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Bemax Inc (OTCMKTS:BMXC) Is Running Up; More To Come?

Bemax Inc (OTCMKTS:BMXC) Is Running Up; More To Come?
Written by
Chris Sandburg
Published on
January 16, 2017
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Bemax Inc (OTCMKTS:BMXC) has had a great start to 2017. The company closed out last year trading for just $0.006 a share. Fast forward to the end of last week, and this had risen to $0.017 a share. It's still a microcap, but the close to 200% gain has brought it out of the double zeros, and the spike in volume that accompanied the gain is resulting in a fair amount of speculative attention towards the stock. True to form, then, we're going to take a look at it and see what's going on.So, here goes.This one's business model is pretty simple. Basically, Bemax has developed a disposable diaper product, and its current focus is the rollout of this product into a variety of markets, primarily (at present) Europe and South, East and West Africa and other emerging markets. The company has a network of wholesalers and distributors spread across the globe, and it uses this network to get its product into the hands of consumers. Disposable diapers already exist, and from what we can tell, there isn't too much that is revolutionary about Bemax's product. With that said, it is made in the US (affording the company a claim to quality in its sales pitch), and it is designed to overcome some of the shortfalls of the currently available options. It is also generating sales, and that – in a sense – speaks for itself. Revenue for the six months ended November 30, 2016 totaled $115,153 compared to $65,219 for same period a year earlier. These numbers have translated to a revision of the company's full year 2016 forecast sales, with Bemax now looking for revenue in a range of $3.5 million to $4.5 million, up from a range of $2.73 million to $3.3 million as reported earlier last year.So what is driving this increase in expectations? Again, nothing spectacularly interesting. The company just reported that it has opened up a fresh sales channel on Amazon.com, Inc. (NASDAQ:AMZN), and in turn, that it expects this to drive a boost in topline near term. That's a reasonable assumption, but whether on its own it will be enough to meet the targets the company has put forward as revised, remains to be seen. With that said, the Amazon channel does offer penetration into the US market; something that the company had – to date – not been able to achieve. If it can execute on a successful marketing and commercialization strategy, then there is some credence to a revised outlook. The baby diapers market is expected to reach just shy of $60 billion globally by 2020, and the disposable diapers segment accounts for a little over 65% of this market.All said, there is a reason this one is a microcap. It is pushing to drive sales of a product that isn't overtly unique in a market that is both saturated and dominated by large brands. It's got to just $115,000 cash on hand, and more than twice that in short term debt.However, that doesn't mean there's no opportunity here. The company holds a current valuation of just $5.8 million, and in line with revised forecasts, should generate between 60% and 80% of that in revenues during 2016. Sales should gain traction throughout 2017, as the fresh channels come into play, and so without an upside revaluation, the company will be trading at a market cap that comes in at less than its annual top line between now and end-2017.There is a long way to go before Bemax catches any substantial portion of the North American market, but if it can secure even a small percentage of the European and African markets, then there are revenues to be had, and it's not going to take much (given its current valuation) to warrant some upside.We will be updating our subscribers as soon as we know more. For the latest updates on BMXC, sign up below!Disclosure: We have no position in BMXC and have not been compensated for this article.

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