 |
New Initiation: Staffing 360 Solutions, Inc. (NASDAQ: STAF)
SeeThruEquity Initiates Coverage on Staffing 360 Solutions, Inc. (NASDAQ: STAF) with a Price Target of $5.65
May 17, 2016
Headquartered in New York with domestic and international operations in 20 offices in the US and UK, STAF is pursuing a consolidation strategy in the fragmented $421 billion global staffing industry. STAF has made significant progress in the last year, completing a NASDAQ uplisting in September 2015 and accumulating a solid base of business while making progress towards its stated goal of $300mn in annualized revenues. As of the end of FY3Q16, the company had annualized revenues of more than $170mn, with extensive operations supported by approximately 4,000 employees (185 internal) billed across 1,000+ customers in the US and Europe. STAF is led by an experienced management team with high ownership in the stock (20%) and a history of leadership in the staffing and financial sectors. Led by Executive Chairman Brendan Flood, and President & CEO Matt Briand, STAF has demonstrated robust growth, with the company's revenues climbing from $1mn to $170mn in three years' time due with six completed acquisitions in the last two years and organic growth in the consolidated business. The company's stable of brands includes Monroe Staffing, Longbridge, Lighthouse Placement Services, Control Solutions International, PeopleSERVE, as well as The JM Group, which was recently acquired. In our view, STAF represents an under-followed high growth opportunity in the staffing sector trading at a steep discount to industry peers.
"Staffing 360 Solutions has grown quite rapidly through accretive acquisitions, surpassing the half-way mark to the company's publicly stated goal of $300mn in revenue in just 36 months. Fueled by a series of inflection points - including its record quarterly results of $44mn in revenue, new Chief Financial Officer, Form S-3 effectiveness and its recent uplisting to the NASDAQ Capital Markets - STAF has the potential to become a major force in the staffing industry," stated Ajay Tandon, CEO of SeeThruEquity. "We are initiating coverage with a 12-month price target of $5.65 per share."
Additional highlights from the report are as follows:
Strong growth driven by acquisitions and execution
STAF recently reported strong FY3Q16 results, with record quarterly revenues and gross profit dollars. Revenues rose by 42% from the year-ago period to reach $44.0mn, primarily due to the impact of a full quarter of results from the recently acquired The JM Group, a UK-based staffing business doing approximately $25mn in annualized revenues. Importantly, however, results also demonstrated strong progress in the company's core business, anchored by Monroe Staffing, which continued to expand its presence in the US. Overall, STAF's organic growth came in at a robust 11% - an impressive organic growth rate for a company pursuing an industry roll-up strategy. We were also impressed by the company's cash flow. In FY3Q16, STAF generated $1.0mn of management-defined, adjusted EBITDA, which excludes certain unusual and non-cash charges. This represented the sixth consecutive quarter of positive adjusted EBIDTA for STAF. Perhaps more impressively, the company generated $2.2mn in operating cash flow during the first three quarters of its fiscal year - a nice move from a use of cash in the comparable year-ago period. Although STAF used cash overall due to acquisition payments, the company appears to be approaching an inflection point in this area.
Experienced management driving acquisitions in a large market
We expect continued growth for STAF as the company's experienced management team pursues additional acquisitions to reach its goal of $300mn in annualized revenues. The staffing market appears ripe for this strategy given its size and fragmentation- there are 15,000 US staffing companies alone with less than $20mn in annual revenues. As of the end of FY3Q16, management had indicated that its pipeline of potential acquisition candidates had consolidated revenues of $500mn, indicating that the company should have plenty of opportunity for acquisitive growth in the near term assuming continued access to financing.
Initiate coverage with a price target of $5.65
Our analysis indicates a fair value estimate of $5.65 per share (detailed on pages 9-10) for STAF. In our view STAF represents an attractively valued speculative growth story in the staffing sector. The company is relatively new to institutions in the sector and offers significant upside potential if management is able to execute on its growth and profit objectives and can cause the valuation gap to close versus industry peers. If achieved, the target of $5.65 represents upside potential of 177% from the recent price of $2.04.
About Staffing 360 Solutions, Inc.
Staffing 360 Solutions, Inc. (STAF) is a public company in the staffing sector engaged in the execution of a global buy-and-build strategy through the acquisition of domestic and international staffing organizations in the US and the UK. The Company believes the staffing industry offers opportunities for accretive acquisitions that will drive its annual revenues to $300 million. As part of its targeted consolidation model, the Company is pursuing acquisition targets in the finance and accounting, administrative, engineering and IT staffing space. For more information, please visit: www.staffing360solutions.com.
