Wednesday, November 15, 2006
Eternal Technologies (ETLT) files Q3 report on time!
Period ending Sept 30, 2006 (also looking at Q2):
40,567,300 shares on Nov 14, 2006, exactly the same as Q2.
Cash and short term investments are $40.2 millon vs $37.2 million in Q2. (Renminbi restrictions apply)
Accounts receivable climbs back up to $2.4 million from under $1 million (but down from more than $7 million at the end of last year).
Net cash and short term investments is $37 million or over 91 cents per share.
Book value is $53.3 million ($1.31 per share), up from $50.9 million in Q2.
The numbers all add up correctly! (yeah, that's a very low hurdle, but then again....)
Revenues $7.1 million (up from $5.0 million last year, but down from $10.4 million in Q2 although it's largely seasonal).
45% gross margin
27.8% operating margin
12% tax rate on operating income
26% net margin!
5 cents earned per diluted share (slightly over 10 cents so far this year)
Again, the numbers add up correctly (it's sad to actually need to check).
9 month cash flow from operations is screaming at $11.2 million due to AR and AP.
Capex is zero so far this year!
The only other significant cash flow is the purchase of short term investments of $15 million.
Free cash flow is $11 million (27 cents per share).
Plus $828K tailwind from currency translaton benefits.
Again, the numbers add up correctly.
No related party transactions this year.
E-Sea's revenues increased to $3.70 million in Q3 from $2.06 [oops, that's $1.46 million] in Q2, a 79% [no, it's 154%] increase! E-Sea's operating income is $1.68 million up 57% from Q2's $945K! E-Sea total assets increased to $7.74 million from $5.99 million. Their returns on assets are simply amazing.
[see Note 8. Segment Reporting, notice that it's year-to-date]
When you take the $1.68 million in E-Sea operating income for Q3 and subtract the $69K of depreciation associated with E-Sea and the $253K taxes for E-Sea listed in the Mgmt Discussion, you end up with $1.36 million net earnings from E-Sea alone for Q3, which is 3.35 cents per share which alone would justify a stock price of at least $2.00, not even counting the net cash (and short term investments) of 91 cents per share.
In Segment Reporting, the agribusiness operating margins are 11%, down from 22% last year's Q3.
Roll mutton sales are up, cattle embryo transfers and lamb meat (high margin) sales are down.
No internal control changes.
No changes in legal stuff (same small pending lawsuits).
These results... what's the phrase I'm looking for here... um... kick ass!
SEC filing on time... check
Numbers add up... check
No funny business or weirdness... check
Net cash/short term investments... 91 cents per share
Book value... $1.31 per share
E-Sea earnings alone... 3.35 cents per share for Q3
Overall earnings... 5 cents per share for Q3
Nine month free cash flow... 27 cents per share
Current stock price... less than 47 cents
Yeah, I think I'm gonna hang onto the the shares I own.
UPDATE same day:
lionsshare1 over on the Raging Bulls message board points out that my E-Sea revenue increase was wrong. It was too low. I had taken the 9 month results and subtracted the 3 month results from them, comparing Q3 against Q1+Q2 rather than just Q2. The actual results were even better.
Swallow 10 m shares [ usd5 m] and you get a major kick upwards in NAV
These results are very convincing.
It is just totally undiscovered I guess.
Agree that E sea was acquistion of the century. If they can repeat that then this really is a five buck stock on a low PE...not sure about turtles though
Must be many shareholders who have held for months if not years and want out. Saw a very healthy volume today at close to 10% of freefloat shares not under control of management.....should go higher IMHO
I'm going to respond to the second (and maybe third) paragraph in the most recent post I made (market goes wild).
Is it finally being uncovered or is a there a buy back on offer....
very strong today and yesterday..
I don't know what to think, but I did sell some of my stock (see the lastest post). Both the business itself and the stock price movements are a bit strange. As far as the stock goes, I'd say some group of investors discovered it and started buying in. It could be that more people discover it going forward, I don't know. I don't know anything about stock price movements, but my gut instinct says it will continue going up based on "Blink" type experience. I could be totally wrong.
As far as the business goes, I really don't like the bamboo thing they put up on the website. I've invested in other companies that were in search of acquisitions, but they were always focused on very limited areas. I get bad vibes from the tortoises, mangoes, and bamboo considerations. I don't have anything specific that I'm concerned about, I would just like to limit my exposure to the company.
