March 18, 2021 - 1:50pm EST by
2021 2022
Price: 1.40 EPS .10 .15
Shares Out. (in M): 2 P/E 14 9.3
Market Cap (in $M): 3 P/FCF 14 9.3
Net Debt (in $M): 0 EBIT 0 263
TEV (in $M): 2 TEV/EBIT 14 9.3

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Bonal Technologies (BONL) is simply a small gem. It has all the attributes of an outstanding investment: a proven unique technology with a competitive advantage, a cheap valuation, a pristine balance sheet, a history of profitability and paying dividends and an outstanding customer list. The only negative is that it's a micro-cap with limited liquidity suitable only for small accounts.

Reviewing the Company's website ( is simply a must, It highlights the advantages of its technology, it's tremendous competitive advantages and the independent studies backing up the Company's claims. The U.S. Department of Energy stated, "Meta-Lax (Bonal's Product) is a proven substitute for 80% to 90% of heat-treatment relief in metal-working application. It improves the inconsistencies of the previous resonant-vibration technology by using more efficient, more consistent "subharmonic" vibrational energy, which is the optimum vibration stress-relief frequency."

So what is this technology in layman's terms? When metal is heated or bent  to be shaped and prepared for its ultimate use it invariably forms areas of significant stress (residual stress), in essence the layers of the mental become entangled with each other. These stress areas need to be removed or they will ultimately cause failure of the metal part; the metal will crack or be deformed in some manner! This could be catastrophic depending on the application of the metal part. This is why these stress areas need to be removed. Bonal's  has developed one of the most effective and efficient ways to remove these deformities. It uses vibration technology versus traditional heating or thermal technology.

Before we go into more detail on how the product works let me highlight some of the "Blue Chip" users of Bonal's technology. Satisfied customers include: General Motors, Ford, Chrysler, Tesla, U.S. Army, U.S. Air Force, NASA, Boeing, Northrop-Grumman, Caterpillar, Siemens, General Dynamics, Lockheed-Martin and Pennsylvania Power. Customers have reported an eight-fold annual ROI on the cost of Meta-Lax equipment. They claim the equipment has helped them achieve: 95% reduction in processing costs; 98% reduction in processing time; 84% improvement in controlling distortion; 41% reduction in machining time; and, 55% scrap rate reduction.

It might sound to good to be true, but let's review the facts:

1) What is residual stress ans stress relief? Residual stress is an internal pressure that is retained by the metal after mechanical or thermal straining once the source has been removed. The source of the residual stress can be mechanical (forcibly changing the shape of the grains), or thermal (a sharp temperature drop). Stress, in particular, thermally induced stress causes three problems: distortion following machining, delayed distortion, and premature fatigue failure. Stress relief neutralizes thermally induced stress thus eliminating future problems. 

2) How does Meta-Lax stress relief compare to thermal stress relief? The most important point is that Meta-Lax and thermal stress relief both consistently achieve stress relief.The main differences lie in the side effects that heat has on the metal. Meta-Lax stress relief does not cause heat side effects like treatment distortion, scaling, or changing of the mechanical properties, This allows Meta-Lax to be used on many kinds of parts that would be challenging for thermal stress relief such as finished and semi-finished parts, assemblies, hardened metals, tubular and structural steel, and non-ferrous metals.

3) Does Meta-Lax have any competitive advantage over other vibratory stress relief equipment? ABSOLUTELY!

a) Only Meta-Lax uses sub-harmonic energy levels. All other competitors use "at resonance" vibrations which are violent, producing inconsistent results according to the U.S Department of Energy, and could be damaging to the part, area equipment and shop personnel. The mild, non-destructive sub-harmonic energy level used by Bonal have mathematically proven to be optimum when using vibrations to stress relief metals. Sub-harmonic technology is exclusively Bonal's patented technology

b) In addition, unlike harmonic technology, Bonal's process is consistent with certified stress relief.

c) Okay, now this is for you engineers and scientists in the group that really want to get a good grip on this. (The rest of you can skip this paragraph if you like, but I thought it would be interesting to include.) What does Meta-Lax do to the metal internally that causes stress relief to take place? Meta-Lax vibrations excite the the metal to gently oscillate in a higher energy state than normal. As it does, areas of high stress concentration that were caused by a sharp temperature drop use the additional energy to redistribute the stress to areas of lower stress, thereby eliminating the overall effects of stress on the metal part. It is critical to note that it is the the optimum vibrational energy is always in the sub-harmonic zone and not in the higher amplitude areas employed by competitors.

