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Dear Partners,
Accounts managed by Halvio were up 14.01% for Q1 2026 compared to the major indices that were either roughly flat to down slightly.
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Large winners for the quarter included Cipher (CPHR), Mestek (MCCK), QEP (QEPI) and Beng Kuang Marine.
Cipher’s product Natroba has started to show some growth and the balance sheet is now back in pristine shape. An increase in the stock price gives the management team another method of potential acquisition currency rather than just cash or debt financing. Mestek and QEP are very illiquid OTC stocks that don’t need much volume to move the price up or down. Both trade for cheap EV/EBIT multiples compared to peers and have substantial net cash balance sheets. Mestek just released its 2025 annual report and grew sales in its metal forming and HVAC segments for the year and continues to remain extremely profitable.
Beng Kuang purchased the remaining 49% of their subsidiary ASOM for S$60m using a mix of stock, cash and contingent consideration. This subsidiary has been their crown jewel and what has delivered a lot of the value to shareholders over the past few years. The company put out a recent presentation that highlights some key aspects of their business. While their fortunes are tied to the price of oil, they are able to capture two different growth avenues: servicing aging FPSO fleets AND potential expansion of new FPSOs coming to the market.
I feel pretty fortunate that we didn’t have any type of exposure to SAAS/tech as most of that sector has sold off due to fears of AI wiping out their business models. It has never appealed to me to pay such high multiples for companies in industries that can change in the blink of an eye, with little hard asset value but only assets comprising the software and other intangibles that could be made worthless by someone with an idea and a computer. Another market worry was the war in the Middle East that has caused oil prices to surge over 50%. While the situation remains ongoing, the long term ramifications to the global markets remains highly uncertain and I have no idea what the end result will look like.
Starting last fall I decided to look at the US OTC market and wrote a blog post about it here.
During the quarter I became interested in a few companies based in Singapore and have taken a position in one on top of our current BEZ position. I also took a position in a tiny Canadian newspaper company detailed below. The small cap space continues to produce a ton of ideas and I currently have more ideas than capital.
Sincerely,
Anthony
New Idea: FP Newspapers Inc (FP.V)
FP Newspapers (FP) is a tiny $5m microcap company that flies under the radar. FP owns 49% of a partnership that owns the leading newspaper in Canada’s 6th largest town, Winnipeg, called the Winnipeg Free Press and some other smaller news outlets. FP was formerly an income tax trust for Canadian tax purposes that owned securities issued by a limited partnership that itself owned a few Canadian newspapers. Due to the implementation of the SIFT tax in the early 2010s in Canada, the trust ownership structure lost its tax advantage and FP then converted into a corporation to own the limited partnership and went off the TSX on to the smaller TSX Venture Exchange. This current structure is in place today and shareholders of FP own 49% of the limited partnership.
Newspapers make most of their money from advertising and circulation (actual sale of the paper). The rise of the internet and digital advertising has resulted in attention and advertising dollars moving online and away from papers, which has resulted in the industry declining over the past few decades. You can see the steady decline in FP’s total revenues over the last few years:
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However, the Winnipeg Free Press is extremely embedded in the 803,000 residents of Winnipeg with 46% of Winnipeg adults reading the Free Press on a weekly basis. And the breakdown of the revenue numbers tell that. While print advertising has declined most years, circulation revenue has remained extremely resilient.
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Even with the decline in overall revenues, FP manages to maintain a reliable $6m-$7m of EBITDA per year. In 2022 management decided to invest in a printing press that they would move from New Jersey to Winnipeg for $10m using debt financing, only to abandon the project in 2023. Since that time revenue has continued to decrease but the free cash flow of the business has remained flat and has been used to pay off the debt.
With a stock price of $0.70 and shares outstanding of 6.9m, FP has a $4.8m market cap. The underlying partnership has net cash of 2m after having paid down all its debt and just did $6m EBITDA for 2025. Without taking account for the net cash, the look through EV/EBITDA is 2x . FP owns the building it operates in and based on conservative property tax records could be worth $22m. Taking FP’s 49% share of that would value the company double its current market cap. This hidden asset provides significant downside protection and there is a potential catalyst on the horizon of management putting some of that cash build up to work for shareholders.
Believe it or not there are still buyers for these types of assets. Just last year the DallaNews Corporation (DALN) decided to sell its building and then right after there was a bidding war for the operating business. A logical acquiror of FP in my eyes would be Torstar Corporation, which owns a collection of Canadian newspapers in some mid-sized Canadian towns. While I don’t think the business needs to be sold to do well from here, it does show there is demand for these declining niche assets.
FP is cheap today for a few reasons:
- They use the equity accounting method for its main asset which makes it hard to screen for as a quick glance or view of the financial statements won’t tell the whole story.
- The building FP operates out of is measured at its historical cost
- $5m market cap makes it too small and illiquid for most funds to own
- It doesn’t own the underlying newspaper asset 100% outright but just shy of control at 49%
- Buying into a declining newspaper company is not very enticing to most investors
- Questionable past capital allocation that resulted in a large one-time write off of $8m right after deciding to make a significant investment in a printing press
References
- Accounts managed started April 1, 2025.
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
