Description
OROA-
business-
OroAmerica, Inc. is one of the largest manufacturer/distributors of karat gold jewelry in the United States. The Companies competitive advantage is one stop offering of a large selection of jewelry styles, consistent product quality, and prompt delivery of product orders, and provides a wide range of specialized services. The Company's principal product line consists of an extensive selection of 14-karat gold chains that are offered in a variety of popular styles, gauges, and lengths. The Company also offers its customers a wide assortment of 14-karat gold charms, earrings, rings, and bracelets and a line of 10-karat gold jewelry that includes both chain and non-chain products. The Company has a line of sterling silver jewelry and has designed and distributed karat gold jewelry accented with diamonds and colored gemstones. Customers include mass merchandisers, discount stores, home shopping networks, catalog showrooms, warehouse clubs, and jewelry wholesalers and distributors. (e.g. walmart, K-Mart, Sears, QVC, etc.).
Valuation-
Market price approximates net-net working capital which is mostly either cash or high quality receivables from wal-mart; k-mart, sears, etc. Market Price to tangible book is around 0.7x. This tangible book value is understated for an almost entire block of real estate owned in Burbank, ca (near new IKEA) whose value is well above stated book value.
With substantial net cash- Enterprise value to Cash flow (EBITDA-CAP EX) is less than 4X; Enterprise Value to sales less than 0.25X
Company has been aggressively buying and retiring stock with 6.5% of entire outstanding retired in most recent quarter alone. (with additional shares repurchased in current quarter)
Mgmt owns over 60%
Catalyst
1) constantly developing new products but particular new product introduction that differentiates oroa gold chain from others are patent rights (expire 2019) in gold jewelry to pushlock clasp- found at http://www.pushlock.com
2) just now scaling up mail order/catalog business to 20,000 smaller jewelry retailers. Margins to these customers are expected to be higher as they will not have to spend advertising co-op dollars that they do for big mass merchants. OROA value add will be fullfillment ability to ship overnight to east coast orders made as late as 6pm EST. (This reduces mom/pop jeweler inventory reqts) and custom orders in 48-72 hours. First catalog in late 2000 of only 2K SKU facilitated initial build of this customer base of over 2000 ordering jewelers already. In late May '01 OROA will send out huge expanded 30K SKU catalog. This new distribution/customer channel offers substantial incremental revenue and cash flow potential in coming holiday 2001.
3) buyback of substantial shares reduces denominator on growing numerator in eps calculation. Buyback at substantial discount to book meaningfully raises book/share and return on equity.
4) increased ownership by activist investor (see http://www.sec.gov/Archives/edgar/data/824435/000093583600500006/0000935836-00-500006.txt )