too many institutional products and mutual funds.For example, there is no ETF tied to the Nadaq index nor small cap Canadian or American technology companies.This is the kind of area where Canadian and American investors are putting new funds to work.

Blake Goldring has done an Excellent Job

Blake Goldring is the present CEO of AGF funds and he has been a part of senior management for some time now.It is in fact hard to determine how long he has been in a senior managemt function at AGF.But it is fair to say that he is familiar with all aspects of the AGF operation.There have been few changes to AGF operation in any major way until 2020.In 2020 there were several major new hires(including a head of marketing for U.S. sales) and a few new funds also.But it is this blog’s position that Blake Goldring needs to continue on this path that he has started down.

Recently there was a new board member added to the AGF board.Of course, the board member must be voted on and agreed to by the entire boasrd.But Mr. Goldring has substantial clout in getting the board member that he prefers.And there can be no doubt that Mr. Clarke is amply qualified to be on the board.But he is primarily an administrator not a marketing or financial savvy board member.It is this blog’s position that this is where Blake Goldring must focus on.Especially in a competitive world where competitors like Fiera Capital and Guardian Capital are trying to “eat your lunch”.And both of these competitors are making improvements.

A Three Way Comparison

In an earlier blog on WordPress a comparison was made between the growth prospects of AGF funds,Fiera Capital(FSZ) and Guardian Capital(GCG).The comparison started in October,2019 and all 3 stocks have made changes.Guardian Capital has a large chunk of BMO shares that it uses as it’s capital base and has largely used the dividends to build upon.But it has added new products to draw in new customers and it’s share price has been rewarded.At the time of comparison GCG was trading at $25 and now it trades at about $35.Consequently it’s market cap has moved up to $868 million.In a good market the strength coming from the BMO shares makes GCG a winner and it is starting to become more of an active manager of it’s funds. . Fiera Capital started off quite strongly with a number of astute acquisitions of it’s competitors.But the acquisitions were funded by exchanging it’s equity for it’s competitor’s shares.This very large addition of shares diluted earnings.Lately it has reduced it’s outstanding shares but e.p.s. has not moved up much.Since 2019 FSZ shares have basically moved sideways.In conclusion,AGF shares have performed slightly better( moving from $6 to $8) than Fiera but Fiera Capital is an active manager and may take steps to improve it’s share price.

The Right Mix

AGF has for the last 5 years been a conservative asset manager with dependable customers.However AUM has only grown by 10% since 2019.There are new asset classes that AGF has missed out on completely.In addition, it’s board and senior management is considered as too resistant to change by this blog.The right mix would be 2 new board members by 2023 and 5 to 10 new funds with emphasis on asset classes like blockchain or natural gas companiesThis blog sees little growth in the share price until mid-2022 but then a gradual move to $10 in 2022 with some news about the right mix.. https://www.zacks.com/http://www.marketwatch.ca/ Dale Mcintyre M.S.Sc. is a freelance writer associated with Zacks Research

Tucows sells Ting Mobile and Assembles new Board

Tucows has been listed on the TSX since 2009 but never considered as a technology stock by this blog or any other Canadian analysts. Tucows(TC) has been covered in many of my blogs on WordPress websites (Blogdaleup,Econothon and EconothonII).Part of the reason Tucows (TC) has not been considered a true technology stock is because of the board of directors and principally the chairman of the Board. Elliott Noss gets paid a six figure salary to manage very few assets.That aside the CEO has managed to keep both revenues and earnings fairly steady;e.p.s. went from $.37 per share in Q2 2020 to $.21 in Q2 2021.This while it recently sold one of it’s main assets called Ting Mobile which operates a mobile internet service in southern U.S.A.Although it is true that Tucows did make a small capital gain on the transaction.Now all that remains is managing domain names which is a rather simple business.

The domain name business can be compared somewhat to a wholesale fruit and vegetable business.As Tucows buys wholesale domaine names and puts tags(including price tags) on them and with one or two tweaks sells them as retail domain names.It is not a sexy business nor complicated business but it is profitable.However without making one or even two more technological related businesses it is hard to see how Elliott Noss can justify his and his board’s salaries.

