Thursday, August 4, 2016

Ellipsiz Ltd - A Review of Full Year 2016 Financials

Not long ago, I wrote about a low-ball offer by the substantial shareholder, Bevrian Pte Ltd.

Recently, the company released its full year unaudited financial report on 2 August 2016.

Based on its new financial report, I did a review of Enhanced Triple S Scorecard (Based on Share Price of $0.375):

The new financial numbers in 2016 Full Year Financial Report still passed the Enhanced Triple S Scorecard!

Wow...so I am already "In the money", but I am still not selling because:

Increasing Dividend - The company has been increasing its full year dividend amount from 1.8 cents in 2014 to 2.5 cents in 2016. Dividend yield at the current price of $0.375 is still at 6.67%!

Passed Enhanced Triple S Scorecard - Yes, even at the current price of $0.375, the company continues to pass the Enhanced Triple S Scorecard. Psst...my purchase price is at $0.300.

Very Low Debt to Equity - Debt to Equity ratio remains very very very low at 0.04 only. This meant that in the event the company decides to expand, it can take on debt to grow. Although I am against this...

Decreasing Capex - Capital Expenditure has been decreasing from $5.4 Million in 2014 to $2.6 Million in 2016. This meant that the company has the ability to produce similar amount of products without significant investment in machinery. Furthermore, this also meant that the company will be able to use the excess money saved to invest in other areas or even give them out as dividends.

Good Management - Despite having a slowdown in the general economy and a supply glut in the Semi Conductor industry, the management is still able to produce net profit without much debt and investment. Furthermore, from other evidences (such as higher dividend), it seems the management also takes good care of its minority shareholders.

But I still have concerns...

The slowdown of the economy and increasing competition - Although we do not know how the slowdown of the economy will continue to affect the company, but we can see there was a huge fall in revenue from 2014 to 2015. Furthermore, with all the cheaper sources recently (esp from China), switching suppliers may not be as hard as before for its customers.

Huge Intangibles - The company has about $40 Million of intangibles in its non-current assets. If these intangibles are deem worthless one day, the write-down will cancel away all the good work the company has done these years.

In Short

It is hard to find a stock that could pass the Enhanced Triple S Scorecard. It is even harder to find one that continue to pass the Enhanced Triple S Scorecard at an even higher price. This actually meant that the company has grown stronger as the share price rises. I look forward to receiving the announced dividend in November and will continue to hold on to it or even add to it after XD.

As stated before, I will only be willingly to sell this stock at a price closer to the discounted net asset value price of at least $0.500.

Current Price: $0.375 as of 4 August 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at $0.300.

If you are thinking of looking at stocks for the long term, do give my initial Triple S Scorecard a try. It's still a good tool!

For those who are interested to find similar quality under-valued stock, you can read about My 1st Sharing Session with T.U.B. Details of the 2nd Sharing Session with T.U.B is located in the post as well.
 

I will only be sharing my Enhanced Triple S Scorecard with the attendees of the Sharing Session. If you are interested to attend the 2nd Sharing Session with T.U.B., do not hesitate to contact me directly.

Oh... and do remember, please like our Facebook page - T.U.B Investing.

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