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At this level there’s security in (Command) Security

I think there is an investment  opportunity in this profitable but overlooked company that…

·       Is experiencing an improving  business mix

·       Has drastically cut overhead and…

·       Is in a consolidating industry.

·       Has no long term debt


Its stock (AMEX: MOC-1.49) is...

·       At a six year  low

·       Selling  at 10X trailing earnings and…

·       Close to book value and 12% of sales

·       Worth more than double its current quote in a takeover scenario.

Command Security Corporation is  a leading national security corporation--  with  over 29 years of experience and employing  6,000 -- that offers uniformed security officers and aviation security services to  a wide range of industry customers including commercial, financial, aviation and government.
The Security Services  segment  provides armed and unarmed uniformed security personnel for access control, mobile patrols, traffic control, security console/system operators, and fire safety. Aviation Services provides security for airlines, aircraft, passengers and cargo; baggage screening, and wheelchair escort  in more than 100 of the world’s major domestic and international airlines.
Customer concentration exists. For example revenues  were down at Delta Air Lines, the largest customer of aviation, now accounting for 9% of total company sales. The decline in revenues at  aviation was due to reduced demand (reflecting reductions in airline capacity)  and government regulations requiring  the Transportation Security Administration (TSA) to provide services previously provided by the company. These declines were more than offset by Command’s win of a contract with a major transportation company (believed to be Federal Express) for $23.3 million in annual revenues(16% of the total). There are bids outstanding with other transportation companies.
In the fiscal  year ended March 31, 2011 the company reported flattish revenues ($146.5 million) and earnings per share ($0.15).Commented Barry I. Regenstein, President of Command Security, “…While we expect these difficult economic conditions will persist throughout our 2012 fiscal year, we continue to take measures that are designed to manage our expenses and streamline our cost structure”. Business trends now are okay. The hoped-for price stability is not happening… yet. Command  continues to explore  the addition of electronics security services, probably via JV. (MOC has a good customer base that could provide the needed entrée.)
In my view, it will take a  buyout to realize value. MOC is a desirable acquisition for larger industry participants and /or financial, cash-flow buyers like Blackstone Group that have bought others in the industry. Much depends on the willingness of the Kikis family with its 25% ownership to entertain offers. 80+year old Chairman  Kikis is key but does not seem inclined to sell now. It’s rumored that his health is deteriorating. Some long- time  patient owners certainly would want out at some point. These include  David Smith (13%  owner);  Norman Pessin (10%); Trinad  Advisors (6.5% and now reversing from being a seller to a buyer).
Meanwhile, it’s a cheap stock with limited downside that could move up , should the company demonstrate any positive earnings surprise this year.

Harris L. Berenholz, CFA 

Disclosure: I own MOC shares