Net-net update- Boss Holdings (BSHI)


bshi chartWhopper is a deep value investor and the founder of He can be reached at whopperinvestments @ gmail . com”

Boss Holdings (first mentioned here) is a stock I have mentioned a couple of times. They are a distribution company involved in everything from industrial gloves to pet accessories. What’s interesting about them is they are both profitable and trade at a significant discount to the net-net assets (current assets minus all liabilities).

Boss reported earnings last week, though you’d never know it because they went “dark” to the pinksheets last year and no longer issue press releases announcing earnings or file with the SEC. Instead, you can find theirfourth quarter and full year results here.

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Looking first to the balance sheet, the net net thesis is certainly still intact. The company now has net-net current assets of over $13.35 per share and tangibe book per share of over $16 per share versus a current price of ~$9.25 per share.

Looking at the income statement, results seem to be accelerating. All of the company’s divisions were up high single to mid double digits year over year, and the Aries acquisition (a distributor of cell phone accessories they acquired midway through the year) seems to be doing excellent so far, though it’s much too early to assess how the acquisition will work out long term.

On earnings term, operating income increased from $1.92m to $2.94m (or $1.48 per share) year over year and EBITDA increased from $2.56m to $3.59m (or $1.81 per share). With the current share price of $9.25, they trade at 6.25x Market Cap / EBIT and 5.11x Market Cap / EBITDA. In addition, the company has significant excess cash. Factoring that in, they trade at an EV / EBIT of 5.19x and EV / EBITDA of 4.25x.

As a bonus, the company has significant NOL which will allow them to avoid paying taxes in the future. Some of these NOLs are on balance sheet, while some have a valuation allowance against them and are those held off balance sheet. The bottom line is this- the company won’t be paying any cash to the tax man for a while, with makes their EBIT / EBTIDA measures more valuable than similar companies and a more accurate proxy for post tax cash flow.

My Take

Is this a company I’d want to have my entire portfolio in? No, of course not. Their ROE and ROIC measures are way too low and management appears to be way overpaid. But as a part of a net-net basket or a basket of extraordinarily statistically cheap stocks? I think it makes an incredible addition! Most net-nets, especially today, are declining businesses burning through cash and/or generating huge losses. Boss is just the opposite- much like DUCK, another net-net I’ve mentioned,  Boss is consistently profitable (positive operating income for at least the past 8 years) and generates plenty of cash However, unlike DUCK, Boss also has some strong growth prospects and the potential to improve its ROE metrics.

Disclosure- Long BSHI


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