Small Cap Favourites: Ellex Medical Lasers Limited
We wrote about ELX several times last month and take this opportunity today to point out its most recent trading update, which we feel some in the market haven’t noticed. ELX said last week that “Group revenue for the year ended 30 June 2016 is expected to be approximately A$72.9 million, a A$10.1 million (16%) increase compared to the prior corresponding period.
The net increase in revenue has three components, namely: Positive impact of organic growth in sales of Ellex-branded product in USA, Asia, Europe and Japan of 15% (A$9.5m) Positive impact of lower Australian dollar against US$, Euro and YEN 11%(A$7.2m) Discontinuation of contract manufacturing and lower margin third party product sales that has reduced revenue by 10% (A$6.5m)..”
CEO Tom Spurling went on further to note that “…We are pleased with the continuation of improved sales growth and margins. The acceptance by the market of our new products, the turnaround of the business in Japan, along with sales growth in Asia, have been highlights. The continued acceleration of growth in our iTrack sales is also exciting..”
Profit grows from a modest $2.6m to $4.2m which represents a 61% increase. We admit that the percentage growth is inflated given the business is coming from a low earnings base, BUT…this is an organic growth story with top line growth to back things up. ELX remains a solid choice on our small cap watch list. Running a marathon, as opposed to a sprint.
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We continue to monitor our position with interest. Invast is very well placed to bring you some huge opportunities in the coming months. Execution costs for ASX stocks are 0.06% (6 basis points) above minimum charge, which means for a trade with a notional exposure of AUD 10,000, the applicable commission is only AUD 6.00.
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Chief Market Analyst
Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia. The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.
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