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KXD Digital Entertainment Ltd (SGX: K07)
December 25, 2007, 2:59 am
Filed under: companies analysis | Tags: , , ,

KXD Digital Entertainment Ltd

As of 25 December 2007

  • 1 SGD : 5 RMB
  • EPS: 0.00513/share
  • P/E ratio: 10.721
  • Earnings Yield: N/A
  • 52 Week High: 0.200
  • 52 Week Low: 0.055

The One Minute Story

KXD designs and supplies home entertainment equipment, which includes DVD players and home entertainment systems.

Financial Analysis (in SGD)

YEAR

2006

2005

2004

2003

2002

Book Value Per Share

0.1629

0.1534

0.1433

0.1120

 

Cash Per Share

0.0128

0.05025

 

 

 

Cash Flow Per Share

-0.0495

-0.0380

 

 

 

Earnings Per Share

0.00751

0.01394

0.03137

0.02154

 

Dividend Per Share

N/A

N/A

 

 

 

Dividend Payout Ratio

N/A

N/A

 

 

 

Net Profit Margin

2.076%

2.954%

5.916%

7.041%

 

Return on Total Assets

2.777%

4.106%

11.195%

7.961%

 

Return on Equity

4.609%

9.091%

21.887%

19.235%

 

Current Ratio

2.380

1.730

1.899

1.609

 

Long Term Debt of Capitalisation

N/A

N/A

N/A

N/A

 

Why Buy

  • At the current price of 0.055, it is at a massive discount to BV/share (0.1599) of 65.6%. It means assets can be bought at massive discount. The question that needs to be answered is whether the assets are worth this amount and whether prospects are good.
  • The CEO owns 75% of the company and has not been divesting his share.
  • The current ratio as of 3Q ’07 is very healthy (3.1787)
  • The company carries zero long-term debt.

Why Not Buy

  • There is a continuing lack of profitability over the years, which indicates a weak competitive position.
  • KXD doesn’t seem to have a visible brand, as opposed to other manufacturers.
  • Cashflow has been negative for at least two consecutive years.
  • Commodity business.
  • KXD admitted in its annual reports that it is facing strong competitive pressures, and that it will channel cash toward R&D efforts. As investors, we want companies to have little competition and to spend as little cash as possible on hit-or-miss research.

Strategy

  • Watch for unlikely turn in fortunes.
  • Currently, based on an aggregation of 1Q to 3Q ’07 results, the company does not seem to be on course to replicate ’06 performance. Total revenue for this 3Qs stands at 397.129 RMB Mil while ’06 had 952.796. Total profit for ’06 stands at 19.778 but the total for this 3Qs is only 3.67.
  • Assets go for cheap and the price seems to indicate that the company is going for a good price, but it is all based on historical data.
  • Looking forward, the company seems to be priced correctly: future results seem to be substantially weaker than the year before.
  • Classic value trap.

Disclaimer: The author bears no responsibility for any financial losses caused by reliance on the author’s views. Investors are advised to do their own research before making their investment decisions.



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