ESE Due Diligence Report ESTEC Q2 Results(Ending December 31st 2015) Released February 29th 2016 Symbol: ESE.V Price: $0.15c 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.
LEVEL 2 QUOTE Market Maker Shares Bid Price Ask Price Shares Market Maker 5,000 0.080 0.150 6,500 5,000 0.075 0.190 37,000 205,000 0.070 0.200 333,000 15,000 0.065 0.600 20,000 15,000 0.035 1.000 1,000 7,000 0.030 -- -- -- 43,000 0.025 -- -- -- 10,000 0.020 -- -- -- 264,000 0.005 -- -- --
ESE has two different revenue streams. First one is their Engineering consulting business, and second is an Electronic manufacturing center. Now it might seem like basic stuff, but if you check out their list of clients, this is not the circumstance: http://encore-elec.com/about-us/our-customers/ Some of the clients: General Electric, NASA, GM, Ford, IBM, Toyota, and many more. When your building and selling products to those type of clients and ESE has been profitable on a quarterly basis for 6 quarters, the stock should be trading at much higher prices.
Few cheap shares for sale but not much. Tight small float, profitable, and great product line. Level 2: LEVEL 2 QUOTE Market Maker Shares Bid Price Ask Price Shares Market Maker 186,000 0.080 0.090 8,000 5,000 0.070 0.095 9,000 5,000 0.065 0.110 100,000 15,000 0.035 0.135 37,000 7,000 0.030 0.145 20,000 43,000 0.025 0.150 8,000 10,000 0.020 0.250 58,000 264,000 0.005 0.600 20,000 -- -- -- 1.000 1,000
ESTec Systems Corp. (ESE.V) has an ongoing P/E of 3.17, which indicates that it is highly undervalued. http://canada.stoxline.com/q_ca.php?s=ese.v
Thanks for that HollyHunter. As well, Q3 results for ESE will be out in a couple weeks and I'm looking forward to seeing another profitable quarter.
LEVEL 2 QUOTE Market Maker Shares Bid Price Ask Price Shares Market Maker 185,000 0.080 0.105 20,000 5,000 0.070 0.110 100,000 5,000 0.065 0.135 37,000 45,000 0.035 0.145 20,000 7,000 0.030 0.150 8,000 43,000 0.025 0.250 58,000 10,000 0.020 0.600 20,000 264,000 0.005 1.000 1,000
ESE Q3 results will be out next week. Level 2 below: LEVEL 2 QUOTE Market Maker Shares Bid Price Ask Price Shares Market Maker 200,000 0.080 0.105 20,000 5,000 0.070 0.135 37,000 5,000 0.065 0.145 20,000 45,000 0.035 0.150 8,000 7,000 0.030 0.600 20,000 43,000 0.025 1.000 1,000 10,000 0.020 -- -- -- 264,000 0.005 -- -- --
ESTec Systems Corp 9 Month Results(Ending March 31st 2016) Price: $0.105 Common Shares: 10,461,629 Insider Holdings: 85.4% as per the last information circular Financials Assets Cash: $318,378 Receivables: $1,190,733 Inventory: $316,717 Tax Recoverable: $69,335 Prepaid Expenses: $77,942 Property & Equipment: $124,694 Intangible Assets: $296,049 Goodwill: $753,702 Total Assets: $3,147,550 Liabilities Bank Debt: $265,000 Payables: $682,211 Customer Deposits: $34,335 Callable Debt: $85,203 Total Callable Debt: $963,970(Due July 2026 as per their MD&A) Advances from parties: $465,460 Total Liabilities: $2,496,179 Below is a breakdown of sales in both the Engineering and Electronics departments over 9 months in 2016, 1 year in 2015, and 1 year in 2014. The goal is to show that although sales in Engineering are decreasing, the sales in Encore Electronics are increasing and should eventually make up for prior losses, especially if the company continues to cut costs from its engineering department. As the US economy improves, so will electronics sales since this asset is US based. Encore sells parts to major corporations such as Microsoft, GE, GM, Ford, NASA, etc: http://encore-elec.com/about-us/our-customers/ 2016 Sales after 9 months(This will obviously increase with Q4 results) Engineering - $905,361 – Net Loss of $272,683 Electronics - $3,224,296 – Net income of $234,450 Total Assets This Quarter - $3,147,550 Total Liabilities This Quarter - $2,496,179 2015 Sales after 1 year Engineering - $2,159,901 – Net Loss of $121,360 Electronics - $3,674,444 – Net Income of $656,550 Total Assets Year End - $2,911,449 Total Liabilities Year End - $2,273,047 2014 Sales after 1 year Engineering - $2,017,208 – Net Loss of $499,565 Electronics - $3,231,516 – Net Income of $267,994 Total Assets Year End - $2,462,691 Total Liabilities Year End - $2,481,167 Over three years, Assets continue to increase and liabilities seem to bounce in between the $2.2 to $2.5 million range. MD&A Highlights Edmonton – 25 May 2016 The third quarter reflects the continuing impact of the decline in oil prices on our engineering operation. Revenues from Allan R. Nelson Engineering are down as compared to last year. Revenue from Encore remains stable and includes the effect of the exchange rate differential. We do not expect current economic conditions to change through the balance of the fiscal year. As a result Allan R. Nelson Engineering will continue to face challenges. During the third quarter Allan R. Nelson Engineering has adjusted its cost structure to offset its reduction in revenue. We will continue to monitor and adjust as required. 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 a small number of customers. The company has negative 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. During the first quarter the Company signed an amended demand loan agreement. (see note 3 and 11 of the financial statements). See also discussion on liquidity risk. The bank revolving demand facility #1 is authorized to a total of $275,000 CAD with interest payable at prime plus 3.55%. At March 31, 2016 the prime rate is 2.7%. At March 31, 2016 $265,000 (June 2015, $65,000) was outstanding on this credit facility. A general security agreement and a guarantee and postponement of claim of $300,000 by ESTec have been pledged as collateral for the credit facility. In the third quarter, the Allan R. Nelson Engineering subsidiary continued to feel the effects of low activity in the Oil & Gas industry. The Encore Electronics subsidiary continued to perform on a comparable 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. In the first quarter of the year 235,000 options expired.
