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Tuesday, January 20, 2015

DMX TECHNOLOGIES: Sharp Discount To NAV, Expected PE 6x

DMX TECHNOLOGIES' recent traded price of 15.9 cents was at a sharp 66% discount to its net asset value of 46.4 cents a share as at end-Sept 2014.

The company's business performance appeared to have turned up, based on the 3Q2014 profit increase of 5.2% to US$7.6 million.

Some highlights of its 9M2014 results:

» A major business segment (digital media) has grown while another segment (infocomm technologies, or ICT) declined.

Digital media (US$126.9 million) overtook ICT (US$118.8 million) in 9M2014 sales.

In the digital media segment, DMX has focused on network convergence as well as increased collaboration with cable TV operators in China on their analog-to-digital TV migration.

(For more on DMX business, visit itswebsite)

» Gross margin is decent but has moderated to 21.6% for 9M2014 from 23.5% a year earlier. 

» Total operating expense fell 20.1% y-o-y to US$30.5 million. The Group has streamlined its headcount and resources over the last three quarters. 

» In its 3Q2014 results announcement, DMX said it was confident of achieving the same level of profitability as FY2013 when it reported US$22.8 million in net profit attributable to shareholders. 

This implies a strong profit in 4Q2014 to top up the US$9.2 million (-27.7% y-o-y) achieved in 9M2014. 

That would be a repeat of 4Q2013 when it achieved US$10.1 million in net profit attributable to shareholders.  

Indeed, a strong 4Q has been experienced in the last few years due to increased demand from clients who typically ramped up orders towards year-end.

If DMX's 2014 profit was at the same level as 2013, the PE of the stock would be about 6.2X.

And if it maintains the 0.3 cent a share final dividend it has paid out in the each of the past three financial years, the yield would be 1.88%.

DMX is expected to report its full-year results in late February.

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