Tuesday, 22 July 2014

Second Malaysian Airline Tragedy Renews Focus On FLYHT Aerospace Solutions Ltd.


FLY:TSX-V

FLYHT CEO, Bill Tempany, was in the spotlight today with an appearance on the Canadian network 'CTV Morning Live' to discuss the company’s technology in light of the recent downing of Malaysian flight MH17 over Eastern Ukraine.

While there was significant global media focus on the attributes of the company’s AFIRS technology following the March disappearance of MH370, additional questions have surfaced about what answers may have been provided in the most recent tragedy if the aircraft had been equipped with the system.

To view the interview with Mr. Tempany, click here.


Tuesday, 15 July 2014

Global Maxfin Reiterates STRONG BUY With A $1 Target For FLYHT With Update


FLY:TSX-V

In acknowledgement of the news issued today by FLYHT on the certification of the AFIRS 228S for A320 Aircraft, Global Maxfin analyst Joe MacKay issued an update to clients. In the report Mr. McKay says the implications of this announcement are positive for FLYHT.  Specifically stating “the process to certify AFIRS with Airbus has been underway since 2012 and was recently approved by Airbus. L3 is the world’s largest manufacturer of flight data recorders. Under the agreement with L3, L3 manufactures and installs the AFIRS units on the aircraft with FLYHT receiving a royalty payment of approximately $6,000/unit for a retrofit and $12,000/unit for a factory fit.”  

Further into his commentary he also points out that, under the L3 agreement “FLYHT then has the opportunity to sell applications and services to the end user, receiving 100% of the monthly recurring revenue.”

To receive a copy of the update please contact Global Maxfin analyst Joseph MacKay at (416) 741-1544. 


Friday, 11 July 2014

Less Mess Storage – Independent Review Affirms Strength Of Self-Storage Acquisitions


LMS:TSX-V

Less Mess management’s confidence has been validated on the business merits of its recent acquisition of five storage facilities in Central and Eastern Europe (CEE) with the filing of the company’s Business Acquisition Report (“BAR”).

The BAR’s principal content is the audited combined financial statements of the five companies acquired for 12 months ending December 31, 2012 and 2013, and the auditor reviewed statements for three months ending March 31, 2013 and 2014.  Effectively, the BAR provides audited or reviewed financials for the acquired self-storage business up until very shortly before the acquisition took place.   The BAR itself is available on SEDAR (www.sedar.com).

Less Mess acquired two facilities in Warsaw, Poland and three in Prague, Czech Republic making LMS the largest self-storage chain in the CEE. This region remains very new to the self-storage phenomenon but has demonstrated a pent-up demand due to robust macro-economic outlook with Poland forecasting an average growth of 3% a year.

Here are some of highlights from the BAR:

  • Total sales in 2013 were $4,176,901, representing a growth of 7.4% over 2012.
  • Operating profit in 2013 was $807,426, representing a growth of 6.9% over 2012.
  • Pro-forma EBITDA in 2013, eliminating former parent company costs, was $2,013,944.  
We note that LMS has just over 10 million shares issued, which equates to approximately EBITDA/share of $0.20. The stock last traded at $0.90 or 4.5 times trailing EBITDA/share.

With a tight share structure, a valuation that could motivate opportunity driven investors, cash flow positive business model, and a management team and board with proven track record in CEE real estate, Less Mess Storage is well positioned.

Its objective is to continue to capitalize on the blue-sky potential and expansion opportunities in this region as well as neighbouring countries.

To the view press release, click here.
To view a recent interview on Stockhouse, click here.


- Ariel Cobangbang
Grant Howard

Wednesday, 9 July 2014

Less Mess Storage Chairman Interviewed On Stockhouse


LMS:TSX.V

Chris Parry, content manager for Stockhouse, recently interviewed Peter Smith, VP Corporate & Chairman of the Board for Less Mess Storage (TSX-V: LMS).

