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Friday, September 16, 2005

Dyna Group International (DGIX)

This company (website) sells worthless pewter crap: belt buckles, miniature versions of junk, key chains, you get the idea. THEY HAVE NASCAR LICENSES! I take it all back. They make wonderful stuff. Also NHL, Major Leauge Baseball, NBA, colleges and universities. Excellent. Most licenses have annual renewals.

Quickly scanning the 10-K:
They sell through direct sales force (12), independent reps (35), and disties. Mfg is mostly done in Mexico. 90%. One customer was 12% of sales in 2004. Top 10 are 41%. Not particularly competitive business. About 115 employees: 26 sales, 9 design, 78 mfg etc.

Tuttle investments (CEO Tuttle) own 46% of the company.

Solid balance sheet.
Current assets are nearly all inventory and AR. Not much else for assets.
Equity is 5/6 of assets.

Gross margins are about 34%. SG&A is about 18%. Royalty fees are less than 8% of sales. Net margin is 7%.
They earned 14 cents/share in 2004.
Share count has been decreasing from buybacks, very little stock options, if any.
They wrote off $612K of inventory.

Cash flow from ops is good. Free cash flow is $900K (12 cents per share).

They have an unconsolidated joint venture which provides 20% of net income, Promociones GAP, which is their Mexican manufacturer. However, an 8-K recently issued says they'll need to restate everything to consolidate it.

They decided to de-register based on the usual reasons. They will keep posting financial results. Year end statements will be audited (they say this in the Q2 results below).

Q2 results were just announced on Friday. 6 month revenues up 15.7%. 6 month earnings up 65%. 3 month results are also good. Earnings per share for 3 months was 5 cents diluted. No balance sheet info or cash flow info provided, so I don't have any real details.

In Q1, they had an operating loss and a net loss, mostly from the rising price of pewter. Even cash flow from ops was negative due to inventory (mostly offset by AR) and another write-off of inventory (they do this after 1 year old). Some gets sold off, some melted down. They had to draw $629K from the revolver and still burned up nearly all the cash.

The stock is currently selling for $1.07. That will probably go up after this recent Q2 announcement.

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