I initiated my first micro cap stock with what appears to be a tiny sappling, little Treecon Resources (TCOR), offered at $.41/share.
TCOR is a holding company that through subsidiaries distributes, leases and provides financing for industrial and logging equipment. The company is also engaged in sawmill operations, oilfield fluids and real estate. Logging and heavy equipment dealership operations are conducted through the company’s wholly owned subsidiary Texas Timberjack, with locations in Lufkin, Jasper and Cleveland, Texas.
Lumber and treating operations are conducted through it’s wholly owned subsidiaries, Southern Forest Products in Newton County and International Forest Products in Houston.
Texas Frac Fluids operates an oilfield services facility in northeast Texas producing water-based fluids for the oil and gas industry.
The company also owns and manages a real estate portfolio consisting primarily of timberlands in Texas and Louisiana.
Two factors drew my attention to the stock. It appeared to be trading at a three and a half year low, bottoming at $.24/share in early April, while a quick look at the financials showed book value of $1.44/share as of 9/30/19.
With 22 million shares out, the equity cap totals just $9.2 million, but this appears to be one asset rich situation while the operating businesses also have real earning power. Sales for the LTM period ended 9/30 totaled $87 million, though they have come down considerably over the most recent quarters. Still, if that is a good proxy for this business, TCOR was trading for .10x sales.
Also as of 9/30/19, Net PP&E totaled nearly $15 million ($.65/share) and investment in Real Estate was carried at $9.2 million, or $.40/share. This is largely comprised of timber as opposed to commercial real estate. Equity in a non-controlling interest makes up an additional $.14/share.
I’d love more disclosure, of course, but I like the underlying operating businesses here, with the exception of the oilfield service operation. In the meantime, I am getting a substantial discount to book value. Real Estate and PP&E together total $1/share.
As I build out my investment in micro caps, I’m hoping to find situations exactly like TCOR. a tree amongst a forest of opportunities.