In this interview, Peter talked about the concept of self storage, the Company’s storage facilities in Central & Eastern Europe (CEE), and reasons for focusing its operations in the CEE.

Peter shared his insights on the company’s management, board and their respective backgrounds, peer comparison and investment highlights such as on-going positive cash flow, a low risk/high margin opportunity and the yet untapped potential in a high growth region.  He also talked about the Company’s short and long term expansion strategy in the region.

Click here to watch the interview.
Click here to read the Less Mess Storage Inc. introductory blog  from June 10, 2014

- Ariel Cobangbang
Grant Howard


Tuesday, 8 July 2014

EuroPac Initiates Coverage On Argex – Speculative BUY - $1.60 Target


RGX:TSX

This morning, EuroPacific Canada released a 50 page report on Argex Titanium. Analyst Luisa Moreno makes the case for a Speculative BUY rating and a 12-month price target of $1.60.

Investors in Argex would think a $1.60 price target is conservative, considering the industry disrupting potential of Argex’s proprietary chemical process for the production of titanium dioxide (TiO2) . However, in her opening paragraph, Ms. Moreno states, “we anticipate an upgrade to our target price once project financing for the Company’s first production plant is completed and financing risk is reduced, which should be seen favourably by investors. We believe the economics of the project will support a successful financing. The current EV/EBITDA multiple for 2017, the first year of full production, is 8.6x.”

Here are some key points from the report:
  • Argex has the potential to become one of the lowest cost and relatively more environmentally friendly TiO2 pigment manufacturing operations in the world.
  • Feasibility Study cash costs of ~$1,500/t, which include transportation, feedstock, and finishing costs, but exclude potential by-product credits, compare favourably to major pure play pigment manufacturers with current average costs above US$2,000/t TiO2.
  • Argex is currently pursuing financing for its first plant, and expects to be in production within 24 months of construction startup. We assume Argex will complete financing in H214, and forecast construction to begin in Q414 with initial production of TiO2 pigment to begin in late 2016. Argex also has mid-term plans to double TiO2 production through the construction of a second processing plant in 2017-2018 with initial production expected in 2019.
  • Argex has completed a definitive Feasibility Study and a pilot plant optimization program, and has started preliminary engineering work with equipment vendors for the procurement of long lead items.
  • Demand for pigments seem to have returned in 2013, and are expected to continue to rise in the near term spurred by TiO2 consumption in China and other emerging countries in the Asia and Pacific regions.
The full report is intended for EuroPacific clients. If you would like a copy of the report please contact Luisa Moreno at 416-933-3352 or by email at luisa.moreno@europac.ca



Monday, 30 June 2014

FLYHT AGM Presentation Videos Now Available Online


FLY:TSX.V

In case you haven’t seen it already, late last Friday FLYHT posted the video recordings of its AGM investor presentation, which was held on June 24th. FLYHT President Matt Bradley, Jeff Brunner - VP Certification Engineering & China Operations and Kent Jacobs - Technical Fellow provided presentations about key parts of the business.

To view the videos, please click here.


Friday, 27 June 2014

Watching Concrete Dry Has Never Been Better


CVX:TSX-V

This week, a well fed group of engineers and construction industry professionals got to witness CEMATRIX Cellular Concrete in action. On Thursday (June 26th) Lafarge and CEMATRIX co-hosted a BBQ lunch & learn on Lafarge’s new property in Southeast Calgary for a group of about 40 engineers and construction industry professionals. Doug Lavis, Business Development with CEMATRIX, provided an in depth explanation of the production and various applications for Cellular Concrete and the many benefits the construction material has.

Doug Lavis fielding technical
questions prior to the demonstration
After Doug’s presentation and a number of technical questions, the group donned all of the appropriate personal protective equipment and walked over to the worksite where a base slab was being poured for a new building. The group intently watched as a concrete slab was poured and began to dry. After the demonstration was complete, many of the attendees  stayed to ask questions as to how this product might work in a variety of applications. Each attendee was given a hockey puck sized piece of cellular concrete as a memento of the demonstration.

