San West Inc.

Company Overview

San West is a development stage company which designs, manufacturers, sells and repairs off-road buggies, and additionally provides after market performance products and accessories for buggies. Its products are sold both at a physical location and online. Its primary service outlet, “Letz Go Racing Off-Road Center” is located in Huntington Beach, California and provides customers with modification parts, accessories and repair services for off-road buggies built in China for the U.S. market. San West reports that it has the ability to service and repair all makes and models including imports. Bryan Britton, San West’s chief financial officer, has experience developing aftermarket turbo kits, king shocks and other high performance accessories and has a master’s degree in all phases of automotive, service, repair and diagnosis from the Arizona Automotive Institute in Glendale, according to the company SEC filings.

The company’s strategy is to expand by acquiring other similar outlets, benefiting from the market fragmentation and capitalizing on economies of scale. In 2008, San West acquired Buggy World – a retailer of buggies, which had sales of $1.6 million in 2007. Buggy World is currently San West’s primary retail point.

Currently, San West is focusing on building consumer awareness and brand loyalty.

Recent performance

As a result of its acquisition of Buggy World in 2008, San West’s revenues grew by 229% year-over-year in the first nine months of 2009. Furthermore, the company expects to report over $800 thousand in sales in Q4-2009, which will be almost double the sales level of Q4-2008, representing mostly organic growth.

Industry Highlights

According to San West, the motorsports industry is highly fragmented, with an estimated 4,000 retail stores throughout the United States, and is highly competitive with respect to price, service, location and selection. At the same time, in many states, dealerships have an exclusive 5-10-mile franchised territory, similar to automobile dealerships, which somewhat limits competition.

The market is a cyclical one, following the general economic cycle, according to the company. This is due to the hobby nature of the motorsports, spending on which depends on consumers’ residual incomes, which obviously tend to shrink during economic downturns. Oil prices also affect this market.

San West quotes the Consumer Product Safety Commission, reporting that between 1998 and 2008, sales of off-road vehicles grew from 2,000 units to 126,000 units, and the company believes that these data suggest that the market is still in early development and presents significant growth potential.

Share performance:[1]

Recent price (USD): 0.21

52 week low (USD): 0.00

52 week high (USD): 0.35

Market capitalization (USD): 23.4M

Shares outstanding: 111.5M

 

SNWT.OB share performance – daily closing price and volume (since listing):

Source: Google Finance

 

 

Disclaimer

 

The opinions expressed in this research report are analyst’s personal views about the company. Opinions and recommendations contained in this report are submitted solely for advisory and information purposes and are not intended as an offering or a solicitation to buy or sell the securities mentioned above. Neither the analyst nor SafeHarborResearch.com owns any equity or debt securities in the analyzed company.

 



[1] Source: Reuters, SEC filings