A Huge 30%-50% Revenue Boost For One Of My “Weird OTC Stocks”
A Follow Up To "Buy A Company Selling Land For Double the Market Cap"
I’m going to be giving an update to my readers on a stock I covered in one of the very first editions of “Weird OTC Stocks”. The company had recently released their 10-K and in it is an update on court proceedings that give the company another large catalyst for revenue growth in 2025. This court ruling involves the company’s ability to raise commission prices for the products that move through their facility. With this new price increase the company should be looking at a revenue increase in the range of $1.75 million to $2.0 million, a 30%-34% increase in the company’s total revenue as compared to their FY 2024 figures.
While the company is now actively collecting these price increases it is also exploring its legal possibilities of recourse to collect backpay on the increases it failed to collect while fighting this out in court. Should the company be able to collect this backpay owed to them it could boost their income for 2025 by an additional $1.1 million. That would increase the company’s total YOY sales figures by an additional 18% should they receive this money. On top of all of this new news, the company I am talking about is also still trying to sell off their businesses, which could result in a large dividend pay out and a total increase to shareholders’ value of around 45%.
As I begin this article this company’s share price sits at $419.99 with only 46,612 shares outstanding. This gives the National Stock Yards Co. ($NSYC) a market cap of $18.3 million. Add the $1.3 million in debt to NSYC’s market cap and subtract the company’s $612K in cash and we get an enterprise value of just barely under $19 million. Since my last article the stock has seen a 25.8% increase in price, going from $330 per share to $419.99 per share today on the news that the company had been working with a realtor to sell off the company’s Oklahoma National Stock Yard which is located right in the heart of Oklahoma City.
A Court Battle Over Stockyard Tariffs
The decision for NSYC to sell off their stockyard was made after the company spent a large amount of money, time, and resources in court defending the company’s decision to put a tariff of $5 per head on all livestock that passes through its stockyard. This price increase was due to NSYC experiencing a mix of lower cattle numbers moving through their facility mixed with inflationary costs. This tariff was also approved by the Packers and Stockyards Division of the USDA’s Agricultural Marketing Service. Even though this increase was approved, only three of the nine Commission Firms that operate in the company’s stockyard adhered to this newly approved tariff at which point an injunction was ordered by the District Court of Oklahoma County, allowing the commission firms to stop collecting and paying the increased tariff. After spending a large amount of money and time fighting these commission firms in court, NSYC won their case and is now receiving their increased tariff pricing from all nine of these commission firms.
On average the company sees between 350K to 400K head of cattle move through its stockyard each year. With the company’s new increased tariffs of $5 per head, the company should be looking at an extra $1.75 million to $2.0 million a year in revenue, a 30% to 34% increase from the company’s past revenue figures. The company is also looking to collect backpay from the tariffs they were unable to collect while their dispute was being heard by a judge. This amounts to another $1.1 million if the company is successful. If the company was able to collect backpay on these tariffs it could help raise the company’s YOY revenue figures by 48.3% - 52.5% to between $8.8 and $9 million.
NSYC Is Currently For Sale
While this incident did have a happy ending and NSYC should see a return to a profitable business model in 2025, this entire incident has left the company’s management team wanting out and in an attempt to maximize value for their shareholders, they decided to list the stockyard for sale. NSYC has posted the 113 acre property for sale for $27 million, a value that’s 42% higher than the company’s current enterprise value. If we subtract 20% of that value for taxes we end up with an almost 16% value upside as compared to the company’s EV.
The agreement that NSYC had signed with their real estate broker ends April 30th, 2025. That being said management has specifically stated on multiple occasions that nobody in this family run business wants to take over the day to day operations. It must also be said that management has also been very realistic about their ability to continue to run a stockyard in a large urban setting such as Oklahoma City. I suspect that this brokerage agreement will be extended or that the company will hire another real estate broker to help them sell. This property is located on the riverfront in Downtown Oklahoma City, right down the road from where a brand new state-of-the-art NBA stadium is being built.
NSYC also has 80 acres of property in the St. Louis area that the company has also recently declared to be up for sale according to the company’s most recent annual report. This property is located just two miles from downtown St. Louis and could be worth another $3 to $6 million or so fully tax burdened.
NSYC’s Upside Potential From Selling Off These Properties
If we put both of those sales figures together we get a 45% upside in value per share as compared to the stock’s current valuation and I would expect a price target in the range of somewhere between $575-$600 per share. When and if these asset sales go through I suspect that NSYC will return this value back to shareholders in the form of a dividend as Chairman of the Board Chris Bakwin specifically stated that selling off the company’s assets was a direct attempt to protect shareholder value. Like I had stated previously, although this has been a family run company for a very long time, everyone running NSYC seems to have a very realistic view of what the future holds for a large agricultural operation in the midst of major metropolitan area. I actually really commend them for that. I grew up helping out on the various farms my dad’s family operated. It’s a great lifestyle that gives back to those who exist within it in ways that a normal job just can not but, times are changing and so is business.
Uncertainties
Of all of the potential headaches that could arise from attempting to sell off these assets the one that’s most relevant right now is the U.S.’s current tariff situation. NSYC’s management has done several interviews with local and agricultural press stating that they have received some offers. With all of this new tariff uncertainty coming into focus, potential buyers of these properties may back out until they feel more confident in the future of the economy. Financing a large asset purchase and then attempting to fund building on it might begin to sound more and more unappealing as investors and market media figures argue over whether or not we’re going to have a recession. I can’t tell the future and right now anything can still happen but comments like this from the company’s Director James Reynolds saying “it’s not like we are trying to have a fire sale and dump that thing off.” give me some comfort knowing that this team is going to be patient and find the right price and the right buyer for their company.
Conclusion
If NSYC has to wait until more certain economic conditions arise before they can get a buyer, the company should see a large boost to profits this year. On average the company sees between 350K to 400K head of cattle move through its stockyard each year. With the company’s new increased tariffs of $5 per head, the company should be looking at an extra $1.75 million to $2.0 million in revenue per year, a 30% to 34% increase from the company’s past revenue figures. The company may even have an additional $1.1 million coming back to it from uncollected tariffs that NSYC didn’t receive while their new charge was being disputed in court. If the company was able to collect backpay on these tariffs it could help raise the company’s YOY revenue figures 48.3% - 52.5%. If NSYC was to successfully sell off their properties in the near-term, we could be looking at a 45% upside in the value of the stock to somewhere between $575-$600 per share. Either way there are two major catalyst for the stock to further re-rate.
Disclosure: I am long National Stock Yards Co. ($NSYC) and will buy or sell my shares anytime following this article. This is not financial advice. I am not a financial advisor. Do your own research.