MVCO
I don't really expect to win this contest, especially with this pick. In 12 months it could be anywhere from 13 to over 20, depending on contract wins and arbitration/litigation wins or settlements. But I do expect it to be up for a decent return, almost no matter what happens in the market. It began the year 8 trading days ago at $10.18, and closed yesterday at $11.06, so up 8.6%, which is a move I wish I could count, just like many others on this board. That said, I think MVCO will have a good solid year and is a relatively safe choice for those interested in them
MVCO is a small construction company doing most things right to grow into a large company. The company was formed in 1994, is based in Phoenix, and operates almost exclusively in Arizona and Nevada. Highlights:
+ Currently 5 million shares OS and 36% Inst. ownership.
+ Had a record backlog of $100.7 million of construction as of 9/30, compared to $71.6 million on 6/30.
+ Recently completed a secondary offering (20% dilution) to increase working capital and Insurance Bonding Capacity, the lifeblood and constraint on growth for a construction company.
+ Has 3 divisions, when you count it's majority (53%) ownership of Ready Mix, Inc. (RMX) which is in the Construction Materials business.
+ Construction Services Division is the primary business, and the 3rd is a start-up and small Construction Materials Testing Division.
+ On 9/30, MVCO had $21.3 million of working capital, $27.4 million of Cash and Cash equivalents and $22.8 million of shareholder equity
+ Net Income after Minority Interest (which is the part of RMX that MVCO does not own) was $.20 in Q3 and $.59 for 9 months. This was down from last year.
+ Both Construction Services and RMX revenues were up 9% YOY in Q3
The big pluses going forward are:
1. Secondary offering permitted Insurance Bonding Capacity to increase 30% to $200 million.
2. Company has 2 large claims that could be resolved in the next 12 months that could result in up to $8.5 million for MVCO.
3. Favorable claims settlement and increasing net income should permit the company to avoid further dilution as Ins. Bonding Capacity is permitted to increase and the company can grow.
4. Company is still down from the 12 month high of $15.87 and has a PE much lower than the industry average.
5. I believe the value of the RMX equity is not reflected on the balance sheet because MVCO has majority ownership/control of RMX and brings it's majority share of income and expenses into it's own financial statements. The market cap of RMX is currently $43.2 million.
6. MVCO currently has $5.40/share of cash and over $4.50/share in the value of RMX capitalization. Add those together, and consider earnings potential of $1.00-$1.50/share, and this company is undervalued.
I hope this summary generates some understanding and interest in this stock. I think it is safe money with a strong upside potential, but unlikely to make the top 10 in this contest, but you never know.
Tmcal6
