It's hard to miss the frustration in Paul Timoteo's voice when he talks about his company's stock price.
The chief executive officer of Toronto-based Armada Data Corp. can't figure out why investors just aren't rallying around his TSX Venture Exchange-listed business – and sending those shares upwards.
"We've done all the things that investors say we want you to do," says Mr. Timoteo, whose 25-employee company collects and then sells car pricing data to consumers and insurance companies.
The company's stock has been hovering for about a year around 20 cents a share. That's a far cry from the $1.25 it fetched when it first went public in 2000. It did a quick sink, hitting an all-time low of a nickel in 2008 and never doing better again than 60 cents in October, 2009.
Most micro-cap TSXV companies, Mr. Timeoteo says, don't offer growth in revenue, profit and dividends like Armada does.
Over the five fiscal years ended May 31, 2010, the company's revenue grew 122 per cent, and profits rose in all but one of those years.
In the last fiscal year, revenue reached $2.9-million – up 37 per cent from the year before – while net income was $288,720, up 104 per cent from the previous fiscal year.
Two years ago, the company implemented a 2.5-per-cent annual dividend, which Mr. Timoteo says Armada plans to increase this year.
Mr. Timeoteo has met several times with bankers and investors to promote his company.
"Yet people still don't pay attention," he says.
Mr. Timoteo has looked for companies in a similar financial position as Armada to see if his company is undervalued.
When he performs a stock screen for micro-cap companies that generate at least $2-million in annual revenues, have net profit of at least $200,000, have grown income by 100 per cent over the last five fiscal years and pay a dividend of at least 2 per cent, only one other business comes up: Asian Television Network International.
It's trading at 6.45 times shareholder equity, while Armada is trading at 1.75 times. Mr. Timoteo thinks his company should be trading in a comparable range. If Armada was priced at six times shareholder equity, his stock price would be 67 cents.
Mr. Timoteo points out that Asian Television Network's stock price has doubled over the last eight months. "So it looks like there are some sharp-pencilled investors out there just like me after all," he says. "Hopefully a few will find us."
The challenge: How can Armada attract investors and see its stock price rise?
The experts weigh in:
David Mason, president of The Equicom Group, a Toronto-based investor relations firm
People need to tell a story. When I look at Armada's site, I see a news section that isn't up to date – its last piece of news is May 12, 2010. That's a red flag.
On their investor relations landing page they have three links: stock price, investor fact sheet and financial documents, but that's it. Use that landing page as an opportunity to hammer home key messages, such as why should I be investing in the company? What's the growth potential?
Armada should meet with retail brokers – a lot of them are almost like fund mangers; they're able to deploy smaller portions into a number of different portfolios. Their risk tolerance is higher. They'll be willing to buy a company that's early in its development.
Go out quarterly, after the financials are released. Talk to investors and brokers about numbers and reiterate the long-term strategy, tell them where you want to be three years from now and what you need to do to over the next 12 months.
Doug Steiner, principal at beCONSULT Inc., a Toronto-based business strategy consulting firm
There are two red flags. The first is their auditor. Most public companies need a good, recognizable auditing firm, but they have a single sole-proprietor as their auditor. Investors will want to know why this one guy is looking over their books.
The spouses (of the company's two officers – one being Mr. Timoteo –) are paid market value salaries. A portion of Armada's IT expenses are also paid to a company where a family member of one of the owners has a controlling position. I don't want a business that's run like a private company. These owners are also major shareholders in another company called Lease Busters. It looks like this could be a part-time job.
Put more information on the website about why investors should be interested in the company. Investors want to know about growth. Is this guy looking for gold? Does he have a chance of making a $100-million? There's no information on the website.
Pierre Fitzgibbon, president of Quebec City-based Atrium Innovations, a TSX-listed company that makes and sells nutritional health products
The reality is that small-cap Canadian companies get lost among natural resources and financial services businesses, so businesses of this size really need to tell a story extremely well to attract investors.
But portfolio managers don't just want to believe in a business, they want to believe in the industry. They want to see that there's growth potential and that a company is a key performer within an industry. We have to sell our ability to distinguish ourselves versus our peers.
Appoint an investor relations firm to help crystallize a message. We also put on investor road shows as much as we can in key cities so we can see investors and tell our story. It's a constant amount of work, but you have to do it to attract investors.
Three things Armada Data should do now:
- Update corporate news Investors want to see up-to-date information, so it should must putting together new releases now.
- Tell a story Armada’s website fails to explain why people should invest in the company. The company needs to develop key messages and a story explaining what its all about.
- Get family off the payroll Many investors are wary of companies that pay spouses a salary.
Special to The Globe and Mail
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