Common Stock: Bicicletas Monark (BMKS3)
Current Market Price: R$237.50
Market Capitalization: R$ 108 million
*All values in this article are expressed in Brazilian Reis (BRL) unless otherwise noted.
**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.
Bicicletas Monark Stock – Summary of the Company
Bicicletas Monark manufactures and sells bicycles throughout Brazil. They offer several different models including BMX, mountain bikes, and beach cruisers. The company was founded in 1948 and is headquartered in Indaiatuba, Sao Paulo
Revenue and Cost Analysis
Bicicletas Monark had sales of R$ 20 million in 2019. Net revenue after COGS and taxes was R$ 4.1 million, representing a gross margin of 21%. The company has significant operating expenses, which totaled R$ 9.4 million, therefore Bicicletas Monark had a net operating loss in 2019 of R$ 5.3 million.
The company has a significant fixed income position, which provided revenue of R$ 9.4 million in 2019. Due to this income from its investments, the company was profitable in 2019, despite the fact it had an operating loss. Net income in 2019 was R$ 2.6 million.
Balance Sheet Analysis
Bicicletas Monark has a very strong balance sheet. They have a very strong liquidity position, including fixed income investments valued at R$ 148.2 million at year end 2019. Their liability levels are low, totaling R$ 30.3 million, comprised of deferred taxes and lease obligations.
Bicicletas Monark – Debt Analysis
The company has no bank debt outstanding as of year-end 2019. They have a leasing obligation valued at R$ 8 million, R$ 2.3 million of which is due in the current period.
Bicicletas Monark Stock – Share Dynamics and Capital Structure
As of year-end 2019 the company had 455 thousand shares outstanding.
Bicicletas Monark Stock – Dividends
The company paid a dividend of R$ 6.08 per share in 2019. At the current market price this represents a dividend ratio of 2.6%.
3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
R$ 30.3 million/ R$ 190.3 million = .16
A debt to equity ratio of .16 implies that Bicicletas Monark uses some debt in its capital structure, but relies mostly on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
R$164.8 million/ R$ 6 million = 27.3
A working capital ratio of 27.3 implies an extremely strong liquidity position. This is due to the company’s large fixed income investments. Bicicletas Monark should not have a problem meeting its short-term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
R$ 237.50/ R$418.50 = .57
Bicicletas Monark has a book value per share of R$ 418.50. At the current market price, this implies a price to book ratio of .57, meaning the company’s stock trades at a discount to the book value of the company.
Bicicletas Monark Stock – Summary and Conclusions
Bicicletas Monark is an interesting company. Their bike manufacturing operation has a long history; therefore, they have some level of brand recognition as well as distribution throughout Brazil. However, this has consistently been a money losing operation.
What is interesting about Bicicletas Monark is its financial position, particularly its investments. The company has a very clean balance sheet, with a large fixed income position. In addition, they hold relevant investments in some equities, including Petrobras.
I don’t view Bicicletas Monark as a manufacturing investment, but rather a fixed income play with a call option on a money losing business. Given the downward trend in Brazilian interest rates, as well as my total lack of interest in Petrobras stock, I am not willing to invest in Bicicletas Monark stock currently. However, I will continue to monitor the stock, and if my opinion on Brazilian fixed income changes, I will reconsider my investment decision, as Bicicletas Monark stock may be an interesting way to gain exposure.
Disclaimer
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.
