Stock Sonar #51 - 4/3/2024

Hawaiian Electric (NYSE:HE) — mrkt cap $1.2B; Price $11.01; EV/EBITDA 5

PASS. Hawaiian Electric is the primary provider of electricity in Hawaii, serving 95% of the population. HE currently faces bankruptcy risk due to causing a major wildfire incident in Maui with share prices down approximately 75%. Legal action has ensued, with HE facing lawsuits from the families of the nearly 100 individuals who perished, as well as for the significant property damage caused. HE’s market valuation hovers around $1 billion, contingent upon the resolution of these claims, which may amount to as much as $6-7 billion against net assets valued between $4 – $5 billion. Given the extent of negative publicity and ill will, we believe that claims will reach these higher estimates. Despite the slight possibility that not all fires were directly attributable to Hawaiian Electric, its current market price is too high to warrant even a speculative investment position.

Gencor Industries (NYSE:GENC) — mrkt cap $250mm; Price $16.75; EV/EBITDA 8

MORE RESEARCH NEEDED. Gencor Industries is a leading manufacturer of machinery used in the production of highway construction materials. The company’s core products include hot-mix asphalt plants, soil remediation plants and combustion systems. Its backlog has increased by 50% yoy from strong demand due to road work driven by the IIJA. Although trends seem favorable, more research needs to be done to evaluate supply chain risks and the scalability of the business given its complex and custom product offerings.

Intellicheck Inc (NAS:IDN) — mrkt cap $66mm; Price $3.39; EV/EBITDA NA

PASS. IDN provides digital and physical identity validation solutions for various sectors including financial services, retail, and law enforcement. Around 2018, when CEO Bryan Lewis took the helm, the company drastically shifted their go-to-market strategy away from selling to bars and liquor shops. Competitors generally have an increased suite of security offerings, but Intellicheck’s competitive advantage appears to be an industry-leading fraud detection rate of 99.9%. More work needs to be done on why this cannot be replicated, but it appears they have long-standing relationships with state authorities and have a unique understanding of barcode formats. The company is close to cash-flow neutral and has recently undergone widescale changes to its sales force. Although there are definitely areas of the tech we like, this appears to be a company that is experiencing a high degree of flux regarding its operations and the efficacy of its sales strategy. We will wait for more clarity before proceeding.

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