Back in July, we highlighted Global Power Equipment Group Inc (OTCMKTS:GLPW) as being a company to keep an eye on throughout the remainder of the year. At the time of our initial coverage, Global Power was down considerably in the wake of some potential accounting irregularities, and traded for around $3 a share. At last close, Global Power went for just short of $4.60, a 20% gain over the period.
As we head into the close of 2016, however, we don’t think the company is going to stop here. There’s plenty more ground to be regained, and it looks as though 2017 could be the year that things get back on track at Global Power.
Here’s what we’re thinking.
Before we get into it, however, let’s bring newer readers up to speed.
The company is a well established, and well known, player in its space. As a broad scope definition, its operations involve designing, manufacturing and servicing equipment for the power infrastructure industry. This can be further broken into three distinct sections. The first, Mechanical Solutions, designs and manufactures equipment for utility-scale natural gas turbines. The second makes generator housing and enclosures. The third services the above mentioned, and also third party equipment.
It’s worth noting here that, despite the above mentioned numbers issue, the company is operating as normal. That said, however, we don’t really have much clarity as to what numbers underpin these operations, because Global Power hasn’t filed since 2014, and the 2014 filing is under review. We do know that the company posted revenue of $145.1 million during the third quarter of 2016, and that it expects full-year revenue in the range of $525 million to $550 million. Third quarter profit came in at $4.5 million.
Latest announcements include a note saying that management is yet again going to miss its filing date. The company had previously noted that it expected to get its revised numbers up to date and with the SEC before the end of the year. This isn’t going to happen now, and the up-to-date target has been put back in to January next year. That’s not too big of a deal, in our eyes. These restatements can take time, especially when we’re talking about hundreds of millions in revenues spread across various business segments. Another month shouldn’t really make too much of a difference to outlook.
Another announcement detailed a joint venture between one of Global Power’s segments, Williams Industrial Services Group, and a company called CarterBrothers Services. The JV will be called CarterBrothers Williams, and will provide differentiated offerings to customers within the power generation, industrial, pulp & paper, aviation and oil & gas industries. It’s a cost saving exercise from the looks of things, designed to get the two entities an improved customer base with the lowest possible outlay. This cost saving effort is also alluded to in a leaseback agreement that Global Power just put in place on three of its properties. It owned the properties previously, and it just sold them for $14.8 million and signed a ten year lease to rent them out.
The bottom line here is that we’ve got a company that is generating more than half a billion dollars’ worth of sales annually, but is valued at less than $80 million. Yes, there are some issues with reported financials, and this makes it difficult to see the exact scale of the undervaluation (debt factors in to this, but again, we don’t know exactly to what degree) but that there is an undervaluation here is almost a certainty.
We’re looking to the January numbers release as our next major catalyst. If the company can get up to date, and the irregularities are not too troubling, there’s no reason this one won’t run.
We will be updating our subscribers as soon as we know more. For the latest updates on GLPW, sign up below!
Disclosure: We have no position in GLPW and have not been compensated for this article.