The market condition as well as the limited investor awareness has stunted
the rapid appreciation that we had anticipated by this time in the game!
The game that we talk about continues to get better on all fields of
interest- yet the share price remains depressed and grounded. In 2007, the
completed a major turn-around reducing and re-issuing debt, sold off
non-performing divisions, evaluating new business opportunities and
strengthening the existing subs that provided ADG with the ingredients to
grow and produce solid revenue and earnings growth for 2008 and beyond.
At present, ADG has the largest backlog in its history- that is $150
million funded and at least $80 million unfunded - and according to our
continuing discussions with upper management, "more contracts are coming
and all divisions are firing". Most of the business is generated from
allies within the Middle East, new markets being developed with friendly
nations within Central Asia and of course Mecar USA(ammunition service
division operating in the USA), which has a backlog that is up 550% over
2007 and growing rapidly. The company just recently announced a joint
venture with defense powerhouse Alliant Techsystems (ATK). Last month ADG
announced a joint venture within the country of Jordan for ammunition
manufacturing and assembly valued at 10s of millions and $5-10 million/yr
thereafter for multiple years.
Concerning the electronic security division--the growth potential from
that division is basically "blue sky". As governments realize that high
security surrounding oil installations, power plants, military
installations, government headquarters and public and private areas that
attract large groups of people is needed to ensure safety, it is in our
opinion that this division will mushroom into growth during the new few
years for ADG. At present the "meat and potatoes" of ADG is the Mecar SA
division located in Belgium, which is producing the majority of revenue
and income resulting from the ammunition side of the business. We also
believe that current unfunded contracts will become funded contracts
before the end of Q2.
From our ongoing discussions with senior management, we are able to
conclude with reasonable certainty that rev for 2008 will reach at least
$140 million and net income/share of .75, based upon 8 million shares
outstanding as of 2/28/2008 (this does not take into account shares that
can be converted via bondholders). It is our belief that upon conversion
an additional 2 million plus could be issued during the next couple of
years. Based upon 10K results, the current book value is $5.70/share,
cash/share equals $4.25 and a combined domestic and foreign "NOL" equals a
juicy $16.37/share (shields from the Federal taxes for many years)!
At present, ADG sports an estimated PE of 8.3X 2008 earning estimate and
also displays an equally attractive PSR of .35. The company will also
receive an additional "kick" because of the currency conversion from euro
to dollars. Another facet of this unknown gem is the fact that ADG is
relatively recession proof for obvious reasons. The world is the way it is
and companies like ADG are in business to protect us.
ADG has reduced debt, disposed on non-performing subs, became cash rich,
opened up new markets and built new relationships, ample cash to meet
current capital needs, record backlog of almost $250,000,000.00 and has
the fundamentals of a super cheap investment which still allows us to call
ADG our "stock pick of 2008." We rate Allied Defense Group with a Strong
Buy recommendation and still believe by the end of 2008 that the share
price should be double the current levels.
We have not been paid by ADG for our opinion. We may buy, sell
and or hold a position in ADG at our own discretion.
Very bullish toward aljj.pk- excellent press has the potential for
.20-.25 net for 08-- stock price .35
awrcf.ob - own it and hold it!
abg.to-- great press release concerning property in Kazahstan-13k boepd