TOP IDEAS - NEW: Titan Logix Corp. (TSXV: TLA). Not a sexy technology, but this Company is debt-free and the numbers are very appealing.
Titan Logix (TSXV: TLA - $0.45) is on a roll. Sales to the oil & gas industry for the Company's mobile technology (not smart phones) but, rather, mobile tank fluid level measurement and control solutions, are booming.
For its fiscal 2011 year, which ended August 31st, Titan Logix reported that its sales grew 67% to over $11 million. To follow up, the Company just announced that in fiscal 2012, Q1 sales jumped 56%. Gross margins on sales were a healthy 45%.
Great top-line growth, but what about the bottom line, you ask? This story only gets better.
Titan Logix's profits climbed 391% to $1.7 million last year, earning 7 cents per share. In 2012, the Company has already recorded $622 thousand in profits for Q1, 2 cents per share fully diluted.
Most important, Titan Logix's balance sheet is completely free of any debt. The Company has $5 million in working capital of which $2.4 million is held in cash.
Based in Edmonton Alberta, Titan Logix manufactures its flagship product called the TD80: Level Measurement and Overfill Prevention System. The TD80 product uses Guided Wave Radar (GWR) technology and is deployed by the North American crude oil over-the-road (tanker) transportation industry to remotely monitor tank fluid levels to avoid exposure to hazardous fluids and vapours and to prevent costly fluid overfills and spills.
Market trends in the North American oil and gas industry are fuelling the Company's rapid expansion. Significant increases in US crude oil drilling and North American oil rig activity correlates to the growth in new crude oil tanker fabrication and Titan Logix's quarterly sales. In 2011, the Company's US business increased by 150% from the prior year.
Canadian and US conventional crude oil output by drilling is expected to grow again in 2012. The Company's strategic objectives for 2012 include a new product introduction (Radar-Stik) for international markets and diversification of revenues sources by aggressively marketing its flagship product to waste collection, aviation fuelling and aircraft de-icing industries.
Given Titan Logix's strong growth profile, we assess that there is a lot of value in the purchase of the Company's shares. If we assume no further growth and annualized the Company's 2012 Q1 results, the stock currently trades at a valuation less than 3x EV/EBITDA and 0.8x sales.
For value-driven small cap investors we suggest that shares of Titan Logix should be accumulated to a high of $0.75 from its current trading level of $0.45, which is equivalent to 6x EV/EBITDA and 1.4x sales, based on Q1 2012 results being annualized.
Admittedly, to forecast that Titan Logix will have no sequential quarterly growth throughout 2012 is very conservative. Therefore the Company's shares may be able to support trading prices higher than $0.75.
Titan Logix has approximately 25 million shares outstanding.
Titan Logix's website: www.titanlogix.com.
Author Disclosure: TSXV: TLA- Long
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