This is another update on recent news and results for some of my current stock holdings, following the theme from my post on first quarter results.

To be efficient, I’m once again going to combine several short blurbs into a single post.

Access Plans Inc (APNC)

APNC continues its amazing growth trajectory, recently reporting a 155% increase in fiscal second quarter earnings (which follows a 69% increase in Q1 earnings).

Quarterly revenue increased 5%, as solid gains in the Wholesale Plans (+12%) and Retail Plans (+4%) segments were partially offset by a decrease in the Insurance Marketing (-6%) segment.

The company benefited from a large decrease in direct costs, fueling the large jump in earnings.

Consider: In the first six months of the fiscal year, APNC has already earned more net profits than in all of 2010.

APNC is throwing off a ton of excess cash, with the net cash balance growing to $8.89m this quarter. Despite this rapid growth, the stock continues to trade at less than 5x TTM EV/EBIT and less than 8x EV/FCF.

As a continued vote of confidence, one of APNC’s largest shareholders, Russell Cleveland of Renn Capital Management, increased his stake by over 350k shares to 10.1%.

While there has been no news, the assumption is that the company is still exploring strategic options for unlocking shareholder value, including a going private transaction – I see this has a strong potential catalyst.

Iteris (ITI)

On a pure numbers basis, ITI is out of place when compared to the majority of my portfolio (which is focused on companies trading at a discount to assets, such as Fuji Oozx or IBAL).

ITI recently reported fiscal fourth quarter fiscals for 2011, with revenues up 4% as compared to the same quarter last year, primarily driven by the recent acquisition of Meridian Environmental Technology (MET).

The company continues to see strong growth in its product businesses, but revenues were held back by weakness in the Transportation Systems segment.

Operating income for the quarter was $0.67m, down from $1.19m last year, primarily due to increased sales and marketing expenses and costs associated with the MET acquisition.

For the fiscal year, the numbers are not great, with the company reporting an operating loss of $4.7m due a large impairment charge taken in the third quarter – backing out the impairment charge shows operating income roughly flat when compared YoY.

This impairment charge also has no effect on cash flow, as the company reported almost $5m in FCF. ITI’s cash balance now sits at $11.8m, offset by roughly $3m in debt.

Despite a history of losses, Iteris reported its fifth consecutive year of profitability, and has paid down over $11m in debt since 2007.

Iteris is probably considered more of a growth stock rather than a true value play, but it’s a name where I believe in the industry trends that back  the company’s technology.

Consider these points from the latest conference call and recent investor presentation:

• Expect Global Intelligent Transportation System (ITS) Device Market to reach $65b by 2015, up from $24B in 2010, growing 22% CAGR
• Road and other infrastructure spending projects usually project $1.50 back as return for each $1.00 invested – comparatively, spending on management infrastructure (in ITI’s sweet spot) usually sees a 7x or more return for each $1 invested
• Next Federal Highway Bill will provide a ‘shot in the arm’ for growth – expected to pass this year
• EU mandate for LDW in commercial trucks will start boosting sales in 2013 ; by 2015, expect 10-20x increase in demand

ITI management sounded very bullish on the latest conference call, with the CEO saying that he expects Iteris to do $100m in sales within the next 18 months!

The stock has struggled, but it’s hard to come up with a valuation less than $2/shr based on current metrics – if the growth materializes, the stock could appreciate significantly from current levels.

New Frontier Media (NOOF)

As opposed to ITI, NOOF violates my rule to avoid investing in business facing industry headwinds. NOOF is not in a great industry, and is therefore ignored by many in the investing world.

But at some point, even unloved stocks in bad industries are just too cheap to ignore.

NOOF reported $48.7m in revenue for fiscal 2011, down 3.4% from 2010, continuing the string of slow but steady declines going back to 2007.

After taking a string of impairment charges over the past few years, operating and net income have both been ugly, but appear to be trending in the right direction – net losses have improved from $5.2m in 2009 to $1.7m in 2010 to only $0.8m in 2011.

The company will likely see continued pressure in the domestic Transactional TV business (the main source of profits). Growth is manifesting nicely however in international markets, where sales have increased 64% YoY to $5.9m.

Despite the GAAP losses, the company has enjoyed positive operating and free cash flow going all the way back to 2004.

The cash pile just keeps growing, and NOOF now sits on $18.8m in cash offset by no debt.

Management made a number of strong moves during 2011, including consolidating facilities and investing in new storage equipment.

These measures caused capex to jump to over $5m during the year.

In 2012, the capex figure should drop significantly, as the business only requires a normal ongoing capex of $0.3m per year.

While the business may be in decline, it’s hard to see a future where NOOF disappears overnight – the business should continue to throw off cash for the medium-term.

At these prices, the stock is selling at a 45% discount to book value and only 2x FCF, for a FCF yield of almost 50%.

That’s just too cheap in my book, and I expect to see management return some of the excess cash to shareholders once the business stabilizes.

Disclosure

Long APNC, ITI, & NOOF

Last week, NOOF reported earnings for the Q3 2011 fiscal quarter. Despite mixed results, the stock responded positively to the news, ending up 2.44% on the day.

The stock had run-up almost 17% leading up to the announcement, and the momentum has continued since then.

I think most of the bad news has already been priced into the current stock price.

Going forward, domestic results should continue to show signs of stabilization and the balance sheet should continue to beef up via margin improvement and cost savings from the upcoming move.

Financial Results

Revenues for the quarter jumped 23% to $14.2m from $11.5m in the same quarter last year. This is the first quarter in quite a while that has shown a measurable increase (last quarter’s results showed mostly flat revenue figures)

The majority of the increase was in the Film Production Segment, as the company completed one of its producer-for-hire arrangements. However, the increase in revenue was not without costs, as the company’s COGS increased by approx $3m, leading to much lower margins.

