FKWL - It is cheap based on cash value and current earnings.
Couple questions/observations
- They have 7M receivables. Who are they from?
- Their cash flows are all over the place. Is that lumpy contracts or something more to it?
- Their FTI acquisition is rather weird. What do you think happened? They are still increasing the position by buying a convertible that was converted into shares. Is this a good use of money? How do you interpret "On October 15, 2009, we opened a branch office in Seoul, South Korea, a wholly-owned subsidiary of Franklin Wireless that manages certain logistical and administrative efforts for the Company. The Korea-based business office has been inactive since September, 2010." (from 10K yahoo.brand.edgar-online.com )
- Why there was a huge sales jump in 2010 but the earnings were exactly the same as on much lower sales in other years?
- AT&T and Verizon are conspicuously absent from the list of companies that certified FKWL modems. Comments?
- Sprint accounts for 59% of sales. I really don't like that much concentration, especially in Sprint, which is IMHO a very erratic and not well managed company. Sprint purchases may explain the huge jump in 2010 while margin dropped. It's also possible that A/R are at Sprint, which also raises the question whether that sales channel is still stuffed.
- The whole situation with C-Motech, which still owns 13% of the company shares is weird. FKWL may have to purchase these shares from C-Motech.
Overall, I think I will pass for now. However, it might be a great buy if they get another big contract somewhere. |
