We owe a lot of our site's popularity to KBS Fashion Group Limited (KBSF). Our article "KBSF: Undervalued Microcap Set For Post-RS Run Like DRYS, ETRM or IPDN" in February of 2017 is one of our best calls of all-time:
We believed that after a reverse split, KBSF was ripe for a massive run with a minuscule float of less than one million shares and fundamentals to support a much higher stock price. That theory proved to be correct as the stock shot up from $2.85 to as high as $18.00 in the three trading days following the report:
The call was a big boost to our site's popularity and since then we have increased our follow count tenfold. We are up to 864 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have nearly 4,000 followers on Twitter as well.
KBSF closed at $2.49 on Friday, near its 52-week low despite significantly improved and profitable financial results with a demonstrated history of keeping dilution low. KBSF has 2.6 million shares outstanding with a 1.3 million float, not too much higher that the numbers back in 2017. Contrast that to numerous other nanocap stocks which have a history of multiple reverse splits and significant dilution during the past two years. At less than $3.00 and with improving financial performance, KBSF becomes a prime candidate to go on yet another massive run.
Looking at the chart, the stock has a history of doing so. In addition to the 500% move made in days in February 2017, the stock shot up from less than $3 to a high of $15 on November 8, 2017 and from $5 to over $11 on March 15, 2018:
While the low float and chart provide the technicals supporting a move, the real bullish factors are supported by fundamentals. KBSF released its Q1 results earlier this month:
● Net revenues increased by 3.5% to $4.62 million for the first quarter of 2019 from $4.46 million for the same period of last year.
● Gross profit increased by 48.3% to $1.61 million for the first quarter of 2019 from $1.09 million for the same period of last year. Gross margin was 34.9% for the first quarter of 2019, compared to 24.0% for the same period of last year.
● Operating profit increased by 127.0% to $0.54 million for the first quarter of 2019 from operating loss of $2.01 million for the same period of last year.
● IFRS net income was $0.31 million, or $0.135 earnings per basic and diluted share, for the first quarter of 2019, compared to net loss of $1.90 million, or $0.886 loss per basic and diluted share, for the same period of last year.
Profit margins and operating profit showed significant improvement on a slight increase in revenue. The highlight of the results was the $0.135 EPS for the quarter. If this is the new reality for KBSF and not just an anomaly, EPS could be in excess of $0.50 for 2019 for this $2.49 stock.
The balance sheet also supports a much higher stock price:
KBSF has:
KBSF is trading at less that half of its cash value and barely over 10% of its book value. With it now pulling profits, $5 should be seen as a minimum share price floor with a target price in excess of $10 being justifiable.
Disclosure: We are long KBSF
We believed that after a reverse split, KBSF was ripe for a massive run with a minuscule float of less than one million shares and fundamentals to support a much higher stock price. That theory proved to be correct as the stock shot up from $2.85 to as high as $18.00 in the three trading days following the report:
The call was a big boost to our site's popularity and since then we have increased our follow count tenfold. We are up to 864 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have nearly 4,000 followers on Twitter as well.
KBSF closed at $2.49 on Friday, near its 52-week low despite significantly improved and profitable financial results with a demonstrated history of keeping dilution low. KBSF has 2.6 million shares outstanding with a 1.3 million float, not too much higher that the numbers back in 2017. Contrast that to numerous other nanocap stocks which have a history of multiple reverse splits and significant dilution during the past two years. At less than $3.00 and with improving financial performance, KBSF becomes a prime candidate to go on yet another massive run.
Looking at the chart, the stock has a history of doing so. In addition to the 500% move made in days in February 2017, the stock shot up from less than $3 to a high of $15 on November 8, 2017 and from $5 to over $11 on March 15, 2018:
While the low float and chart provide the technicals supporting a move, the real bullish factors are supported by fundamentals. KBSF released its Q1 results earlier this month:
● Net revenues increased by 3.5% to $4.62 million for the first quarter of 2019 from $4.46 million for the same period of last year.
● Gross profit increased by 48.3% to $1.61 million for the first quarter of 2019 from $1.09 million for the same period of last year. Gross margin was 34.9% for the first quarter of 2019, compared to 24.0% for the same period of last year.
● Operating profit increased by 127.0% to $0.54 million for the first quarter of 2019 from operating loss of $2.01 million for the same period of last year.
● IFRS net income was $0.31 million, or $0.135 earnings per basic and diluted share, for the first quarter of 2019, compared to net loss of $1.90 million, or $0.886 loss per basic and diluted share, for the same period of last year.
Profit margins and operating profit showed significant improvement on a slight increase in revenue. The highlight of the results was the $0.135 EPS for the quarter. If this is the new reality for KBSF and not just an anomaly, EPS could be in excess of $0.50 for 2019 for this $2.49 stock.
The balance sheet also supports a much higher stock price:
- $20.2 million in cash, or about $7.80 per share
- Net cash (cash less current liabilities) is $14.9 million, or about $5.75 per share
- Working capital (current assets less current liabilities) is $28 million, or about $10.80 per share
- Total shareholder's equity is $57.3 million, or about $22 per share.
KBSF is trading at less that half of its cash value and barely over 10% of its book value. With it now pulling profits, $5 should be seen as a minimum share price floor with a target price in excess of $10 being justifiable.
Disclosure: We are long KBSF
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