Today's Equity Focus Is Kali Inc (OTCMKTS:KALY)

Today Insider Financial is turning its attention to Kali Inc (OTCMKTS:KALY), a newcomer to the OTC Markets. Kali Inc was formed as a marketing and development company with a focus on small to medium size growth companies. The management of Kali Inc aim to turn the public vehicle into an M&A powerhouse by targeting service companies in fast growing sectors with strong margins and the ability to achieve cost cutting synergies.The first acquisition for Kali Inc is Wave Marine & Yacht Services, Inc., a Florida based single source yacht and boating maintenance provider. Wave Marine & Yacht Services provide a wide range of services to boat owners and the recreational marine industry. The company provides engine repairs and maintenance, interior and exterior upholstery services, and cleaning services from washing to waxing. Wave currently serves the Tampa Bay and Sarasota markets with plans to expand into other Florida coastal markets.With the acquisition of Wave Marine & Yacht Services, Kali will focus its efforts on the recreational boating industry, which is expected to continue growing. According to the 2016 ITA Recreational Transportation Top Markets Report:

"The U.S. recreational boat industry is the strongest it has been in years. U.S. expenditures on boating products, as measured by the National Marine Manufacturers Association (NMMA), increased by a compound annual rate of 4 percent from 2009 to 2014. The U.S. boat market is very dependent on consumer confidence and personal disposable income. U.S. consumer confidence has rebounded to levels similar to 2007, just prior to the last recession."

What we like about Kali's move into the recreational marine industry is that it is highly fragmented. There's a clear runway for growth to consolidate the smaller players into a much larger force in the industry. In the U.S. alone there are almost 25,000 boat services companies like Wave. These companies serve almost 12,000,000 registered boats in an industry that generates over $35 billion annually.In addition to buying other players like Wave Marine & Yacht Services, Kali can become a specialty retailer like West Marine Inc (NASDAQ:WMAR). West Marine sells boating supplies, gear, apparel, footwear, and other water life-related products. West Marine is the largest player in the space, yet has just 268 stores in the US and Puerto Rico. The company offers core boating products that comprise of maintenance, electronics, sailboat hardware, anchors/docking/moorings, engine systems, safety, electrical, plumbing, boats/outboards, ventilation, deck hardware/fasteners, navigation, trailering, seating/boat covers, and barbecues/appliances. It also provides apparel, footwear, and clothing accessories; and fishing, water sports, paddle sports, coolers, bikes, and cabin/galley merchandise. West Marine also sells products through direct-to-consumer sales channel, which include westmarine.com and portsupply.com e-commerce websites, direct mail catalogs, and call center.In addition to West Marine, other players like billionaire Wayne Huizenga have been investing in the recreational marine industry. Besides owning several mega yachts through the years, Huizenga owns Rybovich Superyacht Yard & Marina in Palm Beach County, Florida. Huizenga has spent $45 million building the mega yacht service center on 11 acres about a half-mile north of the Riviera Beach public marina. If there's one person that knows how to consolidate a fragmented industry, it's Wayne Huizenga. He was able to roll up Waste Management and Blockbuster Video and then later sell out of both companies.The acquisition of Wave Marine & Yacht Services looks to be the first of many by Kali Inc. We see Kali Inc getting its feet wet with the Wave acquisition and then going on to much larger deals. If the company can achieve its goals via acquisitions and cost cutting synergies, we could easily see a buyout offer come from West Marine or a large private equity firm. The concept of identifying a fragmented industry and achieving economies of scale has proven to be a winning investment strategy in the past. The key for Kali Inc is executing on its stated goals. We will be updating Insider Financial as soon as we know more. For the latest updates on KALY, sign up for our free newsletter today!Disclosure: We have no position in KALY and have been compensated three hundred dollars for distribution of this article.