Yahoo Finance
Filing
Aug. 12, 2020
2020 Q2 Data
Price: $4.65 Shares:4.4m, Cap: $20m
1.Business
(1) History
The company was founded around 1970 in Israel. It was a PCB board manufacturer and still is. At around 1988 Joseph Maiman, a well-known Israel businessman, bought into the business and became CEO of the company. Fast forward to 2013, the company's revenue grew to around 50m. However, it still can't make much profit. Also, it faces tough competition from cheaper suppliers from china.
Filing
Aug. 12, 2020
2020 Q2 Data
Price: $4.65 Shares:4.4m, Cap: $20m
1.Business
(1) History
The company was founded around 1970 in Israel. It was a PCB board manufacturer and still is. At around 1988 Joseph Maiman, a well-known Israel businessman, bought into the business and became CEO of the company. Fast forward to 2013, the company's revenue grew to around 50m. However, it still can't make much profit. Also, it faces tough competition from cheaper suppliers from china.
At the end of 2013, Mainman sold all his shares to Nistec, a company controlled by Yitzhak Nissan. The company also issues some new shares to Nistec. As a result, Nistec bought into 50.5% of the company which is around 5m for $6.5m. Also, Nissan became the new CEO of the company.
For the next two, Nissan was able to cut SG&A expenses from $6.7m to $5m in 2015 and made $1m in profit. However, from 2016 to 2018, the company suffered both revenue drop from Israel and margin contracted from over 15% to a single digit. As a result, it lost several million in these years. In 2017, it did a 5 for 1 stock reverse split. Since 2017, Nistec injected over $5m of cheap debt into the company. In 2019, the company issued 1.3m new shares over $3.4m, most of them came from Nistec and Nissan. After that, Nissan sold 200k shares. By 2019, Nissan controlled 2.86m share which is around 65%.
In middle 2018, the company hired a new CEO Eli Yaffe who has previously had turned around a similar company. Since Q1 2019 to current Q2 2020, the company has increased margin back to 15% and over. At the same time, it is able to maintain the same revenue level. It generated $1.6m real income in 2019.
(2) Major business
It is main focused on the Rigid-Flex PCB board which seems to have a higher margin than the rigid PCB or the flex PCB.
1) Defense and aerospace: Now counts over 55% of its total revenue. It still has some growth potential. This segment usually requires high quality and has a barrier to entry. It should face less competition from China supplier.
2) Medical equipment: Counts around 10% of its revenue.
Israel customers count around 60% of its revenue while US customer counts less than 20%.
Its top 2 groups of customers count around 20% and 10% of its revenue in 2019.
(3) Debt
By 2019, it has $2.5m debt from bank at around 4% interest. It also has a 3.5m loan from Nistec.
(4) Industry
The PCB industry seems quite fragmented and very competitive. In a sense, it feels like a commodity. However, in the defense and aerospace segment, it seems to have a higher quality requirement and margin seems higher.
2. Management
Eli Yaffe: He did an excellent job turning the company around.
(3) Debt
By 2019, it has $2.5m debt from bank at around 4% interest. It also has a 3.5m loan from Nistec.
(4) Industry
The PCB industry seems quite fragmented and very competitive. In a sense, it feels like a commodity. However, in the defense and aerospace segment, it seems to have a higher quality requirement and margin seems higher.
2. Management
Eli Yaffe: He did an excellent job turning the company around.
Yitzhak Nissan: Chairman, 65% of shares.
3. Financial data
4. Valuation and comments
(1) Currently, the company can generate over $2m in annual income. It is just traded around 10 times P/E which is quite cheap.
(2) The US-China tension will likely help its business, especially for the defense and aerospace industry. It will likely have more opportunities in those areas.
(3) Nistec has supported the company quite strongly in the past. In case there is a hardship, it is likely to support it again.
(4) The company's floating shares are around 30% which are just around 1.8m shares.
5. Risk
(1) Historically, it has been up and down quite often, it is hard to tell whether this won't happen again.
(2) The top 2 customers count 30% of its revenue. It has some revenue concentration risk.
6. Conclusion
Overall, the company had made an impressive turned around and has some growth potential in the near future. The current price is very acceptable.
7.Links
Update:
6. Conclusion
Overall, the company had made an impressive turned around and has some growth potential in the near future. The current price is very acceptable.
7.Links
Update:
Mar. 26, 2022
Price 4.2. Shares 5.8m. Caps: 25m
1. The company's year 2021 is very bumpy with Q1 being bad because of the shortage of raw material. Now, this is totally solved by the management comments in Q4 earnings. Q3 was also bad caused by what the management says "the holiday issue". It's probably just partially true. However, in Q4, this does not happen again. Despite all this, the company made around $2m in real cash vs $3m last year & $2.5m in 2019. The company's CapX is $1.5m in 2021 vs $1m in 2020 and $0.9m in 2019. If using $1m as maintenance CapX, it should also generate 2.5m cash in 2021.
2. In the Q4 conference, the management intends to accelerate the 5-year CapX plan to 2 years. That is quite positive.
3. Overall, the company still makes $2 to $2.5 per year with a market cap of $25m. The price is very acceptable with some good upside potential. It might take a while for it to be shown though.