A New Board

Tucows has been replacing and adding new staff for almost 2 years now.And last year has started to assemble a new board.The latest addition is Marlene Carl who on paper seems to be very experienced and competent.In fact, this blog wonders if Mr. Noss has hired his replacement.In total I believe 3 or 4 new board members have been added since 2019.But shareholders have not seen a change in direction over this period.

Time for a Change

A lot of time was spent on managing Ting their mobile internet busineess.Now it has been sold for a fairly small capital gain to the Dish network.Tucows did not even take a small equity position in Dish;this would have been an astute move.Now new board members have been brought on but with no complexity and few assets to manage.In addition, Tucows has very few outstanding shares so it has lots of equity available to make substantial acquisitions.And there is little debt on their balance sheet.This would be a good time to acquire a small,growing junior technology company.

This blog sees Tucows trading in a channel beytween $85 to $95 a share for most of 2021.However it’s stong revenue stream probably prohibits the stock from falling nelow $85.But this blog believes that it will take news on a new CEO or on not one but two acquisitions.And this could send it back towards $100 a share perhaps higher if the acqusition is a substantial one. www.zacks

LIF shows big gains in e.p.s. and cash flow but stock price drops 10%.

This is the first time that Labrador Iron Ore Royalty (LIF) has been covered and so it goes into my Blogdaleup website.It reported it’s results on May 6 when the stock was trading close to $50 per share.The report was a stellar and showed good increases in virtually all financial catgories.Yet the stock price retreated to $45.It is hard to believe that investors expected an even better quarter as this one was very positive.And the future painted for LIF seems quite rosy.The chief difference from Q1 2020 was the price of iron ore which has doubled since last June.Iron ore is chiefly used in the production of steel and steel production has been quite robust during the pandemic.Consequently Iron Ore of Canada (IOC) has increased it’s revenues and the main beneficiary of these higher revenues is LIF.As IOC is owned by Rio Tinto (58%)and Mitsubishi (26%) and LIF (15%).But royalties go solely to LIF.In Q1 royalties to LIF have been buoyant and LIF earnings have improved dramatically.This blog expects that Q2 and Q3 earnings will be as good or better than shown in it’s last report.

Q1Highlights

LIF had an exceptional quarter because it got gains in production,iron ore prices and the IOC dividend.Royalty revenues (from IOC production) were $65 million compared to $48 million in Q1 2020.Equity earnings from IOC were $57 million compared to $25 million in Q1 2020.And lastly it made about $60 million from a IOC dividend of $1.75 per share.So in summary,e.p.s. were $1.35 per share for a 86% increase over Q12020. LIF has very little operating expenses since it is a royalty company and this helps to have dramatic increases in earnings with a relatively small increase in output and revenues.

Labrador Iron Ore Royalty has a good and relatively steady cash flow.It has $34 million cash on hand and earned a positive cash flow of about $56 million in Q1 which is 107% higher than Q1 2020.In addition, IOC declared a dividend payout of $73 million of which $60 million is owed to LIF.$19 million of this was paid in Q1.And LIF has declarted a dividend payable to shareholders in Q2 of $1.75 per share and the annual dividend is expected to be $3.30 per share for a 8.6% yield.Total dispersements from the Q2 dividend will be about $110 million.That aside generally speaking LIF is flush with cash.

2021 Production

Guidance for production and revenues is given by ,the majority shareholder,Rio Tinto.They are calling for a slight increase in production in 2021.The World Steel Association is calling for a 6% increase in production that may require Rio Tinto to raise their forecast for 2021.Either way production and revenues for Q2 and Q3 are expected to be higher than for Q1.

