A Company That Doesn't Wag its Tail or Pay Taxes (WWAG)

Jun.15.06 | About: WWA Group, (WWAG)

Although it’s only Thursday, we’re ready to name the most interesting stock of the week. The winner is WWA Group, Inc. (OTCPK:WWAG).

WWAG is an equipment auction company with offices in Arizona and the United Arab Emirates. The company holds auctions for construction, industrial, and transportation equipment on a consignment basis.

In 2005 management claims to have had over 65% of the market for all industrial equipment auction sales in Dubai. 2005 WWAG auctions covered $110 million of equipment in 5 large Dubai auctions and 4 online auctions, up from approximately $98 million in 2004. Management has expressed its opinion that the market for their services will continue to grow at a healthy pace.

Aside from dominating a niche in a country we don’t often hear much about, what really caught our attention about WWAG is that it does not pay taxes. Its most recent 10Q explains:

WWA Group operates in the Jebel Ali Free Zone of Dubai, which is an income tax free zone. Therefore, the profits of WWA Group are not taxable in Dubai. During the fourth quarter of 2004, WWA Group determined that undistributed earnings from Dubai will be reinvested in the business indefinitely and that such earnings will not be distributed to the U.S. parent. Therefore, in accordance with APB Opinion No. 23, Accounting for Income Taxes — Special Areas, no income tax provision has been recorded for the undistributed earnings.

If -- and only if -- you like extreme volatility, you might like WWAG. We first spotted the company at the end of May and shares are up over 100% since, and that’s after factoring in an 18% drop this morning. If this pace continues, we could theoretically be ready to retire in October.

Our investment capital won’t go to buy shares of this high risk microcap, but we thought the story was interesting enough to warrant sharing with our readers.

WWAG 1-yr chart:

WWAG 1-yr