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Thursday, March 22, 2007

Conforce International (CFRI) aims for the bleachers

Conforce International (combined links) issued this press release today:
Based on the Company's recent launch of its EKO-FLOR container flooring product, as well as the addition of two other composite-based flooring products in various stages of development, management of the Company expects to record for the fiscal period April 1, 2007 to March 31, 2008, total revenues of 26 - 29 million USD resulting in EBITDA of 3.6 - 3.9 million USD and net earnings of approximately 8.5% or 2.2 - 2.5 million USD.

That is for the year starting in just a few days. And for the next year...
For fiscal 2008, management of the Company expects that a significant portion of its field trials will have been completed on all three of its EKO-FLOR composite products and therefore anticipates a significant increase in revenues and earnings. For the period April 1, 2008 to March 31, 2009, Company management projects total revenues of between 112 - 116 million USD resulting in EBITDA of 23 - 26 million USD and net earnings of approximately 13.5% or 14 - 16 million USD.

Ok, so they're projecting earnings of roughly $2.3 million in the upcoming year and roughly $15 million in the year after that?

They have 120 million shares of stock selling for under 50 cents. They're expecting net earnings of perhaps 2 cents this upcoming year and 12 cents in the year after that.

Of course one big question is how much dilution is in the future? Another big question is whether their projection is realistic.

But overall I consider this to be excellent news.

UPDATE later that day:
I'm always extremely skeptical when someone claims a stock price has been manipulated. But this was particularly odd. I grabbed the last part of the tape that was still available on OTC BB and show it below. I bought some shares during the day and found that every time I bought, there was another transaction on the tape immediately afterwards (marked at the identical time) at a lower price. Most of these are from someone else's buying. If a toxic convertible gets announced soon, then it's worth digging further.

0.35 10000 15:57:37
0.36 10000 15:57:37
0.38 100 15:51:48
0.37 100 15:51:40
0.37 10000 15:51:29
0.36 10000 15:51:12
0.36 5000 15:50:55
0.38 5000 15:50:55
0.36 6938 15:50:55
0.38 6938 15:50:55
0.38 1300 15:50:53
0.36 1300 15:50:52
0.38 20000 15:50:34
0.37 10000 15:50:24
0.37 10000 15:49:54
0.38 5000 15:48:31
0.38 2000 15:35:05
0.39 1500 13:26:09
0.41 1500 13:26:09
0.405 1500 13:25:41
0.39 2500 13:06:20
0.41 2500 13:06:20
0.39 2500 13:05:58
0.41 2500 13:05:58
0.38 1062 12:50:45
0.40 938 12:50:45
0.36 2000 12:50:45
0.40 3000 12:27:42
0.40 6000 10:57:35
0.43 10000 10:57:26

UPDATE next day:
When I look at investments, I try to understand them operationally. In other words, based on the bits of information I pick up, I try to understand what's going on inside the business. This is where all that time reading business history books, listening to business stories from old timers, and watching businesses has helped to understand how these things behave.

It's always great fun to attend marketing meetings where people show very exact hockey stick curves of future revenues ramping up quickly only to find out that there's no real substance behind the data. The charts are created "top down" based on the need to have a nice optimistic chart rather than "bottom up" based on what actual future customers are planning to do, how much market share can be stolen, from who, and how, etc.

The market is upset that Conforce isn't ramping up fast enough. More than a year will be wasted before any meaningful earnings will appear. These numbers don't dazzle Mr. Market.

I'm impressed with the numbers. Conforce has demonstrated a pattern of behavior that's almost certainly based on how the CEO does things. They set up a number of specific/measurable/attainable/realistic/time-limited goals and then methodically reach each one. I like that way of doing things when you have a clearly definable place you need to reach. Conforce has met their goals with a great success rate up to this point. That gives me confidence that they'll hit these revenue/earnings goals or at least get fairly close.

Growing a business is difficult. I see investors all the time who think that sustained 30% growth is not so hard. In my opinion (which is somewhat grounded in experience), growing at 30% means that most people in the organization will need to be doing essentially a different job every 2 years or less. Google is planning on a ridiculous growth rate and Steve Balmer of Microsoft, who knows a thing or two about growing a large organization in a fast-changing industry, has pointed out the stupidity of it.

Conforce needs to grow into a larger company with much larger revenues, lots of new customers, lots of new vendors, etc. That won't happen suddenly. What's most important is that it happens at all.

Hi Bruce,

could you give an update on BGII...? thank you!
Wondering if they could be a possible competitor?????
SEE symbol of competitor WBC
sorry I mean WNC that Wabash National
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