Jeremy Hellman - Seeking Alpha 'Jeremy Hellman' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/jeremy-hellman IEC Electronics: Solidly Profitable and Growing http://seekingalpha.com/article/128652-iec-electronics-solidly-profitable-and-growing?source=feed 128652 I was recently introduced to IEC Electronics (IECE.OB) and as I work through the story I continue to get excited. As a micro and small cap investor I am always looking for a solid story where I feel like I have a chance to get involved early. IEC is an electronics contract manufacturer focusing on high-end, complex assemblies. This results in lower volume, higher margin business, as opposed to contract manufacturers such as Flextronics (FLEX) or Jabil (JBL) which base their models on high volume business making items such as MP3 players. IEC serves customers in the military, aerospace, medical, communications, and industrial segments with recognizable customers such as L3, ASML, GE, BAE Systems, and Viasat.
Unlike so many other companies its size, IEC is solidly profitable and growing. Reported FY:08 EPS of $1.12 certainly catch the eye, but after backing out tax gains related to the firm's NOLs, EBT/share comes out $0.175. Further analysis of the income statement yields a number of reasons for optimism:
  • FY:08 (year end Sep 30) revenues grew 24.9%.
  • FY:08 gross margin was 12.2% and expanded to 14.1% in Q1:09. This compares to (typically) mid to high single digit gross margins for larger contract manufacturers.
  • Operating margin nearly doubled in FY:08, going from 2.4% in FY:07 to 4.7% in FY:09. Operating margin expanded again in Q1, rising to 6%. Clearly this business has operating leverage.
  • Year end backlog at Sep 30 was $40.4 million, versus $22.3 million a year ago.
Further reading of IEC's SEC filings and recent press releases - and the Q1 release in particular - lends further cause for optimism. In that release, the company comments that it is winning new business and taking market share. In the coming quarters the company says it intends to focus heavily on the medical technology business, where its focus on complex assemblies is well suited. Also, IEC continues to pay down its debt. Combined short and long term debt has gone from $12.4 million as of Q3:08 to $8.3 million as of Q1:09, clearly demonstrating IEC's financial strength. What's more, reading through the SEC filings shows that IEC's debt carries terms that are far from onerous at roughly 4% all-in. Given these points, a debt/equity ratio that might have appeared high at first blush is now something I am quite comfortable with.
Of course, the crux of the argument isn't what the company has done, but what it may do. I have been working on my earnings model and IEC certainly seems capable of producing EPS of at least $0.30 in 2009. Q1 EPS came in at $0.06, including a non-cash effective tax rate of 35.4%. Thus, the current run rate would be $0.24. As I noted earlier, per IEC's comments, new business has been won which would imply continued top line growth. Assuming very modest sequential improvements in revenue, even if I hold margins constant with Q1, an EPS level of $0.30 is attainable. If the company can continue its recent trend of margin expansion, then my estimate ought to be low.
The shares currently trade on the OTC bulletin board and tend to be illiquid, which leads me to conclude this company remains relatively undiscovered. If the company continues to execute, that won't last long.
Disclosure: I am long IECE.
]]> Tue, 31 Mar 2009 05:37:43 -0400 Jeremy Hellman Jeremy Hellman submits:
I was recently introduced to IEC Electronics (IECE.OB) and as I work through the story I continue to get excited. As a micro and small cap investor I am always looking for a solid story where I feel like I have a chance to get involved early. IEC is an electronics contract manufacturer focusing on high-end, complex assemblies. This results in lower volume, higher margin business, as opposed to contract manufacturers such as Flextronics (FLEX) or Jabil (JBL) which base their models on high volume business making items such as MP3 players. IEC serves customers in the military, aerospace, medical, communications, and industrial segments with recognizable customers such as L3, ASML, GE, BAE Systems, and Viasat.
Unlike so many other companies its size, IEC is solidly profitable and growing. Reported FY:08 EPS of $1.12 certainly catch the eye, but after backing out tax gains related to the firm's NOLs, EBT/share comes out $0.175. Further analysis of the income statement yields a number of reasons for optimism:
  • FY:08 (year end Sep 30) revenues grew 24.9%.
  • FY:08 gross margin was 12.2% and expanded to 14.1% in Q1:09. This compares to (typically) mid to high single digit gross margins for larger contract manufacturers.
  • Operating margin nearly doubled in FY:08, going from 2.4% in FY:07 to 4.7% in FY:09. Operating margin expanded again in Q1, rising to 6%. Clearly this business has operating leverage.
  • Year end backlog at Sep 30 was $40.4 million, versus $22.3 million a year ago.
Further reading of IEC's SEC filings and recent press releases - and the Q1 release in particular - lends further cause for optimism. In that release, the company comments that it is winning new business and taking market share. In the coming quarters the company says it intends to focus heavily on the medical technology business, where its focus on complex assemblies is well suited. Also, IEC continues to pay down its debt. Combined short and long term debt has gone from $12.4 million as of Q3:08 to $8.3 million as of Q1:09, clearly demonstrating IEC's financial strength. What's more, reading through the SEC filings shows that IEC's debt carries terms that are far from onerous at roughly 4% all-in. Given these points, a debt/equity ratio that might have appeared high at first blush is now something I am quite comfortable with.
Of course, the crux of the argument isn't what the company has done, but what it may do. I have been working on my earnings model and IEC certainly seems capable of producing EPS of at least $0.30 in 2009. Q1 EPS came in at $0.06, including a non-cash effective tax rate of 35.4%. Thus, the current run rate would be $0.24. As I noted earlier, per IEC's comments, new business has been won which would imply continued top line growth. Assuming very modest sequential improvements in revenue, even if I hold margins constant with Q1, an EPS level of $0.30 is attainable. If the company can continue its recent trend of margin expansion, then my estimate ought to be low.
The shares currently trade on the OTC bulletin board and tend to be illiquid, which leads me to conclude this company remains relatively undiscovered. If the company continues to execute, that won't last long.
Disclosure: I am long IECE.