I too have sold half of what I had and it just got gobbled up on monday and tuesday...
I too have a hazy outlook on ETLT
On the one side there is un-mistakeable cash and assets and 50% discount on NAV. It is normal to have a 5-10% discount on cash but not 50%!!!
On the other side of sentiment they appear to be desperate to acquire something even though there seems little or no synergy between them...does there need to be ? not sure. Agreed mangs and tortoises!!
A buy back would for sure get people closer to real shareholder values but one mistaken acquisition and a total tale off on the cattle embroyo side and we could go back to 40 c...wish I knew.
Still holding a chunk.
All the best
First of all, thank you Bruce for your blog on ETLT. I found it really good.
I am a private investor from Belgium and I have also a significant position in this stock.
Well I am in for one year now and still haven’t made one $ on it as I don't want to sell my shares for 0,6$.
I am also a bit concerned on the strange projects they have but if they could turn the dead money they have in bank into earnings, this would be terrific. I think that they demonstrate us with the Esea acquisition that they are abble to get very good returns on their investment.
I agree with the fact that Esea might be the key of our future success story here. If they manage to grow their sales of Esea and if they build more centres in China , Esea alone could bring us to 4$ easily. I hope only that the management is aware of that.
Imagine also just one second they manage to have the export licence to other countries and FDA approval for this technology...As I don't think that is unachievable and that it won't last years , that made me very confident on our foreseeable future.
I hope I am not to bullish on it and that I don’t have too much expectations here. But I am here for dollars, not pennies.
Best regards ,
Pascal, Belgian investor
ETLT is one of the most difficult investments I've made. I'm very happy having a limited portion of my portfolio in the stock. The stock is insanely cheap and the company is not nearly suspicious enough (from what I've observed) to justify this low of a price. I could be wrong, and that's why I want to limit my exposure.
From less then 1Million in Q1 to 1,5million in Q2 and finally to 3,7Milion$ in Q3.
I hope we can count at least on 5Million in Q4 which would give us annual sales of around 10,5Million$. That’s a tremendous growth.
I just emailed the company to convince them to develop a little more of the Esea business by issuing a press release to the market. They have to show that we have a future cash cow on hand with an outstanding technology. Building new centres in China, working hard to receive export license,…are the key of our share price appreciation.
This only business, if it’s all for true, is worth at least 2-3$/share I would say.
Did you also already send an Email to the management in order to try to get them aware of the necessity of such PR??
Thank you in advance.
Do you have e mail addresses for ETLT management.
I would really appreciate.
Suite D 5/F, Block A, Innotec Tower
235 Nanjing Road
Heping District, Tianjin, PRC 300052
Ask for Mr Cai or Annie
Heron Public Relations Group Inc., Houston
William Cai, 281-683-2395
2 days ago I asked them to give more place to Esea on their Website as it is generating more and more earnings. I also asked that they issue a press relaese to demonstrate to the market the potential of this technology.
Here is a copy of their answer :
Thanks for message. I talked to management of Esea about shareholders'
concern. They answered they are going to update the website and post more information about Esea. We will wait and see.
Heron Public Relations Group
Good morning Annie
Could you please provide me some information on my concerns?
Will there be soon a press release issued to the public on the
different projects ETLT is working on?
I mean that the information available on the website is just not always clear enough in which manner the further acquisitions may
increase directly our earning per share.
It would also be very good and indispensable to develop a little more
about the Esea business as we see that it is the most prolific operation of ETLT.
I think that the market should be more aware of the possibilities of
growth of Esea such as more centres in 2007, increasing national sales
and of course, the fact that ETLT is trying to get an export license
for this wonderful technology.
The most important things the market is looking for is visibility,
true products, earning growth and communication. If you achieve that,
no way we would be trading below 2$/share.
Please provide me some info and transfer, if you can, this E-mail to
the management. I mean it is not normal to trade so far away from our
book value, something has to be done.
Thank you in advance.
I wish you a wonderful week-end.
Is it my imagination or has the website changed with a new statement from Wu?
They talk about the internet but ther is not one e mail address of any employees apart from the PR firm which are most underwhelming. They created the site
Rgs James in London