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  5. BOS: I have been searching for some beaten down industrial names and I came across AirBoss. [AirBoss of America Corp.]
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Investment Q&A

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Q: I have been searching for some beaten down industrial names and I came across AirBoss. I owned it a few years ago so I was somewhat familiar with the company. I noticed that in the past year it traded as $47 WOW and now it is just over $7. I realize that the big Covid contracts for nitrile gloves and respirators. etc. drove the price up and those contracts have dried up, but still only $7ish dollars. They have other divisions, like automotive, that are not covid dependent and the defense and safety segment is still relevant (It was relevant before Covid!!) So what is not to like about BOS when it is in the $7ish dollar range? At this price the dividend yields close to 6 per cent. I would be content collecting a year or two in dividends while waiting for earnings to stabilize or sentiment to change. But is the dividend safe? It is 10 cents per quarter and earnings were 9 cents but cash flow was decent. debt is a little high but it doesn't seem onerous. Then again, I am not an accountant!!

Asked by Paul on November 01, 2022
5i Research Answer:

It is that type of market. BOS is down 87% this year. It is not risk-free, but we do not think it is as bad as all that. Earnings will drop sharply this year, but analysts' consensus calls for good growth in 2023. Even if we cut $1.00 in EPS forecast in half, the stock is not expensive. Debt certainly looks high right now, at $112M, as cash flow has dried up to negative $10M in the last 12 months. With negative cash flow, the payout ratio is meaningless, but dividends are only $8.4M annually, approx. Bloomberg has a default ratio of 2.83% (fairly high). We need to see more contracts, better margins and higher sales to get better comfort on the debt. Insiders own 21% and there has been very little selling. It had bad news yesterday, indicating glove pricing is down and also some products failed to meet standards. With prices down, but costs up, we can see why investors are nervous. We think the dividend is probably at some risk here. The company may be close to covenants on its debt. A big new contract would help, but one cannot rely on that. All in, while cheap, there is still lots of risks here. We would not suggest it for any except the most aggressive investors.