Trilogiq : logic but a red flag for a no go
Market cap : 23,5 M€
Net cash position: 20,6 M€
Share price: 6,3 €
Trilogiq is famous among French investors as being very cheap with a 20,6 M€ net cash position for a 23,5 M€ market cap (with a 6,3€ share price). Q1 2023 sales number are at +15% which coupled with a cost reduction program (restructured Uk, USA and Brazil entities) should bring about operational profitability. EBITDA is at 0,6 M€ and should improve with the previous elements so it appears cheap on a EV/EBITDA basis.
Higher interest rates will help the net cash position bring in some financial results. We can see it already a little bit as financial investment products increased from 38 K€ to 239 K€ but forex neutralised the financial results.
As a reminder, Trilogiq develops modular systems dedicated to the logistics of factories, warehouses and workshops. In other words, it helps employees to have a faster, easier and more confortable access to their tools in a factory so they can be more productive.
So why is the company undervalued?
The answer is in fact in the regulated agreements. We have 4 pages about them but the first 2 agreements are the most interesting.
The CEO is the owner of a patent for which he has granted a non-exclusive license to Trilogiq for 3 years against a fee calculated at the end of each financial year. This fee is equal to 7% of the sales of Graphit products done by Trilogiq. In 2023, it amounted to 75 K€. This amount was capped by the beneficiary who has waived receiving the entire amount.
The products concerned by the patent contribute significantly to sales and even more so to the gross margin. (Pages 2 and 3 of the special report of the statutory auditors on the corporate accounts as of 03/31/2023)
In the past the fee was at 4% but the amount was not capped.
We have the same agreement for another patent. The fee represented 100 K€. The amount was also capped by the beneficiary who has waived receiving the entire amount.
The amount for these two patents is capped at 300 K€. This number was previously 200K and 150 K€.
These two regulated agreements explain why it is a pass for me. One could also apply a discount to the cash position.
Moreover, there has been no dividends since 2014.
They was a good opportunistic and sizable buy back (6.57% of their shares at 3 €) which was done in 2019. The shares were not cancelled and will be used for external growth. On this point the ROI on the buyback is very good (100% in 4 years). The shares were most probably acquired from a fund.
The company has an interesting positioning, is capex light with a solid balance sheet but it is still a pass for me as I want to be as much aligned with management.
As a reminder, I never short shares and I do not own any Trilogiq shares.
Cheers!
Jeremy
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Disclaimer: The above article constitutes the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. The author may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. Disclosure – I do not hold a position in Trilogiq at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).