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Special Situation Investing: A Look At SPAC Technoglass

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Constructing a Portfolio of SPAC Investments that's Poised to Crush the Market by TMFDeeJ aka Jason Knapp

This is the third post in a series that I have been writing about actionable investment ideas in Special Purpose Acquisition Companies or SPACs for short. Previously I have discussed WL Ross Holding Corp. $WLRH (link) and Boulevard Acquisition Corp. aka AgroFresh $BLVD (link). Today I'm going to talk about a company called Technoglass $TGLS.

While much of the work for my first two SPAC write-ups was my own, I always believe in giving credit where credit is due so I'd like to thank Uzi Zimmerman of Venture Capital for his excellent recent write-up on Technoglass over on Seeking Alpha. Here's a link to his recent article on the company. It's a must read for anyone who is considering investing in it: Tecnoglass Is A Ridiculously Cheap Stock

Headquartered in Columbia, the Technoglass is a leading manufacturer of glass for commercial buildings. Technoglass began its life as a public company when it was acquired by Andina Acquisition Corporation $ANDA in late 2013.

While the company's headquarters is in South America, the United States accounts for more than half of Technoglass' business (60% in the most recent quarter and growing).  This benefits the it in a number of ways, shielding it from the more volatile economies of its home continent and providing it with a tailwind as the value of the U.S. dollar strengthens versus the Colombian peso (its revenues are in dollars, but its costs are in pesos).

Technoglass' growth has been and continues to be strong, with the company forecasting a 23% increase in revenue, 50% rise in net income and a 37% increase in EBITDA for 2015.

With a growing order backlog and a significant expansion to its manufacturing capacity scheduled to come online during the second half of 2015. Technoglass should be able to achieve its lofty growth objectives.

So the growth is there, but how expensive is Technoglass?  Not very.  At only 5x its estimated 2016 cash flow, Technoglass trades at a discount to its peers who trade in the neighborhood of 8 to 10 times. It's cheap when looking at the old price-to-earnings ratio as well. According to Yahoo! Finance, the company trades at only 15.5x trailing earnings, which is amazing in today's market for such an impressive growth story, especially when compared with public comps like PGT, Inc. $PGTI which trades at 31x and Apogee Enterprises, Inc. $APOG which trades at 32x trailing earnings.

I mentioned in a previous article that when investing in a SPAC, I usually take a close look at the sponsor of the entity.  After all, if I'm going to give someone a blank check to go out and buy a business for me I want to know who's doing the shopping.  I am not personally very familiar with Andina Acquisition Corp.'s founder Luke Weil, but his background with Bear Stearns and Scientific Gaming Corp. $SGMS and his experience in both business and philanthropy in South America seem solid.  I am less concerned with the background of the SPAC's creators after an attractive acquisition has already been made anyhow.

In Technoglass we have a relatively cheap, fast-growing company that does business in an economically-sensitive sector in a recovering U.S. economy.  Again, I encourage everyone to dive into both the company's presentations and the excellent article that I provided a link to above. I am currently long Technoglass warrants $TGLSW and will definitely consider adding to that position in the future.

More reading: Andina Acquisition Corporation Technoglass Investor Presentation ; Technoglass Investor Presentation - January 2015 ; Technoglass Investor Relations