Microtek Medical Holdings (MTMD) Overview

MTMD is a holding company that has two subsidiaries - Microtek and Orex. From its 10-K

Microtek, a market leading healthcare company within its area of focus, manufactures and sells infection control products, fluid control products, safety products and other products to healthcare professionals for use in environments such as operating rooms and ambulatory surgical centers. Microtek’s core product line consists of a large variety of disposable equipment drapes and specialty patient drapes. Microtek has established a broad product selling system through multiple channels including distributors, directly through its own sales force, original equipment manufacturers, and private label customers. Additionally, Microtek has a strong presence as a branded component supplier to custom procedure tray companies. As a result of an acquisition from International Medical Products, B.V. and affiliates which was concluded on May 28, 2004, Microtek acquired certain businesses engaged in the development, manufacture, marketing and distribution in Europe of high quality dip-molded medical devices (primarily ultrasound probe covers), other equipment covers, cardiac thoracic drain systems, gynecological devices and wound care products.
OTI seeks to develop and commercialize contamination control materials and products coupled with engineered systems for the treatment and disposal of those materials and products using proprietary technology and know-how. While OTI has in the past sought to develop and commercialize such products for healthcare applications, OTI has more recently focused primarily on seeking to commercialize its OREX degradable products and technology for disposing of such products in the nuclear power generating industry. During 2004, the Company licensed its OREX degradable products and disposal technologies for nuclear and other specified applications to a third party. Subsequent to this transaction, the Company no longer sells OREX products to the nuclear power generating industry.

The company's business strategy is simple - the company intends to maintain its business by continually improving its existing capabilities and simultaneously developing and acquiring new businesses. Equipment and patient drapes are contributing to large share of company's revenues at 49%. CleanOp products allow one to efficiently and effectively clean an operating room and such products represented 8% of the companies revenue in 2005.

Now on to the balance sheets. The companies gross margins have howered around 40% since 2001. The gross revenues are increasing in the 6-8% range. The stock dilution is in the 1-2% range per year and the company did a buy back last year that reduced the dilution.

The company has a book value of about 2.9$/share. The working capital has increased from its 2003 and 2004 levels. The book value is growing at double digit rates in the 10-15% range year over year. If this rate holds up, the book value will be 3.1 - 3.3 dollars per share at the end of 2006. Importantly, the company has reduced its long term debt from 13 million dollars to 1.6 million dollars between 2001 and 2006. Another thing I like about this company is that the international revenues are increasing year over year. The international revenues are growing at a faster pace compared to the domestic market share which is something to be liked.

The Q1 fy06 revenues were flat compared to Q1 05. The book value increased by approximately 2.5% in this period. The unknowns in the company's results are foreign currency exchange rates, interest expense ( which has greatly declined ) and federal income tax rate. The stocks were bought by insiders at 3.4 and 3.5 dollar levels in June of last year. Currently, the stock is trading at around 6% premium to what the insiders bought while the book value has increased at the same or higher rate. At the current price, the stock looks attractive.