TOP IDEAS: A supplier to the
oil industry, Titan Logix’s (TSXV: TLA) markets are in growth mode again
and investors today can buy this business for free.
Investorfile has not posted an update on Titan Logix for several years
now. Quite frankly, there was nothing to write about. Well, that may have
Titan Logix’s stock was once big gainer for the
Investorfile blog as one of our earlier Top Ideas. At its peak, shares in
Titan Logix generated an investment return of 234%, 24 months after we
published our first blog post about the Company back in 2012 (See: Titan Logix:
Fluid in value and growing rapidly).
But, that was a long time ago, and
today Titan Logix’s shares trade at a price less than half its historical
highs, precipitated by the collapse of world oil prices over two years ago
and what followed: Massive spending cuts by the oil and gas-related
industries, the Company’s main market. As a result, the Company’s revenues and
profits have plummeted since those heady days.
But, given where world oil prices are
today, Titan Logix’s business prospects may be set for a nice recovery.
Titan Logix Corp. (TSXV: TLA - C$0.47) is
an industrial technology company focused on manufacturing and marketing of
advanced fluid management solutions. Today the Company's flagship products, TD80TM and TD100™ series of mobile gauges, deliver
accurate level measurement, overfill protection, and a wide variety of
integrated control capabilities to avoid costly downtime for repair and
maintenance of mobile crude oil tankers. It is the
market leader for electronic fluid level measurement and overfill prevention
products for mobile crude oil road tankers in North America.
Recently, Titan Logix has invested
in research and development to digitize its technology and
introduce telematics to enhance its product data capture capabilities.
This is to measure crude tanker truck driver productivity and delivery times,
spillage and safety records, which can now be accessed wirelessly and remotely
on the cloud.
After several years of slumping mobile
tanker production, the demand for new crude oil road tankers in North America (the Company’s traditional market)is
recovering. As such, the Company stated in its business outlook -filed in
its most recent Management Discussion and Analysis (MD&A) -that
the "market intelligence from tanker OEMs
and North American Dealers indicates a strong demand for new tanker builds,
resulting in an increase in demand for gauging and overfill prevention
solutions in the crude oil sector.” This is very good news for Titan
Logix, which should reflect most favourably in the Company’s future
For the first six months of fiscal 2022
(which ended February 28th), Titan Logix reported revenues of C$1.7 million,
earned gross margins of 56%, but it had an operating loss of about
C$575,000. We note that the operating loss during this period included some
sizable one-time expenses and, in saying that, we feel the Company is
positioned to break even in the near-term and become profitable some
time in fiscal 2023 (beginning September 1),with the
expected revenue growth to come from the renewed demand for its products.
Of significance is Titan Logix’s balance
sheet: C$14.3 million in working capital, of which (as of today) includes over
C$13 million (C$0.46 per share) of cash. The Company is cash-rich and
Given our above-market prognostication,
the balance sheet and the current market capitalization of Titan Logix (C$13.2
million), the value proposition becomes clear. Today small cap investors can
acquire shares in Titan Logix at a valuation level equaling the amount of cash
holdings in the business.
We acknowledge that Titan Logix’s
stock price has been trading at cash levels for several years now. But, the
conditions of the oil industry and its core markets has now changed very favourably
for the Company’s business, which should drive future financial results and the
stock price to trade at much higher levels.
The Company is also currently in the process of
developing its long-term strategic growth plan, focusing on adjacent
market opportunities in the mobile liquid measurement space, including environmental solutions, chemical, and agriculture. This is
important, as Titan Logix’s new CEO needs to execute this plan and diversify
product lines to serve more end markets and be less reliant on the oil industry
in the future.
Of note for investors is that supply chain constraints
and fluctuating lead-times can temper the Company’s revenue growth rate in the
For small cap investors, we see little
downside (and plenty of potential upside) in owning this stock at today’s
valuation levels given the Company’s strong cash position. Current market
conditions are like déjà vu since we first recommended Titan Logix’s stock.
But, this time investors can acquire the business for free and ride the wave.
Titan Logix has approximately 28.5 million
Author Ownership Disclosure: TSXV: TLA- Yes
Investorfile's share price accumulation initial target of $0.75 for Titan Logix
Corp. was reached on February 5, 2013.
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.com is not
engaged in an investor relations agreement with Titan Logix Corp. nor has it
received any compensation from Titan Logix Corp. for the preparation or
distribution of this article.
The author of this article has
acquired and may trade shares of Titan Logix Corp. through open market
transactions and for investment purposes only.