What the company does?
Sangoma manufacturs hardware to convert telephone frequencies to VOIP frequencies. They also make hardware for a variety of other things in a commercial computer system for calls. You know the computer operated voice which says for barbra press 2, for sales press 3 etc. Sangoma makes the intenal stuff on the computer that makes that work. It saves companies money and Sangoma makes the best quality product. I say that from talking with the fine folks at
http://www.voipon.co.uk/. A distrubiter of Sangoma and their competitors products.
Here is why the stock is cheap.
Market Cap=12.96Mill # of shares=30.15 Price per share=0.43
Balance Sheet (Millions CAD)
Current
Cash & Equivilants 7.675
Accounts receivable 1.347
Income tax credits receivable .192
Inventory 2.030
Prepaid expenses and deposits .090
Income taxes receivable 1.125
12.461
Future income taxes .003
Property, plant and equipment .519
Development costs 2.604
Intangible assets 3.600
Goodwill 5.542
Total Assets 24.732
Total Liabilites = 1.561
At this price you are getting a very good deal for Sangomas Assets. For your purchase price of $12.96Million you are getting
$7.67 in cash- $1.56 total Liabilities = $6.11Mill cash
1/2 Accounts Recievable .67 Using half as a margin of saftey.
1/2 Inventory 1.0
Income tax credits receivable .192
Prepaid expenses and deposits 0
Income taxes receivable 1.125
9.097 Current Assets. Which you can sell and get money for right away almost.
Now lets look at the other assets your going to get
Future income taxes 0
Property, plant and equipment .519
Development costs 2.604
3/4Intangible assets 2.7 Using 3/4 as a margin of sfafety
1/4Goodwill 1.385Using 1/4 as a margin of saftey
Total Assets 7.199
Total Assets purchased for $12.9Million Mkt Cap = $16.28Million
Total amount of assets which are easily liquidated = $9.097Million
Sangoma has steadily increased equity by around 3% a quarter for the last 26 quarters and has been profitable for 26+ quarters in a row. Here is Sangomas income record ( Cad $ Mill)
2007-Rev=8.2 NI=1.82 FCF=1.4
2008-Rev=12.34 NI=2.91 FCF=2.82
2009-Rev=11.12 NI=2.5 FCF=1.81
2010-Rev=12.51 NI=2.56 FCF=0.83
http://www.sangoma.com/about_us/investor_relations.htmlthis is a link so you can do all your DD!
Sangoma has hired some of the industry leaders and founders. The new CEO (replacing founder who is retiring) has 1.6Mill shares at .51 as part of the employee stock option plan. This will be a major incentive for him to do well.
Sangoma has issued a course issuer bid starting December 10, 2010. The stock price has been around .4-.57 since then. This is good as they are buying back the stock at this low price. When stock was issued to help fund the aqquisition of Parapix, it was above $1. This essentialy cuts the price of the purchase.
Sangoma has a niche, it is selling for 30%(3.81Mill) above Current Asset Value. Has been profitable for 26+ quarters and has made over $2.5Million for the last 3 years. If you could buy the whole company at this proce you would be paying 3.81Million (Market Cap- Current Assets) for a stream of cash flows of at least $0.5Mill/year, This is using a discounted Cash flow and a discounted inventory and Accounts Recievable.
