Today we are going to look at Binasat Communications Berhad (KLSE:BINACOM) to see whether it might be an attractive investment prospect. In particular, we’ll consider its Return On Capital Employed (ROCE), as that can give us insight into how profitably the company is able to employ capital in its business.
Firstly, we’ll go over how we calculate ROCE. Then we’ll compare its ROCE to similar companies. And finally, we’ll look at how its current liabilities are impacting its ROCE.
Understanding Return On Capital Employed (ROCE)
ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. In general, businesses with a higher ROCE are usually better quality. In brief, it is a useful tool, but it is not without drawbacks. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.
So, How Do We Calculate ROCE?
The formula for calculating the return on capital employed is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
Or for Binasat Communications Berhad:
0.051 = RM4.8m ÷ (RM107m – RM11m) (Based on the trailing twelve months to September 2019.)
Therefore, Binasat Communications Berhad has an ROCE of 5.1%.
Does Binasat Communications Berhad Have A Good ROCE?
ROCE can be useful when making comparisons, such as between similar companies. In this analysis, Binasat Communications Berhad’s ROCE appears meaningfully below the 11% average reported by the Telecom industry. This performance could be negative if sustained, as it suggests the business may underperform its industry. Regardless of how Binasat Communications Berhad stacks up against its industry, its ROCE in absolute terms is quite low (especially compared to a bank account). Readers may wish to look for more rewarding investments.
Binasat Communications Berhad’s current ROCE of 5.1% is lower than 3 years ago, when the company reported a 36% ROCE. This makes us wonder if the business is facing new challenges. You can click on the image below to see (in greater detail) how Binasat Communications Berhad’s past growth compares to other companies.
When considering this metric, keep in mind that it is backwards looking, and not necessarily predictive. ROCE can be deceptive for cyclical businesses, as returns can look incredible in boom times, and terribly low in downturns. This is because ROCE only looks at one year, instead of considering returns across a whole cycle. If Binasat Communications Berhad is cyclical, it could make sense to check out this free graph of past earnings, revenue and cash flow.
Do Binasat Communications Berhad’s Current Liabilities Skew Its ROCE?
Current liabilities include invoices, such as supplier payments, short-term debt, or a tax bill, that need to be paid within 12 months. Due to the way the ROCE equation works, having large bills due in the near term can make it look as though a company has less capital employed, and thus a higher ROCE than usual. To counteract this, we check if a company has high current liabilities, relative to its total assets.
Binasat Communications Berhad has total assets of RM107m and current liabilities of RM11m. As a result, its current liabilities are equal to approximately 11% of its total assets. This is a modest level of current liabilities, which will have a limited impact on the ROCE.
What We Can Learn From Binasat Communications Berhad’s ROCE
While that is good to see, Binasat Communications Berhad has a low ROCE and does not look attractive in this analysis. Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with modest (or no) debt, trading on a P/E below 20.
I will like Binasat Communications Berhad better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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Riga-based Mintos launches mobile app for its investment platform – EU-Startups
Based in Riga, Mintos is waving the Latvian startup flag on the global stage, turning heads towards the potential of this Baltic country. We have had our eye on their fast growth for a while now, also including them in our list of 10 promising Latvia-based startups to watch in 2020. As a true fintech, its mission is to make investing accessible, easy and transparent.
Now, the fintech, which currently has offices in Riga, Berlin, Warsaw and Vilnius, is launching its first mobile app for Android and iOS, based on the possibilities of the smartphone as an access tool.
Founded in 2015, Mintos allows users to connect with loans from international and Mintos-authenticated alternative lending companies. Today, via its platform, more than 250,000 investors have funded in total almost €5 billion worth of loans and earned more than €80 million in interest.
Now, having gone through extensive community consultations with over 3500 mobile app beta version testers (made up of a group of investors on Mintos), the start has developed an app focused on enhancing existing features of Mintos service, with added capabilities that would increase investor accessibility, engagement and security.
Mintos has decided to build the app gradually, launching versions in multiple releases, with this first version offering easy and quick access to investors’ accounts and investment monitoring in just a few swipes. Upcoming mobile app releases will offer additional functionalities adjusted for smartphones, including the complete investing experience which is already accessible on the Mintos marketplace. Mintos is also working to provide investors’ with essential insights to better inform their decisions via the app.
Marcis Gogis, Mintos Head of Product who led the development of the mobile app, says: “We were pleasantly surprised at how active Mintos investors were in their willingness to participate in testing the app and providing extensive feedback. The strong growth of Mintos is based on the active involvement of the Mintos community of loyal and trusted investors in the development of our products and services.”
Martins Sulte, CEO and Co-Founder of Mintos shared his excitement about the new era of Mintos marketplace accessibility: “At present day, Mintos serves more than 250,000 investors from 91 countries worldwide, and these numbers are increasing rapidly. The primary purpose of the Mintos mobile application is to provide investors with faster and easier access to their accounts. In the future, we believe our mobile application might be the primary access for using our services.”
Martins Sulte adds that while expanding internationally, it is important to accommodate users in those countries where mobile app usage is more common than access via computer or laptop. “Mobile app also gives users the possibility for more comfortable and secure access to their accounts, with a PIN and biometry login,” adds Sulte.
