UPG-Universal Power Group

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Corner of Berkshire & Fairfax Message Board General Category Investment Ideas UPG-Universal Power Group

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Author eclecticvalue
Full Member Posts: 142

Topic: UPG-Universal Power Group (Read 80 times)

UPG-Universal Power Group
on: January 03, 2012, 09:50:04 PM

Hey guys here is a short writeup for UPG. Any thoughts and what am I missing? Universal Power Group Business: Universal power group(UPG) is a distributor of batteries and power accessories and a supply chain management company specializing in third party logistics and value added services. The value added services are as follows Battery Pack Assembly Battery Replacement Program Battery Recycling Kitting Product development Private Labeling Graphic Design Sales & Marketing Support Why is it cheap? The current balance sheet profile looks constricting to UPG in paying down the line of credit and operating lease for the upcoming year. Even though the working capital shows plenty of current assets compared to total liabilities, most of the Current Assets are in inventories and A/R. The inventories are usually not liquid and cant be converted to cash very fast. It seems priced as if UPG will run into trouble in the future with the balance sheet. Also it is a very small microcap company many institutions will not take a look at this at all. Ratios

http://www.cornerofberkshireandfairfax.ca/forum/index.php?topic=5976.0[1/4/2012 1:46:45 PM]

UPG-Universal Power Group P/E(TTM) 7.2 P/S(TTM) 0.1 EV/EBITDA(TTM) 5.0 P/Tang BV(MRQ) 0.5 Earnings Yield 19% P/FCF 1.6 Perusing through the financials, the company makes money although the margins are low. EBIT margins in 2008, 2009, and 2010 have been 2.7%, 1.9%, and 4.8% respectively. Ownership The company is majority owned by Zunicom which has a 41% stake and there is a 49% ownership by the directors and Executive officers. It signals management incentive is aligned. Although looking at compensation expense it is 13% of market cap. Which I consider is a lot compared to most public companies. It is a family held company. William Tan used to be the CEO of the company but still owns majority of the company through Zunicom. He handed the reins over to his son in law Ian Edmonds. Valuation Figures in Millions BV Cash & Equivalents $0.36 Accounts Receivable $12.40 Inventories $20.30 Current Assets - Total $36.30 Total Liabilities $16.97 Shares Outstanding 5.02m NCAV 19.33M NCAV Per Share $3.85 Discount to NCAV 50% Currently the stock is trading at a 50% discount below NCAV. It looks attractive. Unfortunately since it majority owned. There doesnt seem to be an immediate catalyst in the future. Although the company still makes money from operations. Risks Technology Obsolesce Writedown on A/R and Inventory Overall it seems to be an earnings play, meaning if the stock can generate enough cash. UPG will most likely ward off a possibility of a bankruptcy as it is currently priced by the market. 0
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UPG-Universal Power Group

on: January 03, 2012, 09:50:04 PM

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UPG-Universal Power Group

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