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  • National Automation Services Has 3x Return Potential 2 comments
    Aug 1, 2014 9:01 AM | about stocks: NASV

    National Automation Services has 3x Return Potential

    We recently had a chance to speak with Mr. Robert Chance, CEO of National Automation Services to get an update on his company. National Automation Services, Inc. (OTCQB: NASV) is a public holding company that is focused on the acquisition and integration of private companies in the billion dollar oil and gas services sector. Management's end game is to turn NAS into a large vertically integrated energy services organization that will be a large and growing beneficiary of the domestic energy boom. The acquisition targets must meet management's strict underwriting investment hurdles, including track records of long term, stable, and profitable operations. Additionally, they must be accretive to shareholder value, offer synergies (providing additional revenue streams and cost savings) and be geographically compatible with the other wholly owned subsidiaries. The other significant benefit to be recognized from this rollup strategy is the private-to-public multiple expansion that NAS would capture.

    Once acquired, each wholly owned subsidiary will operate as its own entity with existing management retained. This allows the Company's management to focus on maintaining quality while increasing current levels of revenues and profitability. Each subsidiary provides their financials to NAS and the Company will make site visits to ensure companies are in compliance for reporting and monitoring purposes.

    Deals

    In June 2014, the Company announced the completion of its first acquisition, JD Field Services, in an all-stock deal and debt assumption. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation and maintenance of the well-site. JD is licensed in all states west of the Mississippi River including Alaska to do trucking, but is focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies, and specialty long hauling services. JD also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services. JD also operates a fabrication division that builds special-order oil and gas equipment and trucks for customers.

    JD Field Services has approximately 130 employees and a three year historical average of $24 million in annual gross revenues, 2013 EBITDA of approximately $5.7 million, and net assets valued at around $7.5 million.

    The Company is currently working on two additional acquisitions, having signed purchase and sale agreements with Devoe Construction and MonDak Tank, Inc. Devoe was recently awarded the Prestigious Mercury top 100 fastest growing private companies in Colorado. With more than $1 billion being spent on infrastructure in the Denver-Julesburg Basin, this area is primed for growth. MonDak is located in in Williston, North Dakota, right in the epicenter of the Bakken and Three Forks Shale play. MonDak is a widely respected contracting outfit in their field and have an excellent management team that will continue on with NAS after the purchase. The Company expects to finance these acquisitions with cash.

    According to the Company's initial unaudited review of Devoe and MonDak's books, they are reporting 2013 revenues of $15 million and $7.1 million and EBITDA of $2.2 million and $2.2 million respectively. Together with JD, the parent company would have reported 2013 revenues of $46.1 million and 2013 EBITDA of $10.1 million.

    Future Activity/Deal Flow

    Additionally, the Company expects to continue to add to its acquisition pipeline, with four more additional acquisitions over the next 12-18 months funded with a combination of cash, debt, and stock. According to management, some of these acquisitions may be significantly larger than the ones currently on the table. In addition to the expected organic growth from all wholly owned subsidiaries, the Company fully expects to generate additional sales and cost savings via synergies provided by the vertically integrated structure. Management intends to reverse split the stock 200-1 (maximum) and uplist to the NYSE MKT by the first quarter 2015.

    Funding

    The Company recently announced that it has entered into a five year $10 million (straight debt facility) agreement with a National Commercial Finance Company facilitated by Wellington Shields out of Manhattan. Six million dollars will be used to retire JD Field Services obligations, leaving the rest for working capital and corporate uses. Management indicated that Wellington Shields has committed to providing $30 million in debt and $30 million in equity to finance additional acquisitions.

    Investment Opinion

    Shares of NASV currently trade at $0.032 per share on the OTCQB, with 751,987,293 shares outstanding, making a market capitalization of $24,063,593. Holding the market cap constant, post a 200-1 reverse split, this share count would equate to 3,759,936, or $6.40 per share (exceeding the $5.00 minimum price to list on the NYSE MKT).

    If we take a look at a few publically traded comps in the oil and gas service sector, we can try to size up where NASV stands. For instance, one of our comps, Nuverra Environmental Solutions, Inc. (NYSE: NES) provides environmental solutions for unconventional oil and gas exploration and production, including the delivery, collection, treatment, recycle, and disposal of restricted environmental products used in the development of unconventional oil and natural gas fields. On an Enterprise Value (NYSE:EV)/revenue multiple, shares of NES trade at 2.02x. GreenHunter Resources (NYSE MKT: GRH) provides hydraulic fracturing services, as well as fluids handling, hauling, and barging services. On an EV/revenue multiple, shares of GRH trade at 3.49x. For this purpose, we can take the average of our two comps to arrive at a multiple of 2.76x. Using historical revenue numbers for JD and the other two companies to be acquired; we arrive at an enterprise value of $127.2 million, which assuming net debt of $17 million gives us a market capitalization value of $110.2 million, or $29.30 post reverse split. In our view, this means that shares of NASV currently trade at a 78% discount to historic value, with no accounting for future organic growth, synergistic cost savings or growth via future acquisitions. Assuming management is able to successfully execute on its future rollup strategy and uplist to the NYSE, we believe that NAS, after acquiring an additional four undisclosed companies and integrating them into the parent, should approach $200 million in market cap by the end of 2015.

