Seychelle Environmental Technologies Inc (SYEV) - Tiny, cheap, illiquid and hairy

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I came across Seychelle Environmental Technologies Inc (SYEV) whilst rooting through stocks which Dan Schum has disclosed in his portfolio but not written up yet (Thanks for the idea Dan!).

As I suspected the firm is tiny, cheap , illiquid and hairy. Just how I like 'em!

SYEV 's description on the OTC markets website reads as follows;

"Seychelle is a worldwide manufacturer and marketer of portable water filtration products with proprietary filters that remove up to 99.9999% of contaminants that can be found in drinking water sources. Over 7 million filters have been sold in 33 countries through a network of dealers, distributors, humanitarian and faith-based groups, and militaries. The extensive product line includes bottles, water pitchers, drinking water straws, canteens, pure water bags, pouches and pumps; ideal for daily family use or emergencies."

The firm was founded back in  1986 by Carl Palmer who was a pioneer in creating home reverse osmosis products. This is the third water filtration company he's started having sold the previous two,  Aq-ro-matic  Inc to Coca-Cola Co. back in 1973 for $4 Mil in stock and cash, and  PurWater International/Interntional Membrane Laboratories   to AMF Cuno Corp for  around $6 Mil in 1986.

You can read a bit about him here.

If you want to listen to a podcast interview with the founder you can listen here.

Here's some numbers;

Market Cap = $2,125,945
Share price = $0.08
Common = 26,574,313
BV = $3.489,247
Total Debt (not inc. warrants or operating leases) = $877,030
Cash = $2,174,866

No prefs but there's  currently   6,407,221 warrants outstanding with a weighted average life of 1.54 yrs and an excise price of $0.21.

Operating lease obligations are ;


2019 =   $147,509 
  2020$= 258,181 
  2021 =   $153,209 
  Total   =   $558,899


Revenues and earnings are lumpy with SYEV,  every few years the firm turns a profit when a natural disaster hits or a tele-evangelist   pumps their products.

Here's BV for the last few years;

2015 = $4.58 Mil
2016 = $5.86 Mil
2017 = $3.62 Mil
2018 =   $4.3 Mil
​2019 = $3.75 Mil

Here's revs and net profits/losses for the last few years;

2015 = $4.31 Mil / -$1.41 Mil
2016 = $10.91 Mil/ $1.03 Mil
2017 = $4.38/ -$2,15 Mil
2018 = $5.28 Mil/ $660k
2019= $3.15 Mil/ -$240 k

​Now to the charts.

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SYEV 5 yr Chart

SYEV Long-range Chart

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I see a stock selling at it's lowest price since 2004, I see a stock which has frequently moved up several hundred percent in the past. I hear the ghost of Ted Warren whispering into my ear 'This is a buy'.

Before we get too carried away let me describe the fine head of hair this stock currently sports.

​For starters, despite being based in CA, the firm is  incorporated in NV. It re-incorporated there from  Utah back in '98. At this point you might want to start running away!

Given the outstanding warrants there's  a good chance of some dilution if SYEV runs up like it has in the past.

The firm is also currently involved in legal proceedings;
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"There is a pending legal action named Rolling Tides, LLC vs. Carl Palmer, Seychelle Environmental Technologies, Inc., and other defendants.  The case was brought in the Superior Court of the State of California, County of Orange.  The action alleges certain fraudulent transfers occurred from Seychelle to the various defendants.  The plaintiffs have refused to identify any such transfers by date or amount.  The matter is in discovery and trial is set for August, 2019.  All the defendants have denied the allegations of the complaint, and are vigorously defending the matter.  It is not likely that the case will be settled without trial.  The Company believes that the case has no merit."

​This  is probably enough to put most people off but not me.


When I'm looking at a stock I ideally want to see 3 things,


a) discount  to tangible assets

b) multi year or absolute low on the long-range chart

c) Some evidence or prospect of change

Point  C brings us to the  recent release of an 8K by the company;

"Effective March 8, 2019, Mr. Carl Palmer resigned from his offices as Treasurer, President, CEO and CFO of the Company. There are no disagreements between the Company and Mr. Palmer. He remains a Director of the Company and plans to continue to work with the Company primarily in a consulting capacity, with a focus on strategic issues. A copy of his resignation letter is attached.

Also on March 8, 2019, Ms. Cari Beck became the President and Chief Executive Officer of the Company. She is also a Director and HR Manager.

Effective March 8, 2019, Ms. Jocelyn Straubinger became the CFO and Secretary-Treasurer of the Company."

The board had previously removed Palmer from the helm  back in 2016 stating  ;

"This decision of the Board is the result of its dissatisfaction with Mr. Palmer’s past performance regarding both ongoing operations and customer and employee relations"

​Shortly thereafter they did a U-turn and announced a Co-management structure.

You can read about these actions here and here.

Given Palmer is 85 years old it's probably reasonable that he takes a step back. A point of interest is the fact that Mr Palmer is the Father of  Cari Beck and the Father-in-law of  John Beck (Director).

So, it's a family affair. Could be a good thing, could be a bad thing.


Right, what's SYEV worth?

Assuming it should be  worth it's current BV then around $0.13 per share might be fair value, you might have a different opinion after seeing those warrants and operating lease obligations.

If SYEV has another good year like 2016 where it earned  $1 Mil then maybe  it's worth a lot more.

​If it can earn 3 or 4 cents per share again and get a no growth P/E pricing from the market of  7-8  then maybe it's  fair value range is somewhere between $0.20-0.32 per share.

Last I checked the firm had a $300k backlog.

Given the recent unfortunate events with Hurricane Dorian and the imminent Humberto perhaps the firm's business will increase.

In terms of ownership, the family owns  58.25% of the common. If they want to screw minority shareholders they can.


I'm a simple man and my thesis is simple here.


I see a tiny illiquid stock which is  currently subject to negative market sentiment, it is selling at a multi year low and has the potential to run up several hundred percent if it has a good earnings year.  I see some emerging potential with a  change in leadership.

I buy then sit and wait.

Thanks for reading ,

David


Long SYEV


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