QIS Update #3 - 2018 - Three new company introductions and a private placement opportunity - March 13th 2018
Included in this update:
- Three new company introductions
- Private Placement Opportunity (DHC)
First of all, thank you to everyone who sent in investment ideas and strategies following our most recent QIS Update. The response was a little overwhelming and we haven’t been able to respond to everyone and finish due diligence on all the stocks suggested yet. We look forward to reviewing all of the companies and reporting some of the highlights to our investor base.
Please feel free to email us anytime at firstname.lastname@example.org or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.
In this QIS Update, we will be reviewing three companies which we feel deserve some additional due diligence. One of these, Deer Horn Capital is a very speculative micro-cap mining company focusing on tellurium exploration and development. While we are making a concentrated effort to return to our fundamental focus, we are participating in and have access to the recently announced $0.10 private placement which is explained in more detail below. We are including this company for those who are qualified to participate in private placements and for those that are looking for significant upside with a high risk investment tool.
Atlas Engineered Products Ltd. (AEP:TSX-V)
Current Price: $0.47
Atlas Engineered Products is one of British Columbia’s leading suppliers of trusses and engineered wood products. The company was formed over 18 years ago and operates manufacturing and distribution facilities in Nanaimo to meet the needs of residential and commercial builders. Atlas has expert design and engineering teams, a multiple-shift state-of-the-art truss manufacturing operation, and large inventories of engineered beam and flooring components.
Atlas aims to grow its base of business across Canada by pursuing an aggressive acquisition and consolidation strategy. Over the past 4 months, the company has announced 3 acquisitions which are expected to more than double revenues and profits.
Atlas commenced trading in November 2017 following a reverse takeover of Archer Petroleum. Since that time, the company’s shares have declined to the $0.45-$0.50 range with the share price stabilizing and volume increasing over the last couple of weeks.
The company has been experiencing organic sales growth of approximately 30% over the last two quarters with gross margins of 29% for the 3 months ended November 30, 2017 and 28% for the 6 month period. If not for public listing related expenses of $4.9 million, Atlas would have generated net income of $440K for Q2 and $900K for the 6 months. The company also has a stable balance sheet with $2.6 million ($0.08 per share) in positive working capital and no long-term debt.
Atlas currently has 30.7 million shares issued and outstanding.
Deer Horn Capital Inc. (DHC:CSE)
Current Price: $0.22
Deer Horn Capital is looking to develop Canada's first tellurium-silver-gold mine at the Deer Horn Project in north-central British Columbia. The Deer Horn Property has been recognized by First Solar Inc. as one of the world's top four primary tellurium properties.
Tellurium, considered a "critical" or "green" minor metal, is an important element in solar panels and other clean technologies. Principal applications are in battery storage, digital storage, computing power and a range of other future sustainable applications.
Deer Horn Capital is unique amongst mineral exploration firms, exploring and developing the only known tellurium property with an NI 43-101 compliant tellurium-silver-gold resource. There are grade and resource estimates available on the company’s website.
Deer Horn currently has just 9.5 million shares issued and outstanding.
Deer Horn Capital is run by Tyrone Docherty, the former president and CEO of Quinto Mining Inc. Some of our readers may remember Quinto as we featured the company over a period of time more than 10 years ago. While at Quinto, Mr. Docherty raised more than $30 million in a difficult market environment and advanced a Quebec iron ore property to a viable project. Quinto was sold to Consolidated Thompson Iron Mines in June 2008 for a share value equal to $175M (starting from $4M). Consolidated Thompson eventually sold to Cliffs Resources for $4.9B.
Private Placement Opportunity:
We are participating in a private placement with Deer Horn Capital at a price of $0.10 which was reserved prior to the recent increase in share value. The stock is currently trading at a 120% premium to this purchase price. We have also been provided with a small allocation for some of our readers who are qualified as accredited investors and have a high risk profile. Those who would like more information on the private placement are invited to email us or call us at 250-377-1182.
Pioneering Technology Corporation (PTE:TSX-V)
Current Price: $0.38
Pioneering Technology’s core business is focused on cooking fire prevention, but the company's product innovations also help end users save energy and deliver a return on investment. The company's mission is simple: protecting people and property from the No. 1 cause of household fire -- cooking fires. The company does this by engineering and bringing to market energy-smart solutions that make consumer appliances safer, smarter and more efficient. All of Pioneering's intellectual property is protected by patents, patents pending or trademarks.
If you look at a 1 year stock chart for Pioneering Technology, it is pretty ugly. If you look at a 3 year chart it paints a different picture as the company had a huge run up in 2016 and has since fallen off considerably. The stock is currently trading at its 52-week low.
Pioneering missed badly in its latest three month results ended Dec. 31, 2017. Revenue was down approximately 26% versus the same quarter in 2016 which was largely the result of a delay in a large order delivery for the SmartBurner product initiated by a significant, repeat customer. Pioneering had originally expected to ship this order at the end of Q1 and now expects this order to ship later in this fiscal year. Gross margin for the quarter was still 53%, but earnings were negligible due to the decline in revenue. The company continues to have a strong balance sheet with positive working capital of $10.5 million ($0.19) per share and no long-term debt.
The outlook for Pioneering over the next few years appears to be positive. The company continues to increase its penetration in the multifamily social and rental housing channels, the university and college channel, the hotel and motel channels, and in U.S. military housing around the world. The SmartBurner is currently experiencing 100% year-over-year growth at Home Hardware and is poised for expansion through other retailers in both Canada and the U.S. in 2018. It is also important to point out that there are regulation changes (UL858) which become effective in April 2019 which should improve demand for Pioneering’s technology. The company is pursuing OEMs to have its technology incorporated into appliances at source in this regard.
Pioneering Technology currently has 56.0 million shares outstanding.