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ESE.V - ESTec Systems Corp



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By mrduediligence

Posted: Tuesday Mar 1 9:17:29AM 2016

ESTEC Q2 Results(Ending December 31st 2015) Released February 29th 2016

Symbol: ESE.V
Price: $0.12c
Common Shares: 10,461,629
Insider/Institutional  Holdings: 8,933,955 (85.4% as per Information Circular on Sedar)
***Only 1,527,674 retail shares***
website: http://www.estec.com/

Financial Results

ASSETS
Cash: $592,583 - $0.056c a share
Receivables: $829,120
Inventory: $269,333
Tax Recoverable: $36,084
Prepaid Expenses: $59,326
Property & Equipment: $136,477
Intangible Assets: $311,380
Goodwill: $803,206
Total Assets: $3,037,509

Liabilities:
Bank Debt: $150,000
Payables: $557,097
Customer Deposits: $41,798
Callable Debt: $84,222
Remaining Debt: $985,738(Due by July 2026, see MD&A Highlights below)
Advances: $465,579
Total Liabilities: $2,284,434

Q2 Sales( 3 Months)
Revenue: $1,476,862
Net Income: $28,473

Q1-Q2 Sales( 6 Months)

Revenue: $2,775,501
Net Income: $114,673

2014 Total Sales
Revenue: $5,834,345
Net Income: $656,878

Over the last 6 quarters, ESE has maintained its sales with a total of $8,609,846(average of $1.43 million per quarter) and earned $771,551($0.073c) a share in cash.

MD&A Highlights

ESTec Systems Corp. is a holding company that owns Allan R. Nelson Engineering (1997) Inc. and Encore Electronics Inc. Allan R. Nelson Engineering (1997) Inc. (ARN) is a group of professional engineers and technologists who carry diverse skills and a variety of professional backgrounds. The company is located in Edmonton, Alberta. Encore Electronics Inc. is an electronics design and manufacturing business located in Saratoga Springs, New York. Its product line includes signal conditioners, strain gage amplifiers, vibration monitoring equipment and computer controlled signal conditioning instrumentation.

The second quarter shows the impact of the low price of oil. Engineering sales are down about 40% over last year this quarter. The electronics business has remained stable. There is a gain relative to last year in Canadian Dollars due to the drop in value of the Canadian Dollar. The engineering business is experiencing a small increase in the number of jobs being quoted, but that has not yet turned into an increase in the volume of work. We expect current economic conditions to continue through the fiscal year. Management will adjust the cost structure during the third and fourth quarters to reflect forecasted revenue. The Encore Electronics business continues to perform to expectations. Management of Encore is actively working on diversifying their customer base to reduce economic dependence on one customer.

Liquidity

The Company’s liquidity requirements are met through the cash generated from operations. Management monitors and manages its liquidity risk through regular review of its financial liabilities against the constraints of its available financial assets.

The company has positive working capital. Over the next year the company expects to meet all cash requirements from cash flow. While the Company has a significant amount of its receivables invested in a small number of clients, these funds are largely attributable to insurance clients and they have reserves allocated to pay these receivables.

A demand non-revolving term facility has been negotiated to cover the cash requirements to purchase Encore Electronics Inc. Debt repayment is scheduled over 15 years to July 2026 to be repaid from the operating profits of Encore Electronics Inc. 

In the second quarter, the Allan R. Nelson Engineering subsidiary continued to suffer from low activity in the Oil & Gas industry due to the low price of oil. The Encore Electronics subsidiary continued to perform on an even basis relative to last year. Management has been reviewing the sales and marketing efforts to see if additional opportunities can be identified.

During the quarter no stock options were granted to employees and directors of the company. During the year, in the first quarter, 235,000 options expired.

Liquidity risk is the risk that the Company may not have cash to meet its financial liabilities as they come due. The Company has sufficient credit facilities to meet its current and long term financial needs.


By mrduediligence

Posted: Friday Jan 8 9:14:20AM 2016

2012 was the game changing year for ESE when revenue started to increase substantially and yearly losses turned into major profits. Revenue between 2009 to 2012 was under $2.5 million per year. Afterwards it was always over $5 million. Assets started to increase and liabilities decreased. This was all done without dilution. ESE is leveraged towards the US dollar and this is a major benefit right now as a Canadian based company. Below are the yearly breakdowns from 2012 to 2015 + Q1 2016

Year End: 2012
Total Assets: $2,415,938
Total Liabilities:  $2,577,937
Revenue: $5,113,248

Earnings: $197,953 or $0.018c

Year End: 2013
Total Assets: $2,838,026
Total Liabilities: $2,634,966
Revenue: $5,578,487
Earnings: $374,557 or $0.035c

Year End: 2014
Total Assets: $2,462,691
Total Liabilities: $2,481,167
Revenue: $5,248,724
Earnings: Loss of $232,038 – Read MD&A statement below (Due to oil price starting to drop)

The financial results for the year ended June 30, 2014 show a loss as compared to a profit at June 30, 2013. The decrease in comprehensive income can be attributed primarily to Allan R. Nelson Engineering (1997) Inc showing a significant loss during 2014. This was exacerbated by reduced profits in the Encore Electronics business unit. Allan R. Nelson Engineering saw its year start off with several major projects being put on hold or cancelled by clients as they anticipated market changes. Our clients told us that many of these projects were due to restart soon, however that status remained throughout most of the year.

