OMNI-LITE INDUSTRIES CANADA INC (OML.V)

I am putting OML.V on my watch list. This is USA-based, micro-cap company listed on Toronto Venture Exchange. It is a manufacturing company involved in five segments, auto (20%), aerospace (35%), sports (19%), military (18%) and commercial (8%).

The company grew its top line by over 30% in 05 and has grown its revenues in the first three quarters with similar rate sequentially. It has pre-announced its Q3/06 revenues early last week, therefore, eliminating any chance of negative surprise. Margin at 71.5% and improving. It earned 9 cents in 04, 13 cents in 05 and I expect it to earn 19-20 cent this year. It is free cash flow positive and with very little debt. ROE over 21%. Valuation is cheap (14.5X of its 05 EPS and about 10X of its 06 EPS). Insiders own 34% of its shares and it just announced early this month that it intends to purchase 5% of its shares.

Again, it is very illiquid and a bit of cyclical. However, the cyclicality is partially offset by its diversified revenue sources. The company is expecting to continue to grow its revenues in 20%-30% range in the next five years. The stock, despite its micro size, is simply too cheap to ignore. Moreover, I do not believe anyone paid any attention to the revenue announcement and buyback release in early October, both of which are positive catelysts for the stock. I intend to start accumulating a position on this name. My target price for next 12 months is $3.0, representing 15X of its estimated EPS for 06.

Position: None