MTI Wireless Edge (LSE: MWE) is an AIM listed Israeli maker of flat panel antennas for fixed wireless broadband selling primarily to military and commercial customers.
It is currently on sale at half of its net tangible asset value.
From their latest quarterly report MTI show current assets to be $15,687,000 and total liabilities to be $4,962,000 leaving a net current asset value of $10,725,000 or just under £6.4 million at today’s conversion rates.
With a current market cap of £5.22 million it’s not in classic margin of safety territory from an NCAV point of view but it is still selling at a 50% discount to net tangible assets.
There are some aspects of the annual report that need highlighting:
- “The employee options have been excluded from the calculation of diluted EPS as their exercise price is greater than the weighted average share price during the year (i.e. they are out-of-the-money) and therefore it would not be advantageous for the holders to exercise those options. The total number of options in issue is disclosed in note 25″. There are almost two million options outstanding according to the last annual report (note 25). A small dilution here but it should really be recognised in EPS.
- In 2013 2 million options were converted into 2 million shares (4% of shares outstanding) and 280,000, 250,000 and 200,000 options were granted to the CEO, CFO and the Chairman of the board, respectively. Nice one boys.
- A service agreement between MTI and major shareholders that includes remuneration per month of 20,000 NIS (£3,431 or £41,172 per annum) to Mr. Zvi Borovitz for his service as a chairman of the board of the company and 60,000 NIS (£10,294 or £123,000 per annum) to Mr. Moni Borovitz for his service as a CFO of the company.
Still with a current ratio of 4.90 and debt to equity excluding intangibles of 0.12 there is real asset backing with this stock but management need to continue their drive to seek more contracts, grow earnings (now that they are positive) and drive shareholder value if they are to truly deserve their remuneration.
What prevents me from taking a position for the time being is the share price inflation since 2012 from 6p to 10p coupled with the all-time highs in financial markets in general.
It makes me (overly) cautious as an investor but one with a new stock added to his watch list.
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