CEMATRIX has been diligently working towards mass industry acceptance as a preferred supplier and has been submitting proposals on projects across North America.

The demonstration proved to be an effective education tool, supporting the work to gain mass acceptance. Attendees left with a greater understanding of Cellular Concrete and how it can have a positive impact on a variety of projects that are currently underway or in the design phase.




Thursday, 26 June 2014

Cielo – Non-Dilutive Funding For First Commercial Waste To Fuel Technology


CMC:CSE

After 11 years, Cielo’s path to production has become clear. Today, Cielo announced that it has signed a Memorandum of Understanding (MOU) with a private investor that will secure non-dilutive funding to construct its first commercial Waste To Fuel plant. The MOU will also fund upgrades to the current technologies and will enable the construction of a 700 litre per hour (lph) commercial scale plant, with plans to produce both highway grade (Number 2) renewable diesel as well as aircraft, or Number 1 diesel. This plant will be constructed in Red Deer, Alberta.

The MOU is subject to signing of a final agreement and both parties intend to enter into a definitive agreement as soon as practicable.

This announcement marks a significant milestone for Cielo and will enable the commercialization of its Waste To Fuel technology. The proposed agreement is the best case scenario for shareholders, as the financing does not dilute the share structure or add any debt to the company. The MOU will also provide up to one billion ($1,000,000,000) of funding for as many as 100 refineries across Canada. In consideration for this funding, the new partner will receive 50% of the intellectual property associated with the refining technology, 90% of net revenues from the first refinery until the funding is repaid, and then will retain 70% ownership of the first refinery.  The new partner will also receive $500,000 per refinery sold and a royalty of $0.02 per litre from all future refineries.

Additionally, Cielo announced that it has entered into an agreement with New Fuel International (NFI) of Seattle, Washington. This agreement grants the exclusive rights to market and produce biofuel derived from various non Municipal Solid Waste feedstock in the US States of California, Oregon, Washington, Hawaii and Alaska, and the Canadian Provinces of British Columbia and Ontario. NFI has already secured a large supply of feedstock and is looking forward to working with Cielo to produce high grade renewable diesel. This partnership will aid in expediting growth once the commercial technology has been proven.

To view the news release, please click here.



Wednesday, 25 June 2014

Lonestar West CEO Interviewed On BNN


LSI:TSX.V

While in Toronto for Lonestar’s Annual General Meeting (Today, Wednesday, June 25 at 2:00ET at WeirFoulds LLP), President and CEO James Horvath swung by Canada’s popular investment news station - Business News Network. Mr. Horvath was interviewed on Commodities by host Andrew Bell.             

In the segment, Mr. Horvath talks about Lonestar West’s current operations, its aggressive growth strategy and its recent acquisition of Vamp Oilfield, a Saskatchewan-based oil and gas service provider for $9.77 million CDN.   

With this accretive acquisition, Lonestar is in line with its aggressive expansion strategy for 2014 and is positioning itself as a dominant player in the Hydro-Excavation industry in western Canada.  The Vamp Oilfield acquisition increases Lonestar’s fleet to 116 trucks from 93.  

To view the news release on the acquisition, please click here.

To view the clip, please click here.





Monday, 23 June 2014

Canadian Business Names Carfinco As A Best Growth Stock Of 2013


CFN:TSX

Carfinco has been recently showcased in the June edition of Canadian Business magazine as one of the top Small Cap Companies in Canada and, as well, listed as one of the Top 10 Best Growth Stocks in 2013. 

The monthly national magazine publishes its annual Investor 500 special issue where Carfinco placed 195 out of 300 on a list of Canada’s top Small Cap Companies, and placed 1st in the Return On Equity (ROE) column with 36% from the Best Growth Stocks of 2013. 

The electronic version of the magazine is a subscribe only to view and can be linked by clicking here.



