Business
Elsoft Research Berhad
is involved in research, design and development of automated test
equipment (ATE) and burn-in systems and application specific embedded
systems for the semiconductor industries. They also have a 30.91% stake
in Entopia, the butterfly farm in Penang.
Their primary markets are automotive, smart devices and general lighting industries.
Elsoft has a lean workforce. It is manned by 79 employees in different areas.
Significant amount of sales and purchase are overseas which is denominated in USD. Exchange rate fluctuation of USD against MYR may influence the group’s financial results. Since both sales and purchase are in the same currency, the exchange risk is partially mitigated because of the natural hedge.
Elsoft’s top customer is a lighting solutions MNC which accounted for 75% of the group’s total turnover for FY2018. However, this customer has been with the group for more than 15 years which indicates a long term stable relationship.
Their primary markets are automotive, smart devices and general lighting industries.
Elsoft has a lean workforce. It is manned by 79 employees in different areas.
Significant amount of sales and purchase are overseas which is denominated in USD. Exchange rate fluctuation of USD against MYR may influence the group’s financial results. Since both sales and purchase are in the same currency, the exchange risk is partially mitigated because of the natural hedge.
Elsoft’s top customer is a lighting solutions MNC which accounted for 75% of the group’s total turnover for FY2018. However, this customer has been with the group for more than 15 years which indicates a long term stable relationship.
Future Prospect
The group is expecting weaker demand for ATE in the beginning of 2019 and recover in 2nd half of 2019.
Elsoft is undergoing continuous R&D focusing on improving existing products and developing new products for customers.
Their current areas of interest in R&D are mainly in:
Elsoft is undergoing continuous R&D focusing on improving existing products and developing new products for customers.
Their current areas of interest in R&D are mainly in:
- ATE for infrared/laser devices testing
- Next generation ATE for smart devices industry
Income Statement
|
Financial Year |
12/31/2018 |
12/31/2017 |
12/31/2016 |
12/31/2015 |
12/31/2014 |
|
Sales/Revenue |
78,150 |
64,348 |
63,613 |
49,741 |
45,143 |
|
Net Income Avail to Common Sh. |
39,917 |
29,835 |
31,103 |
26,045 |
20,133 |
|
Profit Margin |
51.08% |
46.36% |
48.89% |
52.36% |
44.60% |
Elsoft stated that their R&D efforts in FY2017
successfully converted into revenue for FY2018. Revenue has increased by
26.5% for FY2018, driven by high demand from smart devices industry.
Profit margin went up due to large scale production improving the
economies of scale.
In the 4th quarter of FY2018, production activities were slowed down to give opportunity for the group to ramp up R&D activities in new test application for infrared/laser devices, automotive headlamp and next generation LED flash.
Administration expenses decreased slightly by 1.4% despite incurring more in staff cost and corporate exercise in FY2018. This is due to no one-off expenses such as impairment of other receivables and additional factory assessment raised which happened in FY2017.
In the 4th quarter of FY2018, production activities were slowed down to give opportunity for the group to ramp up R&D activities in new test application for infrared/laser devices, automotive headlamp and next generation LED flash.
Administration expenses decreased slightly by 1.4% despite incurring more in staff cost and corporate exercise in FY2018. This is due to no one-off expenses such as impairment of other receivables and additional factory assessment raised which happened in FY2017.