2021 Guidance

Labrador Iron Ore Royalty has a very comfortable position in a growing steel business.In addition, global supply is limited to a few major producers. But it has little control yet over most decisions affecting LIF’s business environment.And that is because although flush with cash it only has a 15% stake in IOC.For example, IOC owed LIF $60 million in unpaid dividends.This means that Rio Tinto has not paid dividends for many quarters. Only recently (by the second quarter) will the majority owner Rio Tinto pay $19 million of this debt.This blog advises LIF to not collect $19 million in unpaid dividends and instead use it together with some debt and take the 7% ownership not needed for 51% control from Rio Tinto.As Rio Tinto appears to need cash and has 58% ownership in LIF..Whereas LIF has lots of cash and needs a greater stake in it’s ownership.If this solution or even part of it is implemented LIF will have a steadier source of income and likely their P/E ratio will rise above it’s present 10 times earnings.This could easily send LIF’s share price into the $55-$60 price range by yearend. https://www.woodbridgegroup.com/https://www.moneysense.ca/

DCM marches steadily onward to $1.00 per share

Data Communications Management (DCM) reported it’s Q1 results on May11.And the story told is the same as reported in my blog of March16,2021 on Blogdaleup.Revenues have plateaued. So has it’s adjusted EBITDA and net income.But DCM has managed to pare down it’s debt by 15% to a manageable $41 million.Also it has picked up new customers in the medical marijuana industry.And this appears to be a growing revenue area.There has been no mention of the revenues or profitability of it’s Econometrica business.This blog be;lieves that this is a slow and stradily growing area with a substantial amount of repeat customers.But there can be no doubt that the pandemic has had a negative impact on it’s growth of revenues.And little doubt that revenues in the next three quarters will exceed the last quarter.

Tighten the Bolts

Revenues have plateaued and DCM has pared down it’s business expenses.Consequently e.p.s. at $.06 per share has remained constant in this difficult quarter.Slight relief is expected for the second and third quarter.The fourth quarter should show an uplift in revenuesand earnings.Still ,based on this quarter, annual e.p.s. will likely be in the $.25-$.35 area.DCM has one of the lowest price/earnings ratio on the TSX at 3.7 times earnings.A slight improvement in the P/E ratio to 4.5 or even 5 times will put this stock well above $1.00 per share.It has fallen to the $.90 price range recently but this blog believes that it will steadily march towards $1.00 per share by the summer.

Any Acquisitions ?

Data Communications Management appears to be a conservative,yet solidly, managed company.Although they have very few outstanding shares on their balance sheet they don’t want to use shares at $.90 per share when they may soon be at $1.25-$1.35.Instead they use debt and gradually pay it off.So that now their debt/equity ratio is reasonable.However there are one or two small companies available that could add to their product line.These two are Fandom Sports (FDM) with a market cap of $7.5 million and iSignMedia Solutions (ISD) with a market cap even smaller.It should be easy to take on a little more debt and buy a majority interest in either.This would add to revenues and perhaps push DCM quicker into the $1.25-$1.35 price range. https://www.woodbridgegroup.com

Blackline relies heavily on Exports to make record Q1 revenues

Blackline Safety over the last year and a half has built up it’s European revenues.It seems to have a solid base in the U.K. and now is adding a subsidiary in France.It’s latest quarterly report shows record revenues of $11 million and substantial recurring revenues (from repeat customers).But adjusted EBITDA went from $520,000 to a $364,000 loss and net income showed a net loss of $.09.

There were 4 or 5 blogs on both Google Workathon (dated June6,2020 and August7,2019) as well as on Google Blogdaleupsome (dated July23,2020 and March1,2019) suggesting that BLN needed to increase revenues.And it has done so and appears chiefly by having made some clever strategic acquisitions also.But net income has not yet kept pace.

Acquisitions

Blackline Safety has made substantial gains in revenues since 2018– both in total and recurring revenues.In 2018 BLN had $18 million in annual revenues and in 2020 it made $38 million.And in this quarter it showed total revenues of $11 million.So it is on track to hit $45-$50 million annual revenues for 2021.This gain has come partially from acquisitions.My blog on Workathon dated June6,2020 recommended an acquisition of a company called Awesense which is in energy monitoring.A later blog on Blogdaleupsome on Google Blogger recommended a merger with one of their suppliers called Nevada Nano which makes gas detector sensors.And it seems now as if some kind of combination has been arranged.Whereas Blackline tells shareholders itself that it has acquired a British firm called Wearable Technologies.The latter firm sells almost exclusively in the British and French market.Plus BLN has made an arrangement with a British firm called Enovert where it appears that it shares in revenues.Furthermore Blackline sells a lot of safety gas sensors and monitors into the British market.

