Excerpts from OSK-DMG report
Analyst: Lee Yue Jer
XMH executive chairman Elvin Tan (centre) celberating the acquisition of Mech-Power Generator recently with the latter's MD Clive Tan and his wife Corrine. Photo: XMHXMH delivered a healthy set of 1QFY14 results, with its bottomline expanding 23% y-o-y.
Its orderbook remains strong while there is now zero debt on the company’s balance sheet. Armed with its huge cash hoard, XMH is ready for more acquisitions. We see high earnings growth, contract wins, and acquisition announcements catalysing the stock price.
Results within inter-quarter fluctuations. 1QFY14 revenue of SGD21.4m was within the SGD19.4m and SGD29.7m range exhibited in the four quarters in FY13. These fluctuations occur due to the timing of delivery of XMH’s products as the company only recognises revenue upon delivery. The gross margin of 25% was healthy, and we understand that XMH managed to raise the prices of some of its products.
Strong orderbooks all round. XMH has an order book of about SGD70m, the bulk of which will be recognised in FY14. Its core operations are on track to meet our forecasts. The newly-acquired Mech Power Generator (MPG) has an orderbook in excess of SGD40m.
Ready to go on buying spree with zero debt and huge war chest. XMH has an extremely strong balance sheet, with zero debt. The SGD45.5m in cash is equivalent to 54% of assets and 24% of its market cap, which primes the company for upcoming acquisitions. To compare, the cash consideration for MPG this year is barely 10% of this sum.
Strong growth locked in. On top of a high 22% core growth driven by the orderbooks, the consolidation of MPG will raise FY14F growth to 43% vs FY13. We are factoring in another 4% growth from the next acquisition, which leaves a lot of room for upward revisions.
Visible catalysts. Maintain BUY. The strong growth this year will catapult XMH’s ROE to 32%, in the absence of gearing. Contract wins by both XMH and MPG, and the unveiling of the next acquisition(s) are expected to perk up the stock price. Maintain BUY, with SGD0.56 TP, based on 14x FY14F EPS. The premium is justified by the company’s quality and highly visible catalysts.
Recent story: XMH acquires Mech-Power Generator for $17.4 m in earnings-accretive deal
Jismyl Teo, CEO of DMX Technologies.
NextInsight file photo DMX Technologies' Hong Kong subsidiary, DMX Technologies (HK), has secured a four-year contract for the supply of IT professional services to Hong Kong Government departments.
Analyst: Lee Yue Jer
XMH executive chairman Elvin Tan (centre) celberating the acquisition of Mech-Power Generator recently with the latter's MD Clive Tan and his wife Corrine. Photo: XMHXMH delivered a healthy set of 1QFY14 results, with its bottomline expanding 23% y-o-y.Its orderbook remains strong while there is now zero debt on the company’s balance sheet. Armed with its huge cash hoard, XMH is ready for more acquisitions. We see high earnings growth, contract wins, and acquisition announcements catalysing the stock price.
Results within inter-quarter fluctuations. 1QFY14 revenue of SGD21.4m was within the SGD19.4m and SGD29.7m range exhibited in the four quarters in FY13. These fluctuations occur due to the timing of delivery of XMH’s products as the company only recognises revenue upon delivery. The gross margin of 25% was healthy, and we understand that XMH managed to raise the prices of some of its products.
Strong orderbooks all round. XMH has an order book of about SGD70m, the bulk of which will be recognised in FY14. Its core operations are on track to meet our forecasts. The newly-acquired Mech Power Generator (MPG) has an orderbook in excess of SGD40m.
Ready to go on buying spree with zero debt and huge war chest. XMH has an extremely strong balance sheet, with zero debt. The SGD45.5m in cash is equivalent to 54% of assets and 24% of its market cap, which primes the company for upcoming acquisitions. To compare, the cash consideration for MPG this year is barely 10% of this sum.
Strong growth locked in. On top of a high 22% core growth driven by the orderbooks, the consolidation of MPG will raise FY14F growth to 43% vs FY13. We are factoring in another 4% growth from the next acquisition, which leaves a lot of room for upward revisions.
Visible catalysts. Maintain BUY. The strong growth this year will catapult XMH’s ROE to 32%, in the absence of gearing. Contract wins by both XMH and MPG, and the unveiling of the next acquisition(s) are expected to perk up the stock price. Maintain BUY, with SGD0.56 TP, based on 14x FY14F EPS. The premium is justified by the company’s quality and highly visible catalysts.
Recent story: XMH acquires Mech-Power Generator for $17.4 m in earnings-accretive deal
Jismyl Teo, CEO of DMX Technologies. NextInsight file photo DMX Technologies' Hong Kong subsidiary, DMX Technologies (HK), has secured a four-year contract for the supply of IT professional services to Hong Kong Government departments.
This follows on the expiry of a four-year contract, which started in 2009, to provide IT services too to the Hong Kong government.
Under the new four-year award, whose contract amount was not stated, DMX HK will provide an array of professional information security and independent testing services for the various departments and bureaus of the Hong Kong Government, such as:
> Security Risk Assessment & Audit Services,
> Security Management Design & Implementation Services and
Under the new four-year award, whose contract amount was not stated, DMX HK will provide an array of professional information security and independent testing services for the various departments and bureaus of the Hong Kong Government, such as:
> Security Risk Assessment & Audit Services,
> Security Management Design & Implementation Services and
> IT Security Monitoring & Incident Response Support Services.
Ms Jismyl Teo, CEO of DMX, said, “The Hong Kong Government is a major consumer of IT professional services. We are pleased to be awarded another 4 years of services contract. This reflects the assurance and confidence in the IT services provided by our HK team”.
Moving forward, DMX is strategically positioned in each of the three respective business segments in ICT, Digital Media and Mobile Solutions.
Ms Teo added, “We will continue to leverage on skills and capability in software and services to complement our ICT solutions and grow our ICT business. While the Mobile Solutions division remains in the high growth and low base gestation period, DMX looks forward to introduce more value-added services to enhance our Digital Media Solutions for the existing and potential customers.”