Friday, 20 June 2014

Lonestar Closes Acquisition Substantially Increasing Fleet Size



LSI:TSX.V

Lonestar continues with its aggressive growth strategy through the accretive Saskatchewan acquisition of assets from Vamp Oilfield Services in Moose Jaw for $9.77 million.

This acquisition takes Lonestar’s fleet from 93 to 116 units and complements its existing Saskatchewan presence, as gross sales from the purchased fleet last year were $6.6 million, with over $2.6 million in EBITDA.  Along with the trucks comes a new key manager for the area, Ryan Buckton.

It was also mentioned in today’s news release that Lonestar settled, in its favour, against a former lease operator, a breach of a non-competition clause, and added just over $200,000 to its coffers.

To view the news release, please click here.


Thursday, 19 June 2014

Grande West Transportation - Route To Revenues


BUS:TSX.V

Marketing, marketing, marketing has been the central theme for Grande West Transportation in the first half of calendar 2014 with its Vice President, Business Development attending several key conferences amidst a multitude of meetings with  transit authorities and private operators.  

Jean-Marc Landry, had a lengthy, successful past running sales at Nova Bus for many years. Jean-Marc has been in front of Grande West’s immediate target list of about 100 potential buyers across Canada including transit authorities and larger private operations to ensure they are fully acquainted with Grande West and the attributes of its flagship bus, the Vicinity, versus the competition.

Video below offers some insight into the many attributes of the Vicinity through an introduction by Jean-Marc.



CFO Visits China

New 30 Foot Vicinity With 2 Doors
John Sutherland, CFO is back from a recent trip to China where he spent time with management of the automotive division of the Weichai Group which assembles the multiple components that make up the Vicinity.  Management has built a strong relationship with the Weichai Group over the past four years. Grande West also has a full time quality control person in place during all builds of the Vicinity.
Final Assembly and Finishing Area
Twelve buses are for Quebec and three for a Nova Scotia transit authority plus three new demonstration buses including a new 30 foot model with two doors have been added to the current production run. These three Vicinity buses will be utilized for marketing and customer testing in key markets across the country.   The 30 foot Vicinity bus has been specifically designed for the needs in the Ontario transit market. This bus will be demonstrated in Ontario, being Canada's largest transit market, and also will be utilized as a demonstration Vicinity bus for airport shuttle bus applications.

Automotive Division of Weichai Group,
 Xiaman, China - A Duty-Free Zone





Wednesday, 18 June 2014

BBC Asks “Where is Flight MH370” - Is FLYHT’s Technology The Answer?


FLY:TSX.V


Few FLYHT stakeholders have had the opportunity to see a live demonstration of AFIRS. The BBC program Horizon recently provided the world with an insider view of the FLYHT technology in action as part of a documentary on the mysterious disappearance of the Malaysian flight.

This past spring, BBC crews were aboard a First Air aircraft in Ottawa, Ontario to film AFIRS in use with several minutes of the footage used in the documentary. First Air and FLYHT announced this past April that the airline was adding FLYHTStream’s automatically triggered, real-time data and live black box streaming capability to its fleet of B737, ATR and B767 aircraft. Click here to read the news release.  

The AFIRS system is highlighted in the documentary as a technology that could help prevent the future disappearance of aircraft.  To view the documentary, please click here (AFIRS is featured at the 50 minute mark).

- Brad Dryer
Grant Howard


Thursday, 12 June 2014

YANGAROO Eliminates Debt - Well Positioned For Growth


YOO:TSX.V

While many junior companies are struggling to raise money in today’s environment, there are a few bright lights on the TSX Venture exchange. YANGAROO announced today that it closed the first tranche of its brokered private placement for gross proceeds of $1.2 million. The raise was done at $0.30 with NO WARRANTS ATTACHED. It was noted that YOO could raise up to $2 million, but the company has decided to cap the amount at $1.6 million as this reduces dilution.

