ADF Group (TSX: DRX)

ADF Group (TSX: DRX) is a small Canadian company that designs, fabricates, and installs complex steel superstructures and other metals works to clients in North America.  It is a family run business with three members of the Paschini family being executives of the company as well as collectively having 44% ownership of the shares outstanding and voting control via the dual share-structure.

Obviously their industry is highly cyclical but ADF Group's shares price has fallen much further than fundamentals would suggest.  Consequently, the company fits the mark as a deep-value opportunity.  Below I will highlight some of my reasons for thinking so.
 

Trades Well Below Book Value

Net Current Asset = Current Assets - Total Liabilities

Strong Balance Sheet

 

With the strong and growing net-cash position they are well positioned to weather any rough-times ADF may encounter in the coming years.  Thus, the dilution risk is low.  Currently it has a net-cash position of C$0.55 per share on a shares price of C$1.30.

Still Operating Profitably & History of Good ROA

 The company is still operating profitably with much of its revenue from 2011 originating from the World Trade Center : Freedom Tower in New York.  However, due to the cyclical nature of its business one could expect the ROA possibly go zero or negative as the business cycle lulls. 

Large Insider-Ownership

The Paschini family executives who own 44% of ADF Group's economic interest are well incentivised to continue acting prudently and seeing to it that shareholder value is not destroyed.  Currently there is a normal course issue bid (i.e. corporate share buyback program) in place to repurchase ~5% of shares outstanding.  Although financially this will not be a problem to realize considering their strong cash position but due to the low liquidity of their shares, it will probably be difficult to fill that entire order over the course of 2012.

Disclosure:
Thus far I do not own any shares of ADF Group but as my current holdings reach full value I look forward to eventually rotating some of the proceeds into DRX.