The Deep Value Week – 2025/08
A Few New Reports, Share Transactions and Market Updates
Companies mentioned:
· Alico (ALCO) - Targets $20M in Land Sales for FY 2025, Shifts Focus to Agricultural and Development Assets
· Art’s-Way Manufacturing (ARTW) - Asset Monetization and Modular Growth for Sustained Performance
· Fonar (FONR) - Reports Lower Earnings Despite Increased MRI Scan Volume, Eyes Growth with New High-Field MRIs
· Hurco Companies (HURC) – Polar Asset Management sold another 11k shares
· Jewett-Cameron (JCTC) - Expands Lifetime Steel Post® Display to 334 Stores, Targeting Growth in Fence Building Season
· NACCO Industries (NC) - Declares Quarterly Dividend of 22.75 Cents Per Share
· Natural Alternatives International (NAII) - Reports Revenue Growth Despite Ongoing Profitability and Liquidity Challenges
· Strattec Security Corp (STRT) - Institutional Ownership by Gate City Capital Management Reaches 7.9% & GAMCO Investors and Affiliates Increase Stake in Strattec Security Corp to 17.58%
“Graham’s Geiger counter”
Benjamin Graham suggested that one way to measure the valuation of the overall market was to assess the number of net-nets available. When many such opportunities exist, it indicates a cheap market overall, while their absence suggests that the market is expensive. Today’s net-nets, however, are not the same as Graham’s net-nets. Many are un-investable being Chinese RTO’s, loss-making biopharma’s etc. But we do think it is interesting to follow this number over time, and what percentage of total listed stocks qualify as a “naked” net-net without any type of quality adjustments to make them investable. Below is a net-net screen from Stockopedia.
Alico (ALCO) - Targets $20M in Land Sales for FY 2025, Shifts Focus to Agricultural and Development Assets
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Alico, Inc. (NASDAQ: ALCO) has reported its first-quarter results for fiscal 2025, highlighting progress in its strategic shift from citrus production to diversified land monetization and agricultural operations. As part of its transformation, the company plans to capitalize on its 53,371 acres of land and 48,700 acres of oil, gas, and mineral rights in Florida. Management estimates that approximately 75% of its land will remain in agriculture, while 25% will be transitioned for commercial and residential development.
Alico expects to generate approximately $20 million in proceeds from land sales during fiscal 2025, supported by current option agreements and pending transactions. The company is also evaluating lease arrangements for sod production, sand mining, and seasonal crops, including corn, sugarcane, and fruits. Additionally, entitlement work in Collier and Highlands counties is progressing as planned, with further updates expected once public applications are filed. Management estimates the present value of its land holdings could range from $650 million to $750 million, assuming 75% agricultural use and 10% of acres entitled for development within five years.
Art’s-Way Manufacturing (ARTW) - Focuses on Asset Monetization and Modular Growth for Sustained Performance
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Art’s-Way Manufacturing Co., Inc. reported its financial results for the first quarter of fiscal year 2025, highlighting stable profitability despite a decline in overall sales. Net sales amounted to $24.5 million, representing a 19.1% year-over-year decrease. This was primarily due to lower demand and pricing pressure in the Agricultural Products segment, where sales fell by 34.7% to $14.7 million. In contrast, the Modular Buildings segment experienced a 25.9% increase in revenue, reaching $9.8 million, driven by higher demand in research and laboratory markets.
Gross profit improved to $7.3 million, reflecting a margin of 29.8%, up from 28.3% in the previous fiscal year. Operating income was $461,000, down from $1.53 million a year ago, while net income increased to $307,000 from $267,000. The company’s EBITDA reached $700,000, a notable improvement from the prior year’s negative $2.3 million. Asset monetization played a key role in supporting liquidity, with $20 million generated from land sales and an additional $1.2 million expected from the Employee Retention Credit (ERC) in FY2025. The sale of remaining real estate related to the discontinued Tools segment was completed in Q4 2024, contributing $1.27 million in cash flow.
Looking ahead, management anticipates further reductions in inventory and continued positive cash flow throughout FY2025. While the Agricultural Products segment faces ongoing challenges from weak commodity prices and elevated interest rates, cost-cutting measures are expected to help maintain profitability. The Modular Buildings segment is positioned for stable performance, supported by a strong pipeline of engineering projects. With no significant debt maturities until 2029 and $73.5 million available under its line of credit, Art’s-Way Manufacturing remains well-capitalized to navigate market challenges.
Fonar (FONR) - Reports Lower Earnings Despite Increased MRI Scan Volume, Eyes Growth with New High-Field MRIs
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FONAR Corporation announced financial results for the second quarter and six-month period of fiscal 2025, ending December 31, 2024. The company experienced mixed performance, with increased MRI scan volume but declines in key financial metrics. Total revenue for the six-month period decreased by 3% to $49.9 million, while quarterly revenue fell by 2% to $25.0 million. Income from operations for the quarter dropped 48% to $2.6 million, contributing to a 36% decrease in six-month net income to $6.4 million. Quarterly net income fell 48% to $2.4 million. Diluted net income per share decreased by 44% to $0.30 for the quarter and by 33% to $0.75 for the six-month period.
The MRI scan volume at HMCA-managed sites increased by 7% to 79,207 for the six-month period, but volume at owned sites declined by 4%. Selling, general, and administrative expenses (SG&A) rose 24% in the quarter and 16% for the six-month period due to reserves against receivables from a financially troubled insurer and a new outside billing contract. Operating cash flow decreased 42% to $3.9 million.
