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Insiders Are Buying Polaris Minerals

July 13, 2014 | About:
Markus Aarnio

maarnio

2 followers

1 The Company

One construction material company has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

- The stock is purchased by three or more insiders within one month.

- The stock is sold by no insiders in the month of intensive purchasing.

- At least two purchasers increase their holdings by more than 10%.

Polaris Minerals Corporation (TSX:PLS) is engaged in the development and operation of construction aggregate properties and projects in the United States and Canada.

Number of shares (March 31, 2014)

80,549,414

Number of stock options and warrants (March 31, 2014)

4,709,147

Fully diluted number of shares (March 31, 2014)

85,258,561

Share price

C$2.65

Market cap

C$213.5 million

Enterprise value

C$203.8 million

1.1 History

Polaris commenced business in mid-2000 and was listed on the Toronto Stock Exchange in January 2006 at C$4.80 share price.

1.2 Business Model

Polaris’ business plan is to produce high quality construction aggregates that can be economically shipped into major city markets on the west coast of North America where supply shortages are gradually emerging.

nimetön.png

(Source: Investor presentation)

1.3 Assets

Polaris’ main asset is the Orca Quarry, which is located on the north east coast of Vancouver Island west of Port McNeill, British Columbia.

nimetön.png

(Source: Investor presentation)

Polaris’ other strategic asset is the Richmond Terminal, which is a strategic gateway into one of the company’s principal target markets, the San Francisco Bay area.

nimetön.png

(Source: Investor presentation)

2 Management

The CEO Herbert Wilson has over 35 years of experience in the development and operation of construction materials and industrial minerals operations. Herbert Wilson has been CEO since January 2009. Collectively, Polaris' management team and board have over 160 years of industry experience.

2.1 Insider Ownership

Polaris’ directors and executive officers own 1% (4% on a fully diluted basis) of the company.

Here is a table of Polaris’ insider activity during the last 30 days.

Name

Title

Trade Date

Shares Purchased

Prospectus

Current Ownership

Increase InShares

Lenard Boggio

VP

June 27

10,000

Yes

10,000 shares

from 0 to 10,000

Darren McDonald

CFO

June 27

5,000

Yes

5,000 shares

from 0 to 5,000

Herbert Wilson

CEO

June 27

25,000

Yes

348,825 shares

+7.7%

There have been 40,000 shares purchased by insiders during the last 30 days. All these shares were purchased pursuant to a bought deal financing. Two of these three insiders increased their holdings by more than 10%.

Here is a table of Polaris’ insider activity by calendar month.

Month

Insider buying / shares

Insider selling / shares

June 2014

40,000

0

May 2014

0

0

April 2014

0

16,000

March 2014

0

95,000

February 2014

0

11,000

January 2014

0

3,000

December 2013

0

10,000

November 2013

0

10,000

October 2013

0

0

September 2013

0

0

August 2013

0

380

July 2013

0

10,000

June 2013

0

0

May 2013

2,100

0

April 2013

17,900

0

March 2013

0

0

February 2013

0

34,700

January 2013

28,600

0

(Note: Option exercises are not included in the table. There were 100,000 options exercised in January 2014, and 100,000 options exercised in May 2014.)

There have been 88,600 shares purchased and there have been 190,080 shares sold by insiders since January 2013.

3 Financial Summary

3.1 Current Situation

Polaris reported the first-quarter financial results on May 8 with the following highlights:

Revenue

$8.5 million

Net loss

$1.5 million

Cash

$7.0 million

Debt

$1.1 million

Polaris closed a $16.5 million financing on June 27.

3.2 Historical Developments

Here is a table of Polaris’ revenue and earnings since 2007.

Year

2007

2008

2009

2010

2011

2012

2013

Revenue (millions)

15.5

29.6

18.8

18.0

23.4

32.2

44.9

Net loss (millions)

18.4

9.8

17.9

14.3

19.1

13.2

8.6

EPS

-0.52

-0.26

-0.34

-0.25

-0.33

-0.23

-0.11

Polaris has not been profitable yet. Last year was Polaris’ best year ever with a record revenue and smallest net loss.

4 Shares

Here is a table of Polaris’ number of shares since 2007.

Year

2007

2008

2009

2010

2011

2012

2013

Number of shares (millions)

35.3

37.5

52.9

53.2

53.4

53.5

73.6

Polaris’ number of shares have grown 108% since 2007.

5 Outlook

Herb Wilson, President and CEO, commented on May 8:

"Demand for our products in the second quarter has significantly increased and we are now engaged in an exceptional level of shipments. April set a new sales record, some 23% higher than any previous month, and this level of activity is expected to continue throughout the second quarter."

nimetön.png

(Source: Investor presentation)

6 Competition

Polaris has gained market share in an overall flat demand environment in California aggregate market. In 2013, 95% of Polaris’ sales were made to the San Francisco Bay area markets.

nimetön.png(Source: Investor presentation)

7 Risks

I believe the two main risks with the stock are the negative earnings and overall California aggregate demand. Polaris has been growing its sales since 2010.

nimetön.png

(Source: Investor presentation)

8 Conclusion

There have been three different insiders buying Polaris and there have not been any insiders selling Polaris during the last 30 days. The three insiders purchased their shares at C2.57. I believe Polaris could be a good pick below C$2.57 based on the intensive insider buying.

If Polaris can gain market share in California, I believe the stock could test the IPO price of C$4.80 per share during the next 2-3 years.

nimetön.png

(Source: Investor presentation)

Disclosure: The author has no positions in any stocks mentioned.

About the author:

maarnio
I have 15 years of investing experience. I have traded stocks, commodities and Forex markets.

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