Balance Sheet
|
Financial Year |
12/31/2018 |
12/31/2017 |
12/31/2016 |
12/31/2015 |
12/31/2014 |
|
Cash & Short-Term Investments |
72,479 |
54,054 |
45,078 |
30,605 |
32,338 |
|
Cash Only |
10,187 |
12,501 |
11,192 |
14,684 |
12,812 |
|
Total Current Assets (TCA) |
92,467 |
81,292 |
73,013 |
53,677 |
48,937 |
|
Total Non-Current Assets (TNCA) |
37,080 |
38,018 |
38,576 |
39,424 |
32,322 |
|
Total Assets (TA) |
129,547 |
119,309 |
111,589 |
93,101 |
81,260 |
|
Total Current Liabilities (TCL) |
15,978 |
11,293 |
12,782 |
9,271 |
7,150 |
|
Total Non-Current Liabilities (TNCL) |
638 |
600 |
588 |
571 |
525 |
|
Total Liabilities (TL) |
16,616 |
11,893 |
13,370 |
9,843 |
7,675 |
|
Shareholders’ Equity (TSE) |
129,547 |
107,416 |
98,219 |
83,258 |
73,585 |
Elsoft cash position was reduced in FY2018 due to higher placement in money market fund for greater after tax return.
The group remains in net cash position with no debt.
The group remains in net cash position with no debt.
Financial Ratios
|
Financial Year |
12/31/2018 |
12/31/2017 |
12/31/2016 |
12/31/2015 |
12/31/2014 |
|
ROE |
33.56% |
29.02% |
34.28% |
33.21% |
29.98% |
|
ROCE |
72.02% |
56.03% |
58.80% |
55.47% |
54.66% |
|
EPS |
6.00 |
4.48 |
4.67 |
3.91 |
3.03 |
|
DPS |
4.58 |
3.33 |
2.50 |
2.22 |
1.94 |
|
Book Value |
0.20 |
0.16 |
0.15 |
0.12 |
0.11 |
|
DPR |
76.33% |
74.33% |
53.53% |
56.78% |
64.03% |
With all the numbers in the income statement and balance sheet
in place, the financial ratios can give us an indication of how healthy
is this company.
ROE average at 32.01% for the past 5 years. For FY2018, the group recorded 36.21%.
Since more than half of shareholder’s equity is cash and investments, the ROCE of the group is significantly more than ROE. For FY2018, the ROE reached to its highest at 72.02%. This means the company is able to make RM72.02 using its current working capital.
EPS, DPS and book value has increased consistently for the past 5 years along with growing revenues and profit.
ROE average at 32.01% for the past 5 years. For FY2018, the group recorded 36.21%.
Since more than half of shareholder’s equity is cash and investments, the ROCE of the group is significantly more than ROE. For FY2018, the ROE reached to its highest at 72.02%. This means the company is able to make RM72.02 using its current working capital.
EPS, DPS and book value has increased consistently for the past 5 years along with growing revenues and profit.
Valuation
|
Current Price |
0.89 |
|
Dividend Yield |
5.15% |
|
P/E Ratio |
14.83 |
|
P/B Ratio |
4.55 |
At the time of writing (5/5/2019), ELSOFT is selling at market price of RM0.89.
I wrote this post more than 2 months ago and only decided to
upload it now because I have so many other nice posts (in my opinion)
lined up.
I also noticed that I am writing less stock analysis as of late and wrote more about ideas on personal finances. It’s one of the topics that I like to talk about too.
If any suggestions or ideas you want me to write about, feel free to let me know.
I also noticed that I am writing less stock analysis as of late and wrote more about ideas on personal finances. It’s one of the topics that I like to talk about too.
If any suggestions or ideas you want me to write about, feel free to let me know.
I hope this post helped you in some way. If you like this
post, you might like similar posts that I have written previously. Click
here to read them.
Disclaimer
The writer of this analysis may have direct interest to this stock. You can check out his portfolio here to verify.
This post is intended for education and entertainment purpose only. It is not a recommendation to buy, hold or sell. If you decide to act on the information shared, The Stockmonger will not be liable for any losses incurred. At the same time, we will not ask for compensation in any form if you make profits.
https://thestockmonger.com/elsoft-rising-tech-company-with-a-butterfly-farm/
This post is intended for education and entertainment purpose only. It is not a recommendation to buy, hold or sell. If you decide to act on the information shared, The Stockmonger will not be liable for any losses incurred. At the same time, we will not ask for compensation in any form if you make profits.
https://thestockmonger.com/elsoft-rising-tech-company-with-a-butterfly-farm/
