May 03, 2018 - 4:14pm EST by
2018 2019
Price: 15.00 EPS 0 0
Shares Out. (in M): 2 P/E 0 0
Market Cap (in $M): 30 P/FCF 0 0
Net Debt (in $M): -15 EBIT 4 6
TEV (in $M): 14 TEV/EBIT 5 2.4

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BSHI is a net-net that trades for $15.00 per share and has nearly $20.00 per share of net-net value and book value per share of $23.50  and is profitable and does ~$1 per share in annual FCF. This is before two accretive deals. So even if the most recent deal ends up being a dud, you own a super cheap and profitable net-net that has generally been well managed and with a super safe balance sheet. If the acquisitions are integrated and work out, we believe that FCF per share will be $2.40 per share and with a stock price (post acquisition) net of cash per share of $11, BSHI is trading for 4.5x FCF per share on an unlevered basis.


EBITDA 6,565
Capex (700)
Cash int 0
Cash tax (1,100)
FCF 4,765
Per share  $       2.40

BSHI is illiquid but has audited financials posted to its website:

BSHI is a $61M LTM sales business that sells work gloves, pet products, cell phone accessories and specialty imprint/logo products. Since this idea has been written up before I will only touch on a few key points. BSHI is cheap on most metrics: BSHI currently has ~$7.50 per share in net cash and marketable securities and a net-net value of $19.75 per share; it trades for what we believe is likely for 3x EV/EBITDA on 2019 pro forma for two recent acquistions.

We believe that the pro forma BSHI will do $80-100M of sales and >$6M EBITDA, is well run with solid capital allocation and there should be both cross-sell revenue synergies and expense synergies.

Our thesis

- BSHI recently purchased two pet supplies companies (Coast2Coast and PetEdge) that should take its Pet segment revenues from $7-8M annually to $35-60M and we believe they spent around $10M of their $17M+ of cash on those two acquisitions. [the range on sales here is wide because we are unable to verify the $115M sales number we found online for PetEdge ; also we know that they spent $504K on Coast2Coast, but not sure what they paid for PetEdge other than we think they paid a fraction of the $14M face value of PetEdge ].  Importantly, both acquired companies' sales are predominantly to the independent pet retailers and pet groomer markets, not to the large mass customers like Petco, Petsmart and WMT and TGT. So we believe the incremental EBITDA should be $3-4M given that BSHI's legacy pet busienss as disclosed in their reverse/forward split SEC document noted that their legacy pet business does 9% EBIT and over 10% EBITDA margins going back to 2009 [see the proxy for BSHI dated March 2010]. Most of our figures are estimates based on publicly available information including PetEdge bankruptcy court docket at the Delaware Chancery Court, which you can pull on Bloomberg or Pacer.

- The Chairman of BSHI owns ~70% of the outstanding shares and is also the chairman of ACTG and a board member of VERI. Note that he purchased just under $1M of VERI stock with BSHI's cash at a price of $12 approximately , so those VERI shares are now up ~80% and still are on BSHI's balance sheet. BSHI has repurchased a significant amount of stock over the last 7 years and has not paid any dividends and acquisitions have been quite solid and at low multiples. We believe they paid less than 5x EV/EBITDA for most of their deals.

- Boss's two newly acquired companies, Coast2Coast and PetEdge, are adding $30-35M of sales in different channels and this means a cross-sell opportunity for Boss's legacy BossPet division.

- Also, Boss owns its real estate in Kewanee (which incidentally is worth another $1-2/share and is not included in the above net-net figure) and they recently acquired PetEdge which has two DC's in Reno, NV. Clearly they don't need three DC's. There will also be buying and overhead expense synergies. We believe these synergies should easily be over $500K.


- Integration of acquisitions could be poor and PetEdge was a troubled business with declining sales, so integrating this well is key, there is risk here

- Capital allocation, Board could do destroy value by investing BSHI's cash poorly

- Glove business is hyper competitive and could see (continued) margin pressure



I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Higher earnings post acquisition integration

Special dividend


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