    Paul Silver

    Paul Silver is the Managing Director of Research at Wall Street Resources. Previously he has been in auditing with a Big Four accounting firm in New York City, a sell-side research analyst for two global investment banks in New York City including Salomon Smith Barney and UBS Paine Webber. At Salomon Smith Barney he was a member of the firm's research team covering Real Estate Investment Trusts that was consistently ranked #1 by Institutional Investor magazine. Mr. Silver has written extensively on small cap equities and is a contributing writer to numerous publications is a co-manager of the WSR High Alpha model portfolio which has resulted in a 127.39% average annualized return from inception on March 13, 2009 through December 31, 2013. For more information visit: http://www.wallstreetresources.net/High_Alpha_Performance.aspx

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  • jeffk92341
    , contributor
    Comments (2) | Send Message
     
    NASV Expands JD Field Services. Pays off old debt and adds more equipment to expedite growth.

     

    $10,000,000.00 funding agreement with a National Finance facilitated by Wellington Shields out of Manhattan.

     

    The agreement which is a straight debt facility (no Company Equity), will be used to retire approximately $6 Million of JD Field Services obligations, leaving the rest for working capital and corporate uses. This is an important step for us on many levels as we now will have the financial strength to fully execute on our overall strategy. This will allow us to purchase additional cranes, trucks, and equipment to further expand operations to our customer base in Utah, Wyoming, Colorado and North Dakota.

     

    Wellington Shields is a valued financial partner that provides the Company with the capital flexibility to grow in line with its Business Plan. Also, in connection with the Wellington/NAS agreements they have provided important on-going guidance in the process of up-listing to the NYSE planned for later this year.

     

    The additional equipment is estimated to increase yearly revenues from approximately $20,000,000.00 to $24,200,000.00 and increase the bottom line by $840,000.00. Demand for JD's services has steadily increased over the past few years and the additional equipment will help meet those demands.
    4 Aug, 05:58 PM Reply Like
  • jeffk92341
    , contributor
    Comments (2) | Send Message
     
    What’s My Stock Worth?
    [A Determination of Value of NASV Based on Market Capitalization and Gross Revenues of Comparable Companies]
    With the recent (July 25, 2014) filing of a 14A Preliminary Proxy Statement with the SEC, we have learned important details about future plans for NASV. In particular, these details help us to hone our previous pricing forecasts to achieve a clearer vision of the current and forward-looking value of NASV common stock.
    In the 14A, the Company disclosed, among other things, that it will reduce its authorized shares from one billion to 75 million and further will effectuate a 200 to 1 reverse split. These two actions will, in part, facilitate the up-listing of the Company to the NYSE:AMEX listing exchange. How will this affect the valuation of the Company and consequently the price of the Company’s common stock? In a word, “positively.”
    The reasoning is simple. If the Company continues to trade on the OTC Markets quotation system, the true earnings potential of the Company is unlikely to be translated into a true market valuation of its Common Stock. This has been discussed before. The OTC Markets quotation system is fraught with manipulation by unscrupulous market makers. Their primary strategy is shorting, which effectively places an unwarranted artificial ceiling on the price of a company’s common stock. We have seen this with NASV. By all accounts, based on the company’s present forward-looking earnings of about $.014 per share, the Company should be trading at an easy $.20 to $.25 per share. But it’s not, it has been trapped in a trading range of about $.03 to $.05 ever since it announced the successful acquisition of JD Field Services.
    In sharp contrast to the shenanigans of the “penny world”, listed exchanges are closely regulated and achieve the highest degree of professional trading ethics, which allows the price of a company’s common stock to realize its true pricing potential. Moreover, stocks that are trapped in the penny world cannot be purchased by 99% of registered reps employed by the many brokerage firms across the nation. In general, they are forbidden by their broker-dealer from purchasing stocks under $1.00 per share. As a result, the potential demand for shares that can be generated from a good story such as NASV is suppressed because the great story must be ignored or simply goes unnoticed.
    So we know what the value of NASV is as a quoted stock on the OTC Markets. What is a realistic and highly probable value, once moved to the NYSE:AMEX? The most logical pathway to price discover is to compare comparable companies, that is similar participants in the oil and gas field services sector currently trading on a listed exchange. Our research uncovered 6 publicly traded companies with similar business services, who trade currently on the NYSE, NASDAQ or AMEX. These companies would be considered “competitors” of NAS if and when they occupy the same geographical area. The companies were not chosen for Market Cap, PPS, Share Structure or any other reason.
    Included Companies are: Dakota Plains Holdings, Inc. (NYSE:DAKP) Williston Basin, ND; Blueknight Energy Partners, LP (NASDAQ:BKEP) located in 23 states; DHT Holdings, Inc. (NYSE:DHT) an International Corporation; Arc Logistics Partners, LP (NYSE:ENSV) Multiple Locations, headquarters in NY City; Enservco (NYSE:ENSV) Eastern USA to Rocky Mountain Region; and Nuverra Environmental Solutions, Inc. (NYSE:NES) Bakken, Marcellus/Utica, Haynesville, Eagle-Ford, Mississippian Lime, Barnett & Permian Basin shales. The services provided include but are not limited to: trans-loading & storage of energy products; terminalling, gathering and processing of oil and gas products; crude oil tanker fleets; water fluid hauling, frac tank rental, well enhancement and maintenance; delivery, collection, treatment, recycle and disposal of Restricted Environmental Products; water treatment, hauling, trucking and storage.
    Share structure for these companies ranges from 12.9 million to 79.2 million, with the average being 38.6 million shares outstanding. Market capitalization for the companies ranges from $93.2 million to $532 million. Earnings per share ranges from $-8.88 to $0.33, with half of the companies generating negative earnings and half positive. Trading price ranges from $2.46 per share to $25.12 per share. The following table summarizes relevant data on the 6 companies.

