Avalon Holdings: Microcap With Legendary Potential

Nov.25.07 | About: Avalon Holdings (AWX)

We viewed a recent pullback in the price of tiny Avalon Holdings (NYSEMKT:AWX) as an attractive entry point and initiated a position.

We initially wrote about Avalon back in October 2006 and found it an interesting and profitable combination of assets and businesses. The company currently owns two golf courses (Avalon Lakes Golf Course, Warren, Ohio, and Avalon Country Club, Sharon, PA) operates the Avalon Golf and Country Club at Squaw Creek in Vienna Ohio, and runs a waste management business, which accounts for more than 85% of operating revenue.

Strong Third Quarter

Revenue rose 9% to $12.1 million from the same quarter last year, and 20% to $35 million for the first nine months of 2007. Net income rose to 547K or $.14 per share vs, 501K and $.13 for the quarter, and to $1.262 million and $.33 per share vs. 984K and $.26.

The balance sheet remains strong with $6.741 million or $1.77 per share in cash, and just 232K in long term debt. Cash did decrease significantly from year end 2006, primarily due to cap ex related to improvements at the Sharon Country Club (acquired in October 2006).

Buyer beware, Avalon is a microcap with little liquidity. Before taking a position in a company of this size, do your homework.

Avalon Holdings:

  • Price: $6.50
  • Market Cap: $24.7 million
  • Shares Out: 3.8 million (3.191 million Class A, 613K Class B)
  • Book Value/Share: $10.32 (no intangibles)
  • Avg Volume: 8800

Disclosure: The author has a position in Avalon Holdings (AWX).