Friday, 28 January 2011

IWG - SMALL BUT SOLID IS GOOD

International Water-Guard (TSX-V: IWG)
Basic Shares: 38.1 million
Fully Diluted: 45.6million

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Quarter by quarter, year after year, International Water Guard (IWG) has been carefully and quietly flying through clear and stormy skies in the corporate jet and military aircraft markets building up its expertise and financial strength.

The result is IWG is inching ever closer to the point where it's working capital of about $2.3 million is now almost equal to its Jan. 28th market cap of $2.6 million, as the recently released first quarter results show.

(IWG's first quarter ended Dec. 30, 2010.)
And considering that nearly half of IWG's working capital is made up of $1.1 million in cash, that's an incredible bargain for any company shopper. For investors it's also becoming a more attractive prospect for three fundamental reasons.

First, IWG is buying back its own shares. As of Jan. 24th, it had snapped up just over 1.2 million common shares, with a stated goal of buying back a total of 2 million shares. That will explain the lowered 38.1 million in listed basic shares that is included at the top of this blog.

Second, IWG is scouring the broad industry looking for an attractive takeover target itself to add value to its financials. Nothing to report yet but stay tuned.

Third, most credible observers are calling for the overall aviation market to improve again this year, building on gains made in the post recession period of 2010.

If that's the case, IWG's first quarter results mirror that improved market.

Sales up to Dec. 30th, 2010 came in at just over $1.1 million, about 8% over the same quarter the year before.

That increase came despite a customer base still cautious after the Great Recession of '08 & '09 and an adverse exchange rate where IWG's products, which are built in Canada are then primarily sold abroad in ever declining U.S. dollars.
Improved margins in the first quarter compared to the same quarter in the previous year and some excellent foreign exchange contracts helped to buffer that troublesome exchange rate.

First quarter net earnings were $103 thousand compared to over $41 thousand in the same quarter in 2009.

Given all of the above, IWG President & CEO, David Fox, said in the first quarter news release:
" We continue to focus on new opportunities as we leave the recession, and look forward to am improving business aviation climate as the year goes on."

To read the full press release, please click here.