Opinions
James Hodgins
Garda World Security Corp.
GW-T
DON'T BUY
May 26, 2011
Refinanced the bulk of their bank debt but haven’t paid it down so the debt load is still heavy at a little over 5X current EBITDA. Very low margin business. Had a weak earnings report. He is Short this stock.
$10.700
Stock price when the opinion was issued
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TOP PICK
This stock hit its 52 week high today. Garda World Security is a great growth story through consolidation in Canada. Involved in cash handling, security, airport security and background investigation checks. Doubled its revenue over the last couple of years. Managment would like to double its size through acquisitions. He has owned for quite some time, average entry price was about $7-8.00. He is continueing to sell it on the way up just through appreciation, maintaining his weighting.
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COMMENT
Leading security provider. A disaster over the last 12 months. Growth by acquisition story. Have been worries about their ability to manage growth. Recent pop indicates a good quarter. On his radar screen. If they can integrate their acquisitions, they’ll have a very steady growth in earnings. Hopes management doesn’t make other acquisitions until they have settled down.
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Security Company. He is negative on this and has a small Short on it and will probably look to increase his Short position. Significant amount of debt. Some of their businesses in Iraq, Afghanistan, etc are winding down. You could easily see a 50% haircut in the type of market he is expecting.
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