SINGAPORE (Sept 15): Ellipsiz investors could be due for a big distribution payout in the near future, says UOB KayHian.
Ellipsiz in August entered into a sale and purchase agreement to dispose of the probe card business (PCB) to Nidec Corporation for a total consideration of US$65 million ($87.5 million).
“The recent purchase of shares at 75.25 cents per share by Ellipsiz’s CEO also underlines confidence in the completion of the deal and we opine that there is a good chance part of the proceeds will be distributed,” says analyst Nicholas Leow in a unrated report for retail investors on Friday.
After the completion of sale of the PCB to Nidec, Ellipsiz’s only remaining business would be the profitable distribution solutions segment should the company not engage in any further acquisitions or cash hoarding.
The company still has financial assets of $5.2 million and a profitable distribution business that generated 36% of the group’s revenue. That would make Ellipsiz a bargain as it trades below its net cash position.
Ellipsiz’s net cash position should also swell to more than $140 million, or 83 cents per share. This compares to its current market capitalisation of $134 million and share price of 80 cents.
In addition, CEO Melvin Chan on Aug 22 bought a total of 1.5 million shares at an average price of 75.25 cents each, bringing his total stake to 4.65%.
In an earlier sale of its Kita associate for US$6 million, FY17 dividends shot up to 9 cents — with 6.5 cents dividends still pending. This demonstrates management’s willingness to reward patient and loyal shareholders, says Leow.
Other possible outcomes include the sale of the remainder of the company as the gem in the crown (PCB) is being disposed of.
Risks include failure to close the sale of the PCB and non-value accretive M&A activities with the sale proceeds.
Year to date, shares in Ellipsiz are up 135.7%.
