Wednesday, August 20, 2008

Potentially Undervalued: Amisco

Amisco (TSE: IAC) founded in 1954, is a company with expertise in manufacturing and delivering personalized furniture in Canada and the United States. They target smaller retailers whose customers prefer personalized furniture. The company specializes in composite painted tubular and steel sheet residential furniture and offer a wide selection of furniture products available in many different finishes making thousands of possible product combinations.

Amisco's stock price is at $1.64, which is down 84% from the $10.15 price in April 2004. The P/B on Amisco's stock is currently 0.38 and that is the part that I find particularly interesting. In recent years, sales have been in a down turn and the company has not been paying a dividend. It is entirely possible that this is a secular issue for Canadian manufacturing. On the other hand, even if it is a secular issue, with such a low P/B, the market might have been overly pessimistic in pricing the stock, and value may be found.

Amisco's relatively low stock price is not surprising, as there has been a slew of factors working against Canadian furniture manufacturers in recent years. Factors such as a flood of cheaper product imports from Asia, the rising Canadian currency (making product exports more expensive from Canada into the US) and a weakening US consumer have aligned to really hurt the Canadian manufacturers. However, Amisco is attempting to fight back. They are striving to further decrease product delivery times and to improve operational efficiencies with the introduction of factory automation equipment. So far, the company is still enduring significant sales declines but have still managed to squeak out an earnings profit.

In my next post, I will dig deeper into the balance sheet and estimate a liquidation value for the company's stock, as a baseline value for the company's stock.

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