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DDS Wireless International is a value buy (for the Company’s CEO)
Posted by: Gerry Wimmer
6/1/2014
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TOP IDEAS: Going private offer for DDS Wireless International (TSX: DD) has more upside for insiders.

The Investorfile blog takes pride in discovering small cap value stock investment opportunities which make up our elite list of Top Ideas. Unfortunately at times, full value for our stock picks never gets realized for investors.

Last month DDS Wireless International Inc. (TSX: DD – $2.23), a world leader in providing wireless data solutions for fleet management, announced a going-private transaction whereby the Company’s CEO and controlling shareholder proposes to buy out minority shareholders for $2.25 per share. This consideration implies an equity value for DDS Wireless of approximately $31 million, this for a Company with $35 million in annual sales (mostly recurring) with cash/investments of $11.3 million and no debt.

Our comment is: Here we go again.

Within the last year or so, several of our Top Ideas have been subject to opportunistic offers from insiders, controlling shareholders, at the expense of minority shareholders.

It started early last year with Radiant Communications Corp., when a controlling shareholder group attempted to steal the Company (with the help of its own directors) from minority shareholders at $0.85 per share (See: Radiant Communications shares are a steal: Too bad they are getting stolen). Fortunately for us minority shareholders (with the help of media pressure), the highway robbery was thwarted and about six months later a 68% higher offer ($1.43 per share) was consummated (See: Justice served and big gain for minority shareholders of Radiant Communications.)

Not long after, our Top Idea Glavanic Applied Sciences Inc. announced that the Company was going to be privatized at an offer of $1.70 per share (of which $0.65 per share was paid using minority shareholders’ own cash) (See: Offer to buy Galvanic Applied Sciences pockets shareholders cash). This transaction closed as is, returning only a small upside on our stock pick.

This time it is DDS Wireless. Although the current offer equates to total return of about 50% (including dividends paid) since we first recommended the Company’s stock, in our opinion the full value for this investment has not been reached.

Realistically, what can we do about it? Not much, but hope for a higher offer. That said, DDS Wireless is a great value play but only for the Company’s CEO. It is now his top idea!

The Company has 13.5 million shares outstanding.

DDS Wireless' website address is www.ddswireless.com

Author's Ownership Position TSX: DD - Yes


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile is not engaged in an investor relations agreement with DDS Wireless International Inc. nor has it received any compensation from DDS Wireless International Inc. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of DDS Wireless International Inc. through open market transactions and for investment purposes only.

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Gerry: Thanks for small cap stock suggestions over the past 5-years. Your record is very impressive and your analysis has been excellent over the years. I think small investors (and fund managers) should pay much more attention to your work. I look forward reading your blog over the next 5-years!