     

    Due to the lack of applicable Price to Earnings Ratios (based on ½ of our comparable companies having negative earnings and no clear way to estimate what NASV will have for Net Profit in 2015) we have decided to use a multiple of the Market Capitalization divided by Gross Revenue for purposes of determining a comparative share value for NASV. This creates a static number much like a P/E Ratio, but one that can be calculated on a wider range of companies. In addition we can utilize 2013 and 2014 numbers for NASV to determine what size Market Cap we would have if all other variables were equal.
    The valuation formula is simple and easy to apply. We divide each comparative company’s Market Capitalization by its Gross Revenues to arrive at a Market Cap Multiplier (“MCM”). We then calculated the Mean MCM, simply by adding each of the companies’ individual multipliers and dividing by 6. This eliminates weighting for company size and gets a simplistic multiplier. In this case that multiplier is 6.7. To determine the potential market capitalization for NAS, simply multiply the Company’s gross revenues by the Mean MCM.
    We further refined the Mean MCM by removing the highest and lowest MCM’s of the six companies to eliminate the outlier effect. This worked out to a refined Mean MCM of 3.8. Finally, we calculated the Median MCM. This is simply a Higher Than/Lower Than equation. Since there was an even number, the 2 middle were used and averaged. This multiplier came out to 6.2.
    The three multipliers give us a realistic range of possibilities for valuation of NASV once it achieves listing on the NYSE:AMEX. The potential market cap will be now calculated as determined by the companies it owns. First, we know the JD Field Services acquisition is completed, so we will calculate based on the revenue forecast from JD alone.
    In 2013 JD had gross income of $19.4 million. Using the multipliers above, the range of Market Cap for NASV would be between $73.7 Million and $129.9 Million. Post reverse split, figuring there will be roughly 4 million issued and outstanding (“OS”) shares left, this translates into a PPS of between $18.42 and $32.47 per share. Although the estimates for 2014 revenues are significantly higher, I think we would all be satisfied with a PPS in this range.
    Factoring in the recent Purchase and Sale agreements for Devoe Contracting of Colorado and MonDak Tank of North Dakota, we have a much bigger Price per Share potential. In 2013, Devoe had gross income of $15 million and MonDak Tank had $7.1 million. Combined with JD Field Services, that would bring the total gross income of NAS up to $41.5 million. The Market Capitalization range becomes $157.7 to Million - $278.0 Million, while the Price per Share range grows to between $39.42 and $69.5.
    Interestingly, to prove how the move to the NYSE:AMEX allows the Company to reach its true pricing potential or conversely to see what the improvement in today’s pre split pricing would be, divide the above projected per share prices by the reverse split factor of 200. With JD Field Services revenue alone we would be at $.09 to $.16. Adding Devoe and MonDak revenues we would be at $.19 to $.34.
    4 Aug, 06:25 PM Reply Like
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