Adjusted EBITDA

Small junior technology companies rarely make any substantial net income in the first years of operation.And BLN also showed negative net income.But most do earn positive adjusted EBITDA in their third or fourth year and usually it is growing.BLN made adjusted EBITDA of $520,000 in Q1 of 2020 but showed negative adjusted EBITDA in the latest quarter of $360,000.Blackline told shareholders that their adjusted EBITDA margin rose a few points.But it looks to this blog that operating expenses rose even more.This cannot be confirmed because Blackline does not provide information on it’s operating expenses.And shareholders do need to know more about their operating expenses.

Price Target

BLN management has taken the recommendation of this blog ,and others, to increase revenues and recurring revenues.But it appears now that expenses are rising too fast because Blackline has too many new projects and acquisitions at the same time.This blog expects that the adjusted EBITDA margin on it’s European operations is not nearly as high as on it’s domestic operations.It is possible that BLN revenues will hit $45 million on an annual basis but only show a small EBITDA.Blackline must show shareholders that it can control operating expenses and so generate at least a small adjusted EBITDA for 2021.Still investors must be impressed with it’s growth.So, in summary, if revenues continue on track and operating expenses show more constraint a price range of $8.50-$9.75 is not out of sight by the fall. https://www.zacks.com/

Data Communications Mgmt.needs new eggs in the Easter basket

Data Communications Management needs to start sitting down with several new future partners.And it has in it’s basket a few eggs (partners) that are no longer so tasty.The reason that I say Easter basket is because DCM needs new partners and products soon; so Easter would be appropriate.And that is because since 2019 it’s revenues have stagnated (between $60 and $70 million each quarter).Although it is also true that they have picked up a few quite tasty partners.So,in summary, their revenues have plateaued but their margin has improved.So adjusted EBITDA has improved although revenues remain level.

Back in 2018

Revenues have been pretty constant since 2017.In 2018 DCM acquired 2 or 3 small printing companies.They were not extremely profitable but they picked up a few government contracts every year.This stabilized revenues and produced a medium amount of adjusted EBITDA.Since then Data Communications has acquired two or three more technology oriented companies.In fact, this blog suggested acquiring Informetrica,an Ottawa based information provider, in 2020.These recent acquisitions have improved DCM’s gross margin and it’s adjusted EBITDA.As this blog title suggests, now would be a good time to interview new partners in order to make another one or two acquisitions. In particular, acquisitions that complement their recent technology subsidiaries.At the same time some or all of their printing companies acquired back in 2018 could be divested.

Informetrica Plus

My website on Google Blogger called Workathon, in a blog dated August23,2020, set up a meeting with an Ottawa information provider called Informetrica.This same blog on Workathon recommended a merger or even a complete acquisition by DCM.There is no mention of a merger in the quarterly reports but DCM has increased it’s debt in 2020 and it is very likely that Data Communications has taken a major position or even acquired the failing Informetrica.This opens up new services and new skills to DCM.But this blog believes that these services must be expanded both with new hirings and new acquisitions in these new service areas.If necessary some or even all of their low margin printing companies should be divested in order to help finance these actions.DCM needs to be seen as a progressive,technology stock with a high gross margin.This will increase it’s P/E ratio and enhance future equity issues.As Data Communications still has very few outstanding shares and needs to use more of it’s capital base.

Summary

Right now the debt/equity ratio is high as it is above 1.So DCM is financing it’s expansion with too much dependence on debt because interest rates are low now.But with a prudent acquisition their revenues and earnings will rise and the stock price should move towards the $1-$1.25 area.Data Communications may be able to make one or two new equity issues and reduce their debt also.This will put them in a much stronger position in the second half of 2021. https://www.zacks.com/