The remaining $400 thousand amount to reach the $1.6 million is going to be taken up by one investor. Today’s (June 12th) news release stated the company was giving the investor more time to participate and has scheduled the close of the second tranche on or before July 29, 2014.

Today’s news follows yesterday’s announcement that the company paid off 100% of its outstanding $2.3 million debenture debt. This is significant for YANGAROO as it will save the company approximately $77 thousand per quarter in interest expenses. Click here to view yesterday’s news of YANGAROO’s repayment and redemption of all debentures.

In speaking with YANGAROO management today, it was expressed that the company now has the money it requires to accelerate growth.   

Please click here to view full press release.

Tuesday, 10 June 2014

Less Mess Storage – “A Bright Future In Self-Storage Solutions”


Less Mess Storage Inc.
LMS: TSX-V

The self-storage business is well known to North Americans and that in itself, will make this story much easier for investors to understand and appreciate.  The company we are introducing has history, short-term potential to enhance financial returns from existing operations and long-term potential for growth.  As such, it should be appealing to a sizeable investor audience. It is a new story, and thus not well known and ripe for discovery. It has public peers, and comparative valuations are readily available for those who want to dig deeper into the “question of value”.

Less Mess Storage (LMS) is a new addition to The Howard Group client portfolio. Its business is not unique, but at the same time it is unique because of not only where its operations are located, but why it has chosen to establish itself in a grossly underserved market. 

LMS has become the largest self-storage chain in Central and Eastern Europe (CEE) with the acquisition of, five modern self-storage facilities. Two are in Poland and three in the Czech Republic. The facilities in 2013 generated $4.2 million in revenues and just under $2 million in EBITDA on a pro-forma basis.

The acquisition followed a $22.75 million financing comprised of $7 million in equity with a $1.00/unit and $15.75 million in debt. It was completed just this past April and the company began trading again on the TSX Venture Exchange on 5th May.   It conducted a Reverse Take-Over of DGM Minerals.

There are 10 million shares issued and 19 million fully diluted, including 7 million warrants that are good for two years and exercisable at $1.40 as part of the financing. 

As a side note, The Howard Group assisted Less Mess and EuroPacific Canada with the marketing of the financing. We can comfortably say that HG relationships played a pivotal role in the completion of the deal.

In addition, HG introduced Mr. Tracy Graf to Less Mess management. Tracy, is the CEO of the highly successful Carfinco Financial Group Inc. and a long-term HG client. He not only made a substantial investment in the financing but agreed to join the LMS Board of Directors. Tracy co-founded Carfinco (CFN – TSX), which offers vehicle financing programs through 2,400 dealerships in Canada and the U.S. He is also a director of Lonestar West Inc. (LSI – TSX.V) and Aurora Spine (ASG – TSX.V). Tracy brings with him a wealth of experience and an impressive track record in business management, capital markets and financing. His involvement will not go unnoticed by the institutions, firms, and investors that are involved with Carfinco.

There are several reasons why the Howard Group became involved with LMS. First, is the company’s ability to recognize and capitalize on the untapped potential in this high growth region.
    
Consider this - a city like Toronto, with a metro area population of   ̴ 5.6 million, has over 100 self-storage facilities, while Warsaw, Poland, with a metro area population of   ̴ 2.7 million, has only three self-storage facilities, of which two are owned by Less Mess.  

CEE capitals such as Warsaw and Prague are characterized as high-dense population centres and tend to have a higher proportion of apartments compared to Western Europe, U.S. and Canada. “Cramped” would be an understatement to describe the living conditions at these CEE capitals. This clearly demonstrates a pent-up demand for self-storage space.

