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Friday, August 04, 2006

5 Small-Cap Hurricane Plays: HSOA, GV, GLBL, IPII & WEL

By Yaser Anwar, CSC of Equity Investment Ideas

It's being forcasted that we may not get many hurricanes this season but i wanted to highlight 6 small-cap stocks that investors should keep in mind just in case.

Home Solutions (HSOA)

HOM is probably the best known hurricane play as it's a provider of recovery, restoration and rebuilding to areas that are prone to flooding, hurricanes, tornados, fires etc.

Its operations are strategically located in areas prone to natural disasters including California, Texas, Florida, Louisiana and Mississippi.

HOM is profitable and expects to report revenue of $160-165 mil this year, up 110% YOY.

The stock has a fairly large float of 29.2 mln shares, but was the biggest mover of all as it rocketed from $1.80 in mid-July to $6.50 by mid-Nov.
Goldfield (GV)

Goldfield installs and maintains electrical transmission lines for electric utilities in the southeastern US.

The financials look pretty good as the co is profitable and Q1 revenue rose 70% yoy to $8.2 mil. The float is a bit big at 23.1 mln, but it's liquid at 428K avg 3m volume.

The stock doubled from $0.75 to $1.50 when Katrina hit in late August.
Global Industries (GLBL)

GLBL provides pipeline construction, platform installation/removal, and diving services to the oil & gas industry. GLBL is based in Louisiana, where Hurricane Katrina hit.

Results continue to be impressive as Q1 revenue rose 79% YOY to $246.3 mIL.

The stock trades at a very reasonable forward PE of 13.96, only half its expected EPS growth rate next year of 33%. The stock was a big mover last yr as it jumped from $9 to $15 in 3 months.
Imperial Industries (IPII)

IIPI makes building materials such as stucco, plaster and roofing products, as well as gypsum wallboard, roofing and insulation products. The co has said that the repairs of damaged property last year had a "major" favorable effect on demand. It's worth noting that the co is based in Pompano Beach, FL and just about all sales are to southeastern states.

IPII is profitable and posted revenue growth last year of 31% to $72.3 mln. Also, EPS over the past 3 years has grown from $0.28 in 2003 to $1.02 in 2004 and $1.34 in 2005.

Applying Q1's EPS growth rate (27%) for the full year, this computes to an EPS of $1.71 for a very reasonable PE of 13.5x. Last year, the stock jumped nearly 100% twice. From early July to early Aug, $16 to $30, & after a pullback, jumped again from $16 to $29 when Katrina came by in late August.
Boots & Coots (WEL)

WEL provides oilfield services centered on the prevention, emergency response and restoration of blowouts and well fires.

In its Q4 report, WEL said "The aftermath of the hurricanes in the Gulf is keeping our teams busy." Of note, the WEL's prevention service segment was up 72% in 2005 at $13.9 mil and now represents 47% of sales up from 33% in 2004 and the WEL is profitable.

WEL was a mover last summer, jumping from $0.80 to $1.60 in 6 weeks.
This list is not exhaustive, but in my search for plays i came across the aforementioned 5 small-caps that would benefit from repairs & rebuilding.

Source: Thompson, Briefing & Bloomberg

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