What is your opinion of KITS senior management and board members? Could KITS be significantly affected by U.S. tariffs (manufacturing in Canada versus geographic breakdown of sales: 80% U.S. and 20% Canada)? What is the sales potential in $ with current production capacity? What is the next steps in KITS's strategy to continue its growth? If the end game for KITS is the sale of the company as the founder did in the past with its previous company,: where should KITS be in its development and when that could be (time horizon)? What does KITS lack to be included in the growth portfolio? What characteristics of KITS prevent you from writing a report on KITS? If you had written a report on KITS, what would its rating be (B+?)? How do you explain the loss of stock market momentum in recent months prior to the last week? What weighting of your (Peter's) portfolio would you like to have in KITS, or what is the maximum number of KITS shares you would buy, given its daily volume? Which Canadian small caps (market cap below $1,000M) are you considering better than KITS?
Thanks for your cooperation, Eric
Management of KITS founded and grew Coastal Contacts, which was sold for $430M. The team certainly knows the eye business and has already achieved strong success with KITS. We would give them high marks. Tariffs could be an issue, though this remains in flux. In mid 2024, capacity utilization was discussed on a call at less than 15%, so there is plenty of room for sales growth at existing facilities. We are not privy to its future strategies but might expect some acquisitions long term and certainly increased marketing short term. We do not know the end game, but certainly having sold before a sale exit is more likely than not. The stock is interesting, but expensive, and the company is still fairly small. We only have a limited number of spots available in the portfolio. We would like to see higher cash flow and maybe how the company might fare during a true recession, which it has not really experienced yet. We would probably give it a B with a possible upgrade to B+ if it continues to execute. We are not sure we can comment on 'where it should be in its development'. In our view the company is executing well. The shift in stock momentum could simply be profit taking after very nice one-year gains. There was no news until its preliminary results on Jan 20 and any guess would just be that. If we could own Canadian stocks we would see a 1.5% position as right for this particular stock. On valuation and/or growth and/or potential and/or size we would look to VHI and PNG as a bit more interesting today.