Year End: 2015
Total Assets: $2,911,638
Total Liabilities: $2,273,047
Revenue: $5,834,345
Earnings: $656,878 or $0.063c – As you can see, the company made changes and was profitable again

This year has seen modest improvements in sales in both the engineering business and the electronics manufacturing business. Combined with modest improvements on the cost side we have had a significant improvement in the bottom line for both business units. Engineering has attained just short of break even and the electronics manufacturing has doubled its bottom line contribution to the business. During the year the company continued to capitalize R&D into new products. Management is confident that the potential market for these new products exceeds the capitalized value of the R&D. A significant portion of this year’s income is a direct result of increases in the value of the US dollar investments in our electronics manufacturing subsidiary in the United States.

Quarter: Q1 2016
Total Assets: 2,946,395
Total Liabilities: $2,221,793
Revenue: $1,298,639
Earnings: $86,200 or $0.0082c

If you read the MD&A, this quarter had some issues with orders and of course decreased demand from the oil engineering subsidiary. However, with the US dollar rising and added orders coming in Q2 that were supposed to be in Q1, it’s inevitable that ESE.V will keep putting out profitable quarters and paying off liabilities while increasing their assets. Their callable debt only has a small portion to be paid yearly and then will be fully paid by 2026, so there is little concern in this department.

From MD&A: Once again this quarter is impacted by the continuing low price of oil. The engineering division shows almost a 40% decrease in revenue over the same period last year. On a straight US dollar basis the electronics division is down slightly, although after adjusting for currency, the Canadian dollar value of the first quarter sales are up slightly from the first quarter last year. Overall our revenues are down about 10% from the first quarter last year. The Allan R. Nelson Engineering division has reduced staffing and continues to monitor costs. We anticipate continued slow revenue for the foreseeable future due to the continued low price of oil and the resulting impacts on the Alberta economy. While revenue potential for Encore Electronics continues to look good, slow parts delivery in the first quarter has pushed some customer deliveries into the second quarter. The net effect is that while still profitable, the level of profit is down from this quarter last year





 

 


By mrduediligence

Posted: Thursday Jan 7 10:58:26AM 2016

ESTec Systems Corporation Due Diligence

Symbol: ESE.V
Price: $0.095
Common Shares: 10,461,629
Insider/Institutional  Holdings: 8,933,955 (85.4% as per Information Circular on Sedar)
***Only 1,527,674 retail shares***
website: http://www.estec.com/

2015 Q1 Financial Results

ASSETS
Cash: $448,156
Receivables: $716,316
Inventory: $410,635
Income Tax Recoverable: $74,549
Prepaid Expenses: $77,810
Property & Equipment: $139,287
Intangible Assets: $305,164
Goodwill: $774,478
Total Assets: $2,946,396

LIABILITIES
Payables: $631,269
Deposits: $34,335
Current portion of debt: $83,364
Remaining Debt: $1,007,175 (Due by July 2026, see MD&A Highlights)
Advance from parties: $465,650
Total Liabilities: $2,221,793

2014 Year end and 2015 Q1 Results

2014 Total Sales
Revenue: $5,834,345
Gross Profit: $3,219,573
Net Income: $656,878 - $0.063c EPS
**Stock is trading at exactly 1.5 times last year’s earnings which is way too low**
 

2015 Q1 Sales
Revenue: $1,298,639
Gross Profit: $655,650
Net Income: $86,200 - $0.008c EPS
**much of the sales are US based, which adds to revenue when converted to CDN dollars**

Over 5 quarters, ESE has done a total of $7,132,984 in sales with net income of $743,078

MD&A Highlights

ESTec Systems Corp. is a holding company that owns Allan R. Nelson Engineering (1997) Inc. and Encore Electronics Inc. Allan R. Nelson Engineering (1997) Inc. (ARN) is a group of professional engineers and technologists who carry diverse skills and a variety of professional backgrounds. The company is located in Edmonton, Alberta ARN provides forensic engineering & design engineering services to the oil and gas, mining, manufacturing, transportation and forestry industries. The largest part of ARN’s business is forensic engineering. Committed to continuous improvement, ARN utilizes state-of-the-art software to provide timely and competitive solutions for our clients. Encore Electronics Inc. is an electronics design and manufacturing business located in Saratoga Springs, New York. Its product line includes signal conditioners, strain gage amplifiers, vibration monitoring equipment and computer controlled signal conditioning instrumentation.

Edmonton – 25 November 2015
 Once again this quarter is impacted by the continuing low price of oil. The engineering division shows almost a 40% decrease in revenue over the same period last year. On a straight US dollar basis the electronics division is down slightly, although after adjusting for currency, the Canadian dollar value of the first quarter sales are up slightly from the first quarter last year. Overall our revenues are down about 10% from the first quarter last year.

The Allan R. Nelson Engineering division has reduced staffing and continues to monitor costs. We anticipate continued slow revenue for the foreseeable future due to the continued low price of oil and the resulting impacts on the Alberta economy.

While revenue potential for Encore Electronics continues to look good, slow parts delivery in the first quarter has pushed some customer deliveries into the second quarter. The net effect is that while still profitable, the level of profit is down from this quarter last year.

The company has positive working capital. Over the next year the company expects to meet all cash requirements from cash flow. While the Company has a significant amount of its receivables invested in a small number of clients, these funds are largely attributable to insurance clients and they have reserves allocated to pay these receivables.

A demand non-revolving term facility has been negotiated to cover the cash requirements to purchase Encore Electronics Inc. Debt repayment is scheduled over 15 years to July 2026 to be repaid from the operating profits of Encore Electronics Inc.


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