Wednesday, 24 November 2010

FUNDAMENTAL ANALYSIS, HOW IWG FARES

International Water-Guard (TSX-V: IWG)
Basic Shares: 39.3 million
Fully Diluted: 46.5 million

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Brian Tang, President of Vancouver-based Fundamental Research Corp., used International Water Guard (IWG) as a poster boy to write a course on how to analyze public market companies in the investors magazine, Canadian MoneySaver.

After being turned upside down and having all its financial innards put under a microscope, IWG emerged as a buy with a fair stock value of $0.30 cents – around five times its closing price of $0.065 cents on Nov. 23rd.

Mr. Tang’s company writes research on IWG, a Burnaby-based developer and supplier of high-tech water treatment and water handling technology for aircraft.
But in writing this in-magazine course on how to rip a company apart to determine its investment value, some interesting techniques emerged that aren’t part of standard analyst reports.

For example, how does an investor resolve the fact that IWG is overvalued based on an earnings-based multiples analysis but is undervalued on a total enterprise value?

Mr. Tang’s resolution was to rely on a discount cash flow model that was part of the last Fundamental Research Report on IWG in August 2010, wherein a stock value of $0.26 cents was arrived at. That same August analyst’s report then looked at additional factors to arrive at the fair market share value of $0.30 cents.

Mr. Tang also dealt with the issue of how IWG has a market cap of just $2.56 million, based on the Nov. 23rd close, which is almost equal to its working capital of $2.16 million, as shown in the August analyst report.

To read Mr. Tang’s full MoneySaver article please click here and scroll down until Brian Tang's name appears.