Weekly Stock to Watch

Weekly Stock to Watch

This week’s stock to watch is Circa Enterprises Inc. [TSXV:CTO], an engineering company that designs,  manufactures, markets, and sells products to a broad range of industries.

Circa’s operations consist of two distinct business lines – the first being telecommunications surge protection and related products, sold primarily to the United States market, through Circa Telecom, and the second being fabricated metal products Circa Metals. The surge protection business consists of the design, manufacture, marketing and sale of surge protection products, which provide primary protection to telephone systems and data transmission equipment against voltage surges. Circa Metals provides custom metal fabrication services to Circa Enterprises itself and to third parties. Circa Metals also designs, manufactures, markets and sells fabricated enclosures, pole line hardware and other products to the Canadian electrical industry through its Hydel product line.

Circa announced in late July that it has completed the acquisition of substantially all of the assets of Guardian Telecom Inc., a designer, manufacturer and supplier of hazardous and ruggedized high performance telecommunications equipment, for a total cash consideration of $3,577,071 and no shares. The business will operate as Guardian Telecom, a division of Circa Enterprises.

The  Company  recorded  profit  from  operations  attributable  to  shareholders  of  $50,000  for  the three  months  ended  March  31,  2017,  compared  to  a  loss  of  $354,000  in  Q1  2016.  The  improvement  in  the  Q1  2017  profit  is  the  result  of  lower  Telecom production  costs  and  selling,  general  and  administrative  expenses  compared  to  the prior year when the Company was integrating the Alberta Computer Cable business.

Although for the  three  months  ended  March  31,  2017,  total  sales  decreased  to  $5.5  million,  from $5.7 million in the first quarter of 2016 due to lower Telecom  sales; Circa  Metals  segment  partially  offset  the loss with  stronger  sales.  While  the lower  sales negatively  impacted  earnings,  the  reduction  in  operating  costs  and  the  absence  of restructuring costs helped improve profits compared to the same quarter in 2016.

Circa last traded at $0.76 with a 52 week range of $0.69-$0.97.

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