Complete Story »]]> IECE.OB Jeremy Hellman SIGA Technologies: Bioterror Stock Pick http://seekingalpha.com/article/108875-siga-technologies-bioterror-stock-pick?source=feed 108875 To quote a story making the rounds Monday:

The United States can expect a terrorist attack using nuclear or more likely biological weapons before 2013, reports a bipartisan commission in a study being briefed Tuesday to Vice President-elect Joe Biden. The report suggests the Obama administration bolster efforts to counter and prepare for germ warfare by terrorists.

]]> Wed, 03 Dec 2008 03:02:29 -0500 Jeremy Hellman Jeremy Hellman submits:

To quote a story making the rounds Monday:

The United States can expect a terrorist attack using nuclear or more likely biological weapons before 2013, reports a bipartisan commission in a study being briefed Tuesday to Vice President-elect Joe Biden. The report suggests the Obama administration bolster efforts to counter and prepare for germ warfare by terrorists.


Complete Story »]]> SIGA Jeremy Hellman American CareSource Keeps Delivering http://seekingalpha.com/article/106162-american-caresource-keeps-delivering?source=feed 106162 Although it seems that just about every earnings report this quarter has included some combination of a revenue/earnings miss and reduced guidance (or all the above), companies do exist that have done just the opposite - beat and raise. One that definitely merits mention is a small cap company called American CareSource (ANCI).

This aggregator of ancillary care providers reported EPS of $0.06 on revenues of $16.1 million for the quarter. The revenue figure was in line with a positive revenue-only pre-announcement a couple weeks ago, while EPS beat by 2 cents. Furthermore, ANCI upped its guidance for full year 2008 revenue from $50m - $55m to $55m - $57m. When pressed on the conference call, management reiterated its opinion that their guidance is "conservative".

]]> Sun, 16 Nov 2008 04:17:09 -0500 Jeremy Hellman Jeremy Hellman submits:

Although it seems that just about every earnings report this quarter has included some combination of a revenue/earnings miss and reduced guidance (or all the above), companies do exist that have done just the opposite - beat and raise. One that definitely merits mention is a small cap company called American CareSource (ANCI).

This aggregator of ancillary care providers reported EPS of $0.06 on revenues of $16.1 million for the quarter. The revenue figure was in line with a positive revenue-only pre-announcement a couple weeks ago, while EPS beat by 2 cents. Furthermore, ANCI upped its guidance for full year 2008 revenue from $50m - $55m to $55m - $57m. When pressed on the conference call, management reiterated its opinion that their guidance is "conservative".


Complete Story »]]> ANCI Jeremy Hellman