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CPSM Inc. (OTCMKTS:SWMM) On The Acquisition Trail

CPSM Inc. (OTCMKTS:SWMM) On The Acquisition Trail
Written by
Jarrod Wesson
Published on
March 29, 2018
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As a result of a change in control, CPSM Inc. (OTCMKTS:SWMM) traded higher in March delivering double-digit returns to those market participants who could rapidly read the announcements. From the $0.1 mark, the stock spiked up crossing the $0.8 share price level before retracing back to the $0.3-$0.6 trade range. Check the price action in the chart below before we provide more details: 2 months chart for SWMMA close above the $0.65 handle should see the stock surge even higher following the continuation of the uptrend. On the downside, a close below the $0.3 mark would worry the long side. However, With more than 1 million shares traded some days, in our opinion, downside movements are not likely at this point in time. While the market could surprise us, we believe that new information about the new management in place and the new activities of SWMM will strengthen the market sentiments and could benefit the stock price.BusinessCPSM, Inc. was founded in Nevada in 2007. It casts itself as a holding company aggregating separate but related companies in the pool industry in Florida. its singular focus is to provide common strategic and tactical guidance to ensure a seamless and unparalleled customer experience. SWMM believes that it is providing a premium customer experience for commercial and residential pool and spa owners. This is achieved by using the highest quality materials, impeccable service, leading-edge designs, and unparalleled service by a well trained, dedicated staff. Logo - CPSM, INC. (OTCMKTS:SWMM)The change in control and the letter of intentOn March 14, 2018, the previous owners of this business received an interesting offer and sold 51,711,571 common shares and 1,562,500 preferred shares to MAAB Global Limited, a non-affiliate of the company. The transaction was very fast, as the new owner, which is an entity named MAAB Global Limited, received the shares effective March 14, 2018. In total, it controls 62.35% and 100% of the currently issued and outstanding common and preferred stock of SWMM respectively.What's our take on this corporate transaction? In our opinion, any change in control is always an opportunity for shareholders, as new management usually brings new ideas, new business models as well as cash and assets. In our opinion, this initial thesis is correct for SWMM, as the following day the company announced its first corporate move. On March 15, 2018, the company released negotiations with Confida Aerospace Ltd. to acquire all the rights and obligations of Confida in an Asset Purchase Agreement to acquire the following assets:

"Under the Asset Purchase Agreement, Infly agreed to transfer, convey and assign to Confida all right, title and interest in and to the assets belonging to Infly and all books and records, studies, software, drawings, schematics and all ancillary information, rights, agreements and understandings Infly may have in respect of the operations of Infly (collectively, the "Assets"). The Assets consist of PassengerDrone aircraft, hardware, software and firmware components, designs and trademarks." Source

The companies released that SWMM is interested in signing a letter of intent with Confida. While the transaction is not closed, we believe that this first acquisition of assets is a great catalyst for the stock. Let's think about it for a second. If the acquisition is closed, SWMM will grow both its intangible and tangible assets. Additionally, it will receive know how to run a new business model that could return revenues in the future. To sum up, we will be expecting additional share price increases if the corporate move becomes real.What will be the price of the new assets?While we still need confirmation and an acquisition agreement, yet the companies said that SWMM shall issue 10,000 preferred shares to Confida Aerospace Ltd. with the following features:

"Each preferred share shall be convertible into 1,333 common shares and 1,333 warrants. Each warrant shall be exercisable into one common share at an exercise price of $.75. The warrants shall have an exercise period of five years."Source

What's our take? We don't appreciate that the acquisition will be made with shares. Shareholders will not appreciate it either. However, if the assets acquired push the company to grow in the following years, we as well as the market will celebrate the transaction.We encourage readers to stay tuned to SWMM. Negotiations can last for a few weeks, so a definitive agreement could be released soon. In our opinion, this catalyst should pay off. But, as usual, only those market participants who follow the market every day will benefit.The financial situation is solidThe company has a stable balance sheet consisting of $1.8 million in assets and $1.0 million in total liabilities. It has also exhibited an outstanding net asset growth in the last four years. Taking into account the fiscal year 2016, since 2013, the value of the assets has increased by 230%. Will this overwhelming growth rate continue? With the new management negotiating a new acquisition, we believe it could. Undoubtedly, it could be positive for shareholders.In addition, the revenue growth is also interesting. In 2013, the revenue was $2.7 million, whereas, in 2016, SWMM’s reported revenues were equal to $5.2 million. This represents 92% growth in three years, which means that the company is working in the right direction. On the top of it, it is also remarkable that SWMM is profitable too. The EBITDA has gone from $0.57 million in 2013 to $0.162 million in 2016, and the net income has gone from $0.033 million to $0.133 million.ConclusionWith a market cap of $29 million and 82,938,960 shares outstanding, the market is betting on the company continuing its previous growth pace. We cannot say for sure that this will happen. However, given that there a new management in place and with new acquisition plans, more growth should come in 2018. To sum up, stay tuned for this name. There is a lot to like here. Disclosure: We have no position in SWMM and have not been compensated for this article.Image courtesy of Ken Teegardin via Flickr.

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