4) Who endorses the Meta-Lax technology? Meta-Lax has been verified by over seven major organizations, including the U.S. Department of energy. There have been over 165 published articles in trade magazines of which 125 of these included pre-approved case studies from Bonal customers including NASA, U.S. Navy, and General Motors. In addition, Bonal has received numerous awards and recognitions from prestigious government organizations and industry publications.


In the first three quarters of fiscal 2020 (calendar year ending March 2020) Bonal was doing well. Accordingly, in the third quarter of that year, the Board issued a $.05 per share dividend. This was the twenty-third time in the last 15 fiscal years that a dividend was issued, Then, like most companies, the Covid-19 pandemic hit the Company's customers. This led to a $50,000 loss for the year. This was the first time in 16 fiscal years that Bonal reported a loss. The year was not a total loss as the Company introduced the new Model 2800 computerized Meta-Lax stress relief system. This introduction was a huge success as it represented 22% of sales for fiscal 2020. The Model 2800 is the most advanced state-of-the art stress relief system on the market.

In the first nine months of fiscal 2021 (year ending March 2021) the Company's profitability has rebounded nicely. Although sales are down 15% year to date versus last year, net income is up 245% to $102,000 or $.06 per share. Gross margins improved from 69.8% to 74.4% in the comparable periods. The Company was proactive and cut G&A expenses by almost 19%. Hence, the Company is managing the Covid crisis extremely well. Sales will continue to improve as the economy rebounds over the coming year and orders will rise to levels above pandemic years with the introduction of the Model 2800. The reinstatement of a dividend will not be far behind.

The Company's balance sheet is pristine. The Company has $954,000 ($0.55/share) in cash. It's total current assets are $1.65 million versus short term liabilities of $101,000 and ZERO long term liabilities. It's current ratio is over 16 with no debt on the books. It's book value is $0.90, which is made up almost completely of net current assets of $0.89 per share. Again, the Company shows plenty of liquidity to resume its dividend policy,

What is Bonal worth? First we obviously have at least $.50 in value from the cash on hand. What do we expect earnings to be? In a bad fiscal year like 2021, $.09 or $0.10 earnings per share is a reasonable expectation. If we value the company based on Covid year earnings of $.10 per share and give it a fair multiple of 15 and add back the cash we get a value of $2 per share, over a 40% premium to its current share price. But, that's not a fair valuation as it is based on the bottom of the cycle. $.15 per share in earnings is easily doable for Bonal next year with an expectation of a possible $.10 dividend! At 15 times earnings and with the cash on hand this would give the Company a valuation of $2.75 per share, almost double its current price. Even if the price remained stable at $1.40 it would have a potential yield of over 7%. These expectations are very reasonable given the Company's stellar profitability and dividend history.


The negative part in the story is the liquidity. Management has a controlling interest in the Company, The float is only about 800,000 shares and the stock does not trade often. It takes time and patience to build a position, but shareholders will be rewarded over time with dividend payments and price appreciation.


I recognize this Company is not everyone's "cup of tea" but it has all the attributes of an outstanding business with a proprietary product with a huge gross margin. It's a product that customers need and derive tremendous benefit from. The shares are currently selling at 10 times depressed earnings, net of cash. My only wish is that this opportunity were 100 times the size that it is. But, in any case, I believe it is too good to pass up, even if you can only establish a small position,






I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


The catalysts are obvious here:

1) Reinstatement of dividend payments as the economy rebounds.

2) Growth in sales and earnings as sales of its new Model 2800 grow.

3) A possible sale of the Company.

4) The family decides to simply tender for the remaining shares it does not hold and takes the Company private.

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