DALLAS, TX -- January 12th, 2024 -- U.S. Global Investors, Inc. (NASDAQ: GROW): Stonegate Capital Partners updates their coverage on U.S. Global Investors, Inc.
Company Updates
- Well Positioned to Grow AUM: U.S. Global Investors offers 6 innovative and thematic no-load mutual funds and 3 specialized ETFs to the retail investment community. The Company is well positioned to benefit from the growing demand of the retail public. As of 1Q24, total AUM was $1.8 billion.
- History of Developing Innovative Products: For over 50 years, GROW has offered specialized investment products, including the U.S. Global Jets ETF (JETS). JETS is the only pure-play airline ETF available to investors, providing exposure to the global airline industry, including airline operators and manufacturers. JETS is a smart beta 2.0 product, meaning its model and strategy are a more advanced and tailored version of a traditional index fund, aimed to provide better risk-adjusted returns.
- Scalable Business Model: The Company has a relatively fixed expense structure. As AUM grows, most of the incremental revenues flow to the bottom line. This is due to revenues increasing faster than expenses as AUM grows, despite the Company providing breakpoint discounts. A small and experienced team combined with strong operating margins presents GROW the ability to significantly scale the business and improve EPS.
- Returning Capital: The Company has a history of increasing dividends and share repurchases. In 1Q24, the Company repurchased 198,213 shares at a net cost of approx. $611,000, which is an increase of ~359% from 1Q23. The Company believes its stock is undervalued, and therefore buys back shares when the price is flat or down from the previous trading day.
- Strong Balance Sheet: The Company has high cash reserves of approximately $26.8 million and no debt as of September 2023, allowing it to invest in lucrative opportunities available in the market. In addition, the Company owns its own office building, with a book value of $4.61 million, although recent appraisals indicate a higher valuation.
- Impressive Liquidity Position: GROW ended fiscal 1Q24 with working capital of approximately $37.7million, up by $3.0 million or 8.8% from fiscal 1Q23. With approximately $26.8 million in cash and $54.1 million worth of total assets, the Company is in a strong position to meet obligations and grow. This has allowed GROW to continue its monthly dividend payment which is equal to an annualized 3.22% dividend yield.
- Investment in HIVE Digital Technologies: The Company has an investment of warrants and convertible debentures valued at $6.3 million in HIVE Digital Technologies Ltd. (NasdaqCM: HIVE), the first ever publicly traded cryptocurrency miner. HIVE uses 100% green energy to mine Bitcoin, realizing industry leading gross margins.
- Valuable Oversight: CEO/CIO Frank Holmes owns approximately 18% of the Company. Under his leadership, the Company has grown to an AUM of $1.8 billion. Additionally, the Company recently selected Grant Thornton LLP as its new independent auditor. Grant Thornton was selected after a rigorous review process and is a nationally recognized firm.
- Valuation: We are using an EV/EBITDA multiple to value the Company. Using an EV/EBITDA multiple range of 4.0x to 6.0x, with a midpoint of 5.0x results in a valuation range of $4.38 to $5.28 respectively, with a midpoint of $4.83.Fisca
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Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.