The segment did manage to return to profitability in the quarter, reporting an operating profit of $0.3m to draw almost break-even through the first 9 months of fiscal 2011.

The Transactional TV segment continues to stabilize, with revenues down 3% compared to the prior year quarter. NOOF’s international expansion is progressing in both the VOD and PPV channels and will continue to be the key source of growth.

Through the first 9 months of 2011, revenues were $37.8m compared to $35.3m in the same prior year period. International sales now make up 15% of total revenues compared to an 11% share last year, growing 51%.

Operating income through the first 9 months was $0.6m compared to $3.7m in 2010. The decrease was primarily due to an asset impairment charge of $0.6m, increased costs associated with the upcoming location move, and a shift in sales towards the lower margin segments.

The balance sheet remains rock solid, with $14.7m in cash and working capital of $21.3m. The company extended its $5m line of credit until Dec 2011.

Due to the large D&A expense, the company continues to generate solid FCF.

Conference Call

On the international expansion:

“Within this transactional TV segment, we continue to have success with our international expansion. We are now distributing content in over 28 countries”

“we are continuing to experience a growth trend within our international distribution, and are currently generating approximately $1.5 million per quarter from this international revenue.”

On the profitability of the Film Production segment:

“We’re focusing our efforts within this segment on the profitable components of the business, which has allowed us to take advantage of reducing the segment’s overhead and improve margins, which should become visible in fiscal 2012.”

On the upcoming location move and equipment upgrades:

“By executing our equipment upgrades to current with the relocation, we expect to realize cost savings and minimize the operating risk that goes with such major upgrades. We originally expected to begin construction in fiscal year 2012, but due to timing and additional cost saving opportunities, we are beginning the relocation in Q4 fiscal 2011.”

Conclusion

There is no doubt that the company has run into some problems outside of the main business segment, leading to the writedowns over the past 2 years. However, it looks like management is now focused on profitability headed into fiscal 2012.

(The financial statement notes also show that the co-Presidents of the Film Production segment were let go in September/October last year. Hopefully this means that the bad decision making and poor results are behind them)

Going forward, management is very bullish on the cost saving potential of the new facility. There are upfront costs for such a move, and the company expects to realize those costs in the next two quarters.

Combined with the heavy equipment investments (which were needed anyways), these costs will continue to depress profitability for the next two quarters but should pay off in the long-run.

This faith is reflected in continued institutional support, with Baker Street Capital continuing to buy up shares at a rapid pace.

Since disclosing an initial 6.3% position on Dec. 21, 2010, Baker’s recent 13D/A filing shows that the stake has grown to 7.9%, with almost 200k shares recently purchased north of $2.00.

Despite the recent run-up in price, the stock still trades at very low multiples (EV/EBIT – 4.01 or EV/FCF – 2.7 based on 5yr averages).

Disclosure

Long NOOF

New Frontier Media Inc (NOOF) reported fiscal second quarter earnings last week, showing continued pressure on the business segments as the company discloses additional (although much lower) impairment charges.

Quarterly Results

NOOF’s second quarter revenues were relatively flat, falling to $11.2m compared to $11.4m in the prior year quarter.

Overall, international revenues are up 41% during the first six months of the year while the domestic market fell 6%.

The Transactional TV business continues to generate a vast majority of overall profits, driven largely by increased sales in the Video-on-demand (VOD) segment.

However, this revenue growth comes with additional costs as the company must make upfront investments to reach these new markets. Gross margins within this segment have fallen to 63% compared to 69% in the same quarter last year.

NOOF reported an operating loss of $286k, driven primarily by higher costs across most of the business segments and a non-cash impairment charge of $0.6m in the film production segment.

Financial Position

While the business continues to face challenges going forward, the balance sheet and financial position of the company remain strong.

The company has $14.8m in cash on the balance sheet – after backing out liabilities, NOOF’s net cash balance is $5.7m or almost $0.30 per share.

The company’s current ratio sits at a healthy 3.61.

Despite the business struggles, the company continues to generate cash, with an adjusted free cash flow of $3.37m so far in 2010.

This cash-flow number is affected by a significant increase in cap-ex expenses as the company is in the process of upgrading its storage systems. In addition, cash was paid out at the beginning of the year for producer arrangements that should be recouped before the end of the fiscal year.

New Lease Agreement

In October, the company announced the signing of a new lease agreement to consolidate its operations into a 50k square-foot facility. Historically, business operations were split between two smaller locations.

The new lease is offering very attractive leasing terms including substantial leasehold improvement allowances, and should allow for increased efficiencies in NOOF’s operations going forward.

According to NOOF’s CEO, Michael Weiner,

“We obviously will have some costs associated with moving, but we estimate combining the facilities and what we have to look forward to, we will save a substantial amount of money over the next several years by having everything in one facility, and plus the ability to grow.

So it was a very, very favorable deal…And as I say the amount of money we got from the landlord was substantial and made the deal very economically viable.”

Conclusions

Consider these valuation statistics:

Using a TTM EPS number of $0.23, the cash-adjusted P/E is only 6.9.

EV/EBIT is only 5.03.

P/Book Value is 0.7.

By most traditional valuation metrics, the company continues to remain historically cheap, even after the recent run-up in the stock price.

This conclusion is backed by management actions, as several company insiders bought back over 33k shares in August when the stock traded between $1.35-$1.50, near its 52-wk low.

A new institutional investor, Longkloof Limited, an investment holding company based out of the Virgin Islands, disclosed a new 11.5% stake as well.

While the business is certainly facing short-term pressures, the stock remains too cheap to ignore.

Disclosure

Long NOOF