Elsoft Research Bhd (“ELSOFT“) is in the business of research, design and development of test and burn-in systems and application for semiconductors. In simple terms, ELSOFT is in the business of designing and producing automated test equipment (“ATE“) to test a semiconductor-based product.
The growth engine of ELSOFT lies in two major segments: automotive and smartphone segments.
In the automotive segment, ELSOFT develops ATE which tests daylight running lights, LED headlamps and rear-end signature lighting for branded cars.
In the smartphone segment, ELSOFT develops ATE which tests the LED component of a smartphone.
I have designed a basis template of ELSOFT’s financials from FY2011 to FY2016.
DATA | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 |
REVENUE (RM’000) | 63613 | 49741 | 45143 | 25218 | 18758 | 12653 |
PROFIT (RM’000) | 31186 | 26045 | 20133 | 10823 | 6620 | 4938 |
OPERATING PROFIT (RM’000) | N/A | 26313 | 19576 | 10434 | 6585 | 4349 |
SHAREHOLDERS’ EQUITY (RM’000) | 98303 | 83258 | 73585 | 60728 | 55351 | 50550 |
DEBT (RM’000) | 13327 | 9843 | 7675 | 4350 | 5125 | 5724 |
RATIO | ||||||
DEBT TO EQUITY | 0.13 | 0.11 | 0.10 | 0.07 | 0.09 | 0.11 |
OPERATING PROFIT MARGIN | N/A | 0.52 | 0.43 | 0.41 | 0.35 | 0.34 |
OCF RATIO | 2.51 | 1.915 | 1.954 | 2.842 | 1.002 | 0.553 |
PROFIT MARGIN | 0.49 | 0.52 | 0.44 | 0.42 | 0.35 | 0.39 |
EPS (CENTS) | 11.5 | 9.6 | 11.1 | 6.0 | 3.7 | 2.7 |
EPS (ADJUSTED) CENTS | 11.4 | 9.6 | 7.4 | 3.9 | 2.4 | 1.8 |
DPS (CENTS) | 10 | 8 | 7 | 3 | 2 | 2 |
DIVIDEND PAY OUT | 0.86 | 0.55 | 0.63 | 0.5 | 0.54 | 0.74 |
P/E | 14.37 | 13.43 | 16.10 | 11.29 | 10.14 | 15.38 |
ROE | 31 | 31 | 27 | 18 | 12 | 9 |
Note: * FY2016 is unaudited
From my calculations, the compounded growth rate of the company, between FY2011 to FY2016, is a whopping 36%. Notably, ELSOFT’s profit margin is strong, between a range of 40-50%. This indicates that the company is not in a price competitive industry and/or its products have a competitive edge over similar products in the market.
ELSOFT’s customer base is from Malaysia (~90%), China (~7.8%) and Taiwan (~2.25%).
The automotive segment contributes close to 50% of ELSOFT’s revenue whilst the smartphone segment contributes a respectable 37%. General lighting contributes 13%.
Through its R&D, ELSOFT has developed two new products:
This would be, I believe, ELSOFT’s first foray into the solar cell segment.
ELSOFT intends to enter into the medical devices market to develop control boards or embedded control systems for kidney dialysis machines. This will start as soon as ELSOFT obtains an European quality certification for medical devices.
For the 1st half of FY2017 (until 31 March 2017), it has a book order of RM27 million already. To the contrary, book order for the 1st half of FY2016 was RM21.5 million and a full year’s (FY2016) book order stood at RM49 million.
I like ELSOFT for the following reasons:
I dislike ELSOFT for:
I have already own shares in ELSOFT and will continue to acquire more of ELSOFT’s shares.
https://bursagoinglong.wordpress.com/2017/04/09/analysis-of-elsoft-research-bhd/
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Created by bursagoinglong | Mar 02, 2018
too expensive this stock,my friend build the factory for elsoft told me to buy when it traded at around 1.40 before the bonus. now ex bonus 2.10 is 3.15 already. moderate growth only the stock price up so much already.....limited gain
2017-04-09 22:51
KESM provides burn-in test services. ELSOFT provides the burn-in machines for companies like KESM. Totally two different business.
2017-04-11 14:46
suregain
Tp only rm1.90 by kenanga
2017-04-09 17:51