Monday, 18 November 2013

Eyelogic Systems (CVE:EYE.A) $0.08

The company is a cash box. Its been trading below net cash, and continues to do so. It is functionally controlled by the Olympia Trust/Tarjan Capital folks. The core Eyelogic business has been approximately cash flow even for a number of years, and their new business producing custom stretched canvases seems to be ramping up nicely. The company's primary business is the sale of optical equipment for performing eye exams. This business has not produced a reasonable return on capital for a number of years, hence the low current price of the company's stock. I believe management intends to sell or wind it up, and continue with their new business of custom stretched canvas production and sale. The company would be better off liquidating, but I believe that to be unlikely. The management team uses the company as a publicly traded vehicle for raising private capital. This does not cost Eyelogic anything, and the company generates some small fee income. However, this is likely to prevent a liquidation in the near term.

All that being said, the company seems to be able to operate at approximately cash break even, and it trades at $0.08 for a market capitalization of $241,000. With current assets of $946,740 and total liabilities of $183,591 the company has a net current asset value of $763,149, or more than three times its market cap. In addition, the company also owns Eyelogic systems which it leases to customers, and those customers have been buying out their contracts in recent quarters, which converts non-current equipment assets to cash.

Disclosure: Long EYE.A

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