On the balance sheet, total assets stood at $209.1 million, with total liabilities decreasing to $50.0 million. Cash and short-term investments amounted to $53.7 million. The company's financial strength was evident in its improved total assets-to-liabilities ratio of 4.2 and a 4% increase in net book value per share to $25.66.
Looking ahead, management expressed optimism about future scan volume, citing the upcoming addition of high-field MRIs at two HMCA-managed centers in Nassau County, New York. These advanced scanners, combined with the company's STAND-UP® MRI, are expected to enhance diagnostic capabilities and reduce appointment backlogs. Fonar's stock repurchase program continued, with 343,485 shares repurchased at a total cost of $5.6 million as of December 31, 2024.
CEO Timothy Damadian emphasized the company's commitment to expanding its MRI network, which currently includes 43 scanners across New York and Florida, positioning FONAR for long-term growth and profitability.
Hurco Companies (HURC) – Polar Asset Management sold another 11k shares
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Polar Asset Management reported two sale transactions.
Jewett-Cameron (JCTC) - Expands Lifetime Steel Post® Display to 334 Stores, Targeting Growth in Fence Building Season
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Jewett-Cameron Trading Company announced that its Lifetime Steel Post® in-store display program has expanded to 334 retail locations across The Home Depot and Lowe’s Home Improvement stores. This milestone, achieved ahead of the fence building season, aims to meet rising demand for durable, labor-saving fencing solutions among both professional contractors and DIY homeowners.
CEO Chad Summers emphasized the importance of this expansion, noting that the Lifetime Steel Post® provides a long-lasting, maintenance-free alternative to traditional wood posts, which are prone to rot and decay. The posts, available in galvanized and black powder-coated finishes, offer faster and more cost-effective installation, requiring smaller holes and less concrete. In many regions, hydraulic post drivers can install the posts directly into the ground within seconds, significantly reducing labor time and costs.
Jewett-Cameron’s strategic focus for 2025 includes enhancing product accessibility and customer education on steel fence post solutions. Combined with the company’s Adjust-a-Gate® steel frame gate kit, Lifetime Steel Posts® contribute to building fences that last longer and require less maintenance. The in-store displayers play a key role in this initiative, allowing customers to engage with the product firsthand and understand its installation benefits.
NACCO Industries (NC) - Declares Quarterly Dividend of 22.75 Cents Per Share
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NACCO Industries, Inc. (NYSE: NC) announced that its Board of Directors has declared a regular cash dividend of 22.75 cents per share for both Class A and Class B Common Stock. The dividend will be paid on March 17, 2025, to shareholders of record as of the close of business on March 3, 2025.
Natural Alternatives International (NAII) - Reports Revenue Growth Despite Ongoing Profitability and Liquidity Challenges
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Natural Alternatives International Inc. (NAII) reported a 14% increase in net sales for the second quarter of fiscal 2025, reaching $67.2 million compared to the previous year. Private-label sales contributed $32.3 million, while patent and licensing revenues accounted for $1.8 million. Despite higher revenue, gross profit rose only 11% to $3.9 million, reflecting a slight decline in gross margin to 5.8% from 6%. Operating income remained negative at -$4.6 million, impacted by a 13% rise in selling, general, and administrative expenses (SG&A), which totaled $8.5 million. Net income fell to -$4.2 million, or -$0.70 per share, compared to -$3.8 million in the same quarter last year.
Cash flow from operations was negative at -$3.4 million, a significant decline from the positive $4.8 million reported in the prior year, primarily due to lower working capital. The company’s cash and cash equivalents decreased by 28% to $8.7 million. Total current liabilities were reduced by 8% to $21.6 million, contributing to a solid equity ratio of 50.7%. However, NAII reported non-compliance with certain covenants related to its credit facility as of the quarter-end and is actively negotiating with its lender to address this issue.
Looking ahead, management remains focused on improving profitability and liquidity amid ongoing challenges. The company acknowledges that continued losses and potential difficulties in meeting future loan covenants could impact its ability to sustain operations. Furthermore, reliance on key suppliers for beta-alanine presents risks of cost increases and supply disruptions. Despite these challenges, NAII aims to leverage its revenue growth momentum while implementing measures to reduce costs and enhance operational efficiency in the coming quarters.
Jerome also shared his thoughts on X.
Strattec Security Corp: Institutional Ownership by Gate City Capital Management Reaches 7.9% & GAMCO Investors and Affiliates Increase Stake in Strattec Security Corp to 17.58%
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Gate City Capital Management, LLC has disclosed an increased stake in Strattec, reporting beneficial ownership of 328,060 shares of common stock as of December 31, 2024. This represents 7.9% of the company’s outstanding shares, positioning Gate City as a notable institutional shareholder.
GAMCO Investors, Inc. and its affiliates have disclosed an increased beneficial ownership in Strattec Security Corporation, reporting a total of 733,479 shares of common stock as of December 29, 2024. This represents 17.58% of the company’s outstanding shares, according to the latest Schedule 13D/A filing. The shares are held across multiple entities within the GAMCO group, including GAMCO Asset Management Inc., Gabelli Funds LLC, and Gabelli Foundation Inc.
GAMCO Asset Management Inc. holds the largest portion, with 686,579 shares (16.46%), followed by Gabelli Funds LLC with 31,600 shares (0.76%) and Gabelli Foundation Inc. with 15,300 shares (0.37%). The shares are held with sole voting and dispositive power, with no shared authority reported. The firm’s recent transactions included sales of shares between January and February 2025 at prices ranging from $36.13 to $51.56 per share.
The writer may own shares of the companies mentioned. This communication is for informational purposes only.
Excellent as always. Keep up the good work. The people at Gate City are great at finding value.