LEVEL 2 QUOTE Market Maker Shares Bid Price Ask Price Shares Market Maker 187,000 0.080 0.120 25,000 5,000 0.070 0.135 37,000 5,000 0.065 0.150 8,000 45,000 0.035 0.600 20,000 7,000 0.030 1.000 1,000 43,000 0.025 -- -- -- 10,000 0.020 -- -- -- 264,000 0.005 -- -- --
LEVEL 2 QUOTE Market Maker Shares Bid Price Ask Price Shares Market Maker 187,000 0.080 0.120 25,000 5,000 0.070 0.130 36,000 5,000 0.065 0.135 37,000 30,000 0.035 0.150 8,000 7,000 0.030 0.600 20,000 8,000 0.025 1.000 1,000 10,000 0.020 -- -- -- 99,000 0.005 -- -- --
Found some great information on ESTec including a private company that's invested in them, background on the CEO and a chart showing that volume has picked up over the last few quarters and this is the first time in a decade it's started to build. below are the links. Haanz Group and ARN(ESE's first subsidiary): http://www.haanz-group.com/index.php?option=com_content&view=article&id=50&Itemid=86 ESE CEO Article: http://www.canadianpetroleumhalloffame.ca/Allan-Nelson.html Stock volume chart: http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=ca%3Aese&insttype=&time=20&freq=2 Encore Electronics clients(ESE's second subsidiary): http://encore-elec.com/about-us/our-customers/
I made this comparison sheet after ESE acquired Encore Electronics in May 2011. As you can see, revenue from the Encore Electronics subsidiary has gone up almost 1000% in 5 years. We are still waiting for Q4 results, but I am confident that Encore Electronics sold around $4 million US dollars in 2016. However, this positive cash flow is offset by Allan R Engineering which I hope the company has reduced costs from or should consider closing down. If you look at Encore Electronics website, they deal with some major groups like the US Government, NASA, Ford, Toyota, and major corporations. Therefore, if their products are good for the most high end clients, then any company would want to use them. This means their growth potential could increase substantially and major deals could come at anytime. If oil prices ever do come back, then the Engineering department should also start producing positive cash flow. Another advantage of Encore Electronics over Allan R Engineering is that it's a US subsidiary, that means the conversion from US to Canadian dollars will only add extra cash to ESE's balance sheet. 2011 Year End Allan R Engineering - $1,843,864 – Loss of $179,101 Encore Electronics - $422,616 – Loss of $215,547 Total Sales for 2011 - $2,266,480 - Total loss of $394,648 2012 Year End Allan R Engineering - $2,722,196 – Net Income $438,388 Encore Electronics - $2,391,052 – Loss of $257,351 Total Sales of 2012 - $5,113,248 - Total net income of $181,037 2013 Year End Allan R Engineering - $2,397,536 – Loss of $45,488 Encore Electronics - $3,178,949 – Net Income $397,902 Total Sales for 2013 - $5,576,485 - Total net income of $352,414 2014 Year End Allan R Engineering - $2,017,208 – Loss of $499,565 Encore Electronics - $3,231,516 – Net Income $267,994 Total Sales for 2014 - $5,248,724 - Total loss of $231,571 2015 Year End Allan R Engineering - $2,159,901 – Loss of $121,360 Encore Electronics - $3,674,444 – Net Income $656,550 Total Sales for 2015 - $5,834,345 - Total net income of $535,190 2016(9 Months) Allan R Engineering - $905,361 – Loss of $272,683 Encore Electronics - $3,224,296 – Net Income $234,450 Sales for 9 Months - $4,129,657 - Total loss of $38,233 List of Encore Electonics Clients: http://encore-elec.com/about-us/our-customers/
ESTec receives 12-cent-a-share offer from numbered co. 2016-10-24 18:14 MT - News Release Mr. Mark Bamford reports ESTEC SYSTEMS CORP. ENTERS INTO LETTER OF INTENT FOR A GOING PRIVATE TRANSACTION ESTec Systems Corp. has entered into a letter of intent with 2000285 Alberta Ltd. (AcquisitionCo), an entity controlled indirectly by Anthony B. Nelson, a director, officer and shareholder of the company. The LOI sets out the non-binding intention of the parties to negotiate and enter into a definitive agreement pursuant to which AcquisitionCo would, through a series of transactions, acquire all of the issued and outstanding common shares in the capital of the company. Pursuant to the proposed transaction, shareholders of the company who are not also shareholders of AcquisitionCo (or an affiliated entity) at the time of closing of the transaction would receive 12 cents in cash for each common share held. The transaction is anticipated to be structured as an amalgamation of AcquisitionCo and ESTec under the laws of the Province of Alberta. Provided all