Click here for the entire press release: STAF Press Release
Click here for the initiation report: STAF Initiation Report
-------------------------------------------------------------------
New Update: DTS8 Coffee Company, Ltd. (OTCQB: BKCT)
SeeThruEquity Issues Update Note on DTS8 Coffee Company, Ltd. (OTCQB: BKCT) with a Price Target of $0.43
May 17, 2016
DTS8 Coffee Company, Ltd (OTCQB: BKCT), ("DTS8") is engaged in the roasting, marketing and sale of artisan roasted, gourmet coffee. It sells its artisan roasted, gourmet coffee under the "DTS8 Coffee" and 'Don Manuel' brands through distribution channels that reach consumers at restaurants, multi-location coffee shops and offices in Shanghai and other parts of China. DTS8's sales office and distribution center are located in Shanghai while its roastery is located in Huzhou, Zhejiang Province, China, a suburb two hours' south-west of Shanghai. DTS8 holds an exclusive license from Coffee Holdings Company, Inc. (NASDAQ: JVA) to roast, market and sell its iconic "Don Manuel" brand of 100% Colombian coffee in China, as well as Taiwan, Thailand, Vietnam, Cambodia, Laos, Philippines, Myanmar, Indonesia, East Timor, Hong Kong, Macau, Malaysia, Singapore and Brunei. The company has recently made several major announcements, including a potentially transformative acquisition of a private, yet to be named, roaster in the US, which could have a major impact on future results, if the deal is consummated and meets the expectations described by management.
Highlights of note are as follows:
Potential acquisition of US roaster could be transformative
On March 1, 2016, DTS8 announced that it that entered into an agreement to acquire a private coffee roasting and wholesale company located in the Northeastern US. Management has indicated that the move should enable the company to reach revenue levels of $10mn-$12mn in the first year of combined operations, which would be a transformative development for a company whose growth has taken longer than we originally expected to come to fruition. Indeed, the move would add scale in revenues and operations, adding gourmet roasting facilities in the developed US market as well as a stable revenue base. Importantly, the move would better position DTS8 to capitalize on the higher margin specialty coffee market, given that it would include high quality roasting facilities.
DTS8 management has indicated that the deal will be funded with cash and/or debt, and it is expected to carry a price tag of $4.5mn - $4.7mn, depending on he mix of cash / debt. Management expects the deal to close during August 2016, pending audited financial statements by the target company and the securing of financing by DTS8. The deal is expected to be accretive within the first year, according to CEO Douglas Thomas, who assumed the role of Chief Executive last August following the departure of Sean Tan. We are looking forward to gaining more specifics about the transaction.
Expanding online presence in China may provide a boost
In April DTS8 also announced an online sales initiative in which the company will market its brands and products on leading online Chinese e-commerce websites Tmall and Taobao (both owned by Alibaba, NYSE: BABA). As part of the announcement DTS8 CEO Douglas stated that he expects the initiative to "positively impact overall revenue in the near term." Clearly there is significant growth in online commerce in China - e-commerce sales in China grew by over 40% in 2015 according to eMarketer. It is prudent for DTS8 to seek to participate in this channel given the strategic importance of China to its company. We also see the company as positioned to benefit from a longer-term shift in consumer behavior, China consumes more coffee per capita as a result of urbanization and changing consumer preferences. The country consumers less than ten cups per year versus 300+ cups per year per capita in the US and Europe.
Price target moves to $0.43
We continue to see BKCT as targeting a large market with immense potential. Our price target moves to $0.43 reflecting a higher share count than when we initiated coverage on the company. Given the transformational nature of the company's planned acquisition - which would add $10-12mn in annual revenues - we expect to conduct a detailed valuation analysis when there is more data available about the target company and how the transaction / related financing will affect the share count and balance sheet at BKCT. We do note that, assuming debt financing of $4.7mn, the target implies an Enterprise Value of $26.3mn, or 2.4x the midpoint of guidance for the combined company, assuming the acquisition is consummated as planned.
Please review important disclosures at www.seethruequity.com.
About DTS8 Coffee Company, Ltd.
DTS8 Coffee Company, Ltd., is a Canadian based, purveyor of artisan roasted gourmet coffee with operations in Shanghai and Huzhou, China. The company roasts, markets and wholesales its "DTS8 Premium," "Single Origin Premium," "Don Manuel," and "Private Label" brands in Shanghai and other areas of China. DTS8 coffees are well regarded by consumers for their uniqueness, consistency and special flavor characteristics, and are sold through distribution channels reaching consumers at restaurants, multi-location coffee shops and offices. www.dts8coffee.com.
Click here for the entire press release: BKCT Press Release
Click here for the initiation report: BKCT Update Note - May 2016
|
|
SeeThruEquity is an equity research and corporate access firm focused on companies with less than $1 billion in market capitalization. The research is not paid for and is unbiased. The company does not conduct any investment banking or commission based business. SeeThruEquity is approved to contribute its research to Thomson One Analytics (First Call), Capital IQ, FactSet, Zacks, and distribute its research to its database of opt-in investors. The company also contributes its estimates to Thomson Estimates, the leading estimates platform on Wall Street.
For more information visit www.seethruequity.com.
Contact:
Ajay Tandon
SeeThruEquity
info@seethruequity.com
DISCLOSURE
See www.seethruequity.com for important disclosures.
|
|
|
|
Copyright © 2011-2016. All Rights Reserved.
|
|
|
|
