Reco Int.(RGI.v): earned +.03$/share in Q3, trading at .03$, no debt with 60% Gross margin

Reco International(RGI.v)
Yu Guang Zhen, President and CEO, Tel. 604-273-2932




The company was incorporated under the Alberta Business Corporations Act on October 12, 1999 and is in the business of commercial and residential construction and millwork.



The pros

- Current Market cap 468k (.03$ at last trading price)
- Q3 earnings = +.03$/share (+$406k);
- Profitable in 4 out of the 8 past quarters
- 9 months earnings = +.02$/share (+$301k)
- Trailing 12 months earnings = +.01$/share (+$120k)
- Annual sales usually around 2-4M$ but recent contracts seem to indicate a breakout
- No long term debt
- Gross margin 58%
- Price/sales ratio under 0.1x
- Book value = +.047$/share (740k – no goodwill and intangibles on the books)
- Free cash flow positive (generating cash)
- 15.6M shares outstanding; 55% held by CEO and CFO




The cons

- EXTREMELY illiquid, your patience is not only needed, it will be tested, unless someone convinces management to ramp up visibility
- Could greatly benefit from an IR program
- No share buyback in place



What makes this company interesting in my opinion?

The company seems to need about 400k of business per quarter to break even. Based on current backlog and bids in the works, the target is likely achievable for a few quarters ahead of us. One cannot find a profitable stock at such discount (trading at 468k market cap), unless my 20 year experience is unworthy. Bear in mind the company has no debt and +.032$/share of working capital, relieving the worry of significant dilution in the near future. The float is MASSIVELY held on the inside, especially taking into account the large positions held by former directors.

Nobody seems in hurry to dump and lots of options are waiting at 10 cents. Now that they are breaking the profit barrier for the foreseeable future, let’s see if management will address the share price/liquidity, to redress the value of their holding. A similar type play, liquidity and metrics was presented via highly illiquid MountainView Energy(MVW.v) in the 10 cents range…I guess certain people wish they had given it a second look.

With undervalued accounting metrics and a ridiculous $468 000 market cap, it won’t take much to bolster a price multiplication, especially if the profitable trend is maintained. Good luck to all.






The above is simply my personal understanding and not to be construed as investment advice. I’m not a broker, director, manager or employee of the aforementioned company, just a shareholder. Some typos could have occurred, do your own due diligence.