Living conditions comparison
Warsaw
Western Europe, US & Canada
§  ̴ 620 ft2 of living space
§  3.2 people per dwelling
§  Avg. of 194 ft2 per person
§  Avg. 1,948 ft2 of living space
§  2.5 people per dwelling
§  Avg. of 779 ft2 per person
Sources: Polish Statistical Office, Eurostat

To further illustrate the growth potential on the self-storage market, have a look at this table:

European Self-Storage Evolution – No. of Stores

1990
1995
2000
2005
2010
2013
UK
10
60
197
490
750
825
Netherlands


16
79
127
264
France


36
120
177
245
Spain



21
95
93
Sweden


11
28
60
90
Germany


4
14
42
86
Denmark



20
34
85
Finland


4
15
30
85
Italy



17
34
45
Norway

3
7
17
25
36
Belgium

3
14
19
25
29
Ireland

2
3
12
20
25
Austria


1
7
14
30
Switzerland
1
1
1
4
13
15
Portugal



2
5
6
Central and Eastern Europe



2
14
30
Total
11
69
294
867
1465
1989
Growth

527%
326%
195%
69%
36%
Source: European Self-Storage Associations

North Americans can be insular and have pre-conceived notions about other cultures and living standards. There is ample opportunity for a Canadian company in a strong, modern emerging economy and this should be an attraction to an educated investor.

CEE Market
Poland
Czech Republic
§  ̴ 39M inhabitants, Poland is Europe’s eight largest and the EU’s sixth largest population
§  As of 2013, Warsaw had a population of   ̴ 2.7M people with a density of 3,304 Km2
§  According to the IMF, Poland has a nominal GDP of  ̴ $516B (22nd worldwide) and a PPP GDP of $818B (21st worldwide)
§  Per capital nominal GDP is $13,393
§  Per capita PPP GDP for Warsaw is $42,735
§  Czech Republic has a population of   ̴10.5M as of 2013
§  Population of Prague as of January 2014 was  ̴1.2 M people
§  According to IMF, the Czech Republic has a nominal GDP of $196.4B (49th) and a PPP GDP of $286B (43rd).
§  Per capita nominal GDP is $18,857 (42nd) and per capita PPP GDP for Prague is $43,552
Sources: World Bank, OECD, IMF

The company’s ability to use debt alongside equity to grow minimizes dilution.  Below is part of the company’s short and long term expansion strategy:
  • Focusing on Warsaw – favourable demographics
  • Warsaw could support over 40 stores based on UK penetration rate
  • Expected time to construct new stores, including permitting is one year

An attractive valuation  is another highlight that attracted the Howard Group to LMS.  We read with interest a recent Desk Note from EuroPacific that was authored by Rob Sutherland. To read about the facilities that were acquired and comparative metrics for public self-storage companies, please click here.

Comparable Publicly Listed Companies
  • Comparable EV/EBITDA multiples across the US, UK and Canada markets indicate an average of 19.6x, while comparable EV/Sales multiples indicate an average of 11x
  • Less Mess acquired its assets at a significantly lower EV/EBITDA multiple of 11x and an EV/Sales multiple of 5x

Comparable Asset Valuation
  • Comparable facilities in Europe are valued at   ̴ EUR 167/ft2 or CAD 250/ft2
  • Less Mess paid  ̴ EUR 89/ ft2 or  ̴ CAD 131/ft2


                         

Source: Rob Sutherland - EuroPacific

A solid management and board with a proven track record in the Central European real estate, fund raising and capital markets has made this appealing to the Howard Group.  Cambridge educated, Guy Pinsent, is the company’s president and CEO, has an extensive background in real estate development and investment. He is based in Warsaw and speaks fluent Polish.

Peter Smith is the VP Corporate and Chairman, and is headquartered in Vancouver. He has over 10 years’ experience as CEO/director of several TSX-V listed companies and is a former clerk to the Supreme Court of Canada and attorney at Debevoise & Plimpton (NY). He was also educated at Cambridge and the University of British Columbia (Law). 

To download Less Mess Storage’s latest corporate presentation, please click here.

In closing, Less Mess Storage is designed for people that understand the merits of an existing business, the market and growth opportunities, and perhaps are already using self-storage. 

Should you wish to receive future commentaries from The Howard Group on LMS, click here to register or send us an e-mail at info@howardgroupinc.com.