conditions and approvals are met, upon closing of the transaction, shareholders of ESTec immediately prior to the time of closing (other than shareholders of ESTec who are also shareholders of AcquisitionCo or its affiliates) would be entitled to receive one redeemable preferred share of the amalgamated entity for each common share held. Each redeemable preferred share would be immediately redeemed for 12 cents in cash. Shareholders of the amalgamated entity (or an affiliate thereof) following the cash distribution to minority shareholders upon closing of the transaction would consist of the Nelson family and other ESTec shareholders acting jointly and in concert with the Nelson family. It is anticipated that the interested shareholders will transfer substantially all of their common shares to AcquisitionCo (or an affiliate thereof) immediately prior to the closing of the transaction. Under the LOI, the company and AcquisitionCo shall use their reasonable commercial efforts to negotiate a definitive agreement in respect of the transaction by Oct. 31, 2016. Pursuant to Multilateral Instrument 61-101, the proposed transaction is a business combination, and the completion of the transaction will require simple majority approval of the company's minority shareholders. Of the 10,461,629 currently issued and outstanding common shares, interested shareholders own or control, directly or indirectly, approximately 7,726,758 common shares in aggregate, and the votes attached to such shares would be excluded for the purposes of obtaining minority shareholder approval under MI 61-101. The board of directors of the company formed an independent special committee, consisting of David Wright and Barbara Fraser, in connection with the transaction. The special committee has retained Quantum Advisory Inc. to provide a fairness opinion with respect to whether the consideration offered under the transaction is fair from a financial point of view to the ESTec shareholders (other than AcquisitionCo or its affiliates). The special committee will review and recommend or reject that the board approve the transaction, after considering all aspects of the transaction and the outcome of the fairness opinion to be provided from the company's financial adviser. The board may proceed to approve the transaction at a later date and advise that shareholders vote in favour of the transaction after considering the recommendation of the special committee, all aspects of the transaction and the outcome of the fairness opinion to be provided from the company's financial adviser. The acquisition price of 12 cents represents a 26-per-cent premium to the closing price of the common shares on Oct. 21, 2016, and a premium of approximately 32 per cent to the 30-day weighted-average price of the common shares on the TXV Venture Exchange up to and including Oct. 21, 2016. Following completion of the transaction, it is anticipated that the common shares will be delisted from the TSX Venture Exchange, and the company will apply to the applicable securities commissions to cease to be a reporting issuer. The company and AcquisitionCo have agreed, on a binding basis, to a period of exclusivity commencing on the date hereof and ending on the earlier of the date the LOI is terminated or the date that a definitive agreement in connection with the transaction is executed, during which period the company will work exclusively and in good faith with AcquisitionCo in an effort to negotiate a definitive agreement and will not solicit or initiate discussions regarding any other business combination or sale of material assets. The company has also provided AcquisitionCo the right to match any unsolicited acquisition proposals. The transaction is subject to a number of conditions, including the receipt of the required shareholder approvals and regulatory and TSX Venture Exchange approval. It is anticipated that an annual and special meeting of shareholders of the company will be held on or about Dec. 9, 2016, at which the transaction would be considered and that meeting materials in respect of such meeting will be mailed on or about Nov. 17, 2016. The transaction must be approved by 66-2/3rds per cent of all shareholders of ESTec, as well as a simple majority of the company's minority shareholders (as described herein). It is anticipated that closing of the transaction would occur within seven business days of shareholder approval and, in any event, not later than Dec. 30, 2016. We seek Safe Harbor. © 2016 Canjex Publishing Ltd. All rights reserved.