The launch of the mobile app lays the groundwork for other anticipated Mintos services that are currently in the works, including an IBAN account number and debit cards.
MMJ Group sees opportunity to invest in Canadian cannabis businesses at attractive valuations – Proactive Investors USA & Canada
The company owns a portfolio of investments in the cannabis sector and aims to invest across the full range of emerging cannabis-related sectors.
MMJ’s asset manager, Embark Ventures, sources new investments to diversify the company’s cannabis portfolio whilst providing resources to actively manage its existing investments.
The company believes that the current market and industry sentiment surrounding cannabis companies has created opportunities to invest in listed and unlisted Canadian cannabis businesses at attractive valuations and prices.
In addition to opportunities to invest into new businesses in the global cannabis market in line with MMJ’s investment mandate, MMJ also holds warrants (similar to ‘options’ in Australia) and contractual rights in a number of its existing listed and unlisted investments which provide opportunities for MMJ to make follow-on investments in businesses at a discount to current valuations.
Canadian cannabis industry: challenges
Whilst MMJ continues to hold high-quality Cannabis investments, the Canadian cannabis investment market suffered a material downturn in valuation in 2019.
The industry remains in a period of transition from business establishment to producing operational cashflow. This period of transition is expected to last for the majority of 2020.
Investors are critically examining the capacity of Canadian companies to generate sales and earnings growth during the following 12 to 18 months with expectations that some companies will need to raise cash to continue the rollout of their business plans.
Share purchase plan
MMJ recently launched a share purchase plan (SPP) to raise up to $5 million through the issue of shares priced at 11 cents.
The funds raised will be primarily applied towards investment in existing and new cannabis and hemp businesses, operating expenses and general working capital.
Eligible shareholders will be able to subscribe for up to $30,000 worth of new shares until March 10.
Can These 2 Small-Cap Growth Stocks Power Your Investment Portfolio? – The Motley Fool Canada
Small caps are stocks that have market capitalizations below $1 billion. This is the generally accepted definition. Likewise, micro caps are those with a market cap below $500 million. Although these stocks can be highly volatile, there are some high-quality companies in this space that are worthy of investors’ attention.
Earlier this month, I brought to your attention two micro caps that have the potential to yield outsized returns — Hamilton Thorne (TSXV:HTL) and WELL Health Technologies (TSX:WELL). Earlier this week, Hamilton Thorne released strong preliminary results, and it is up by 7.4% in only a few weeks.
It was a record quarter and year for one of world’s leading Assisted Reproductive Technology (ART) companies. Fourth-quarter revenue of $10.8 million and EBITDA of $2.2 million represents growth of 34% and 27%, respectively. Margins continue to trend upward, and Hamilton Thorne experienced growth across all of its segments.
For the fiscal year ended December 2019, it posted record revenue of $35.3 million and adjusted EBITDA of approximately $7.1 million. Once again, this represented strong growth of 21% and 14.6% over fiscal 2018.
Not only did the Hamilton Thorne pre-announce strong results, management also introduced the company’s 2020 outlook. The company is looking to drive strong growth across its U.S. and U.K. equipment businesses and has several big sales in the pipeline for 2020. Although these bigger-ticket items are lower margin, the focus remains on driving top-line and adjusted EBITDA growth.
The company also re-iterated plans to execute its growth-through-acquisition strategy. Speaking of which, its latest acquisition — Planer — contributed approximately $1.6 million in revenue to fourth-quarter results.
In 2019, Hamilton Thorne’s share price climbed 23%, and it is well on its way to posting double-digit gains again in 2020. After announced preliminary results, the company briefly touched a 52-week high of $1.50 per share. This is close to analysts’ one-year average price target of $1.54 per share and implies 15% upside from today’s share price of $1.30 per share.
The top stock on the TSX Venture
Another small cap garnering plenty of attention is DynaCERT (TSXV:DYA). The company is involved in the design and manufacturing of a transportable hydrogen generator system. DynaCERT’s technology reduces carbon emissions in diesel engines. This makes it an attractive investment for those looking for eco-friendly investment options.
This past Thursday, the company was announced as the top stock on the TSX Venture 50. The TSXV 50 is an annual ranking of the top-performing stocks on the venture exchange. In 2019, DynaCERT’s share price shot up by 284%, more than tripling investors’ investment.
Is DynaCERT a buy? Unlike Hamilton Thorne and WELL Health Technologies, the company remains a speculative buy on the basis that it generates little revenue and is far from profitability. It is early days for this eco-stock, and investors can expect considerable volatility.
Can the company post a repeat performance in 2019? It will be a tough task. On the bright side, the company has the shift to renewables and sustainable investing as a tailwind. Investors are craving for the next clean energy company, and DynaCERT’s technology certainly fits the build.
Hamilton Thorne is poised to continue strong growth and is one of those rare small caps that is profitable. It remains a top micro cap and is worthy of investors’ consideration. On the flip side, DynaCERT is still in the “prove itself” stage, and investors should not rush out and start a position in the company based solely on last year’s performance. That being said, it is worth adding to watch lists.
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Fool contributor Mat Litalien owns shares of HAMILTON THORNE LTD. The Motley Fool owns shares of and recommends HAMILTON THORNE LTD.
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