When looking at Ellies Holdings Limited (ELI), it was difficult to pin down the one thing in this company that is has going for it. The truth is, there are just too many for simply one to be considered the 'most' important. So instead of trying to identify just one reason why Ellies would make for a good long term investment, we will rather discuss - briefly - some of the activities of the company.
Starting with the part that everyone probably already knows; Ellies imports and manufactures electrical products ranging from light-bulbs to DSTV remotes. Included in this list are things like; alarm systems, power-surge protection accessories, terrestrial and satellite receivers, generators, you get the idea. Generally all things that are, well, needed for everyday life in Africa. Then on the more industrial side of things, Ellies manufactures large and small power generation and power management solutions, as well as electrical switch-gear and mini-substations. So that means that they make the everyday things that none of us realise we need, as well as the everyday things that none of us realise we're using.
Another interesting observation regarding Ellies is that they take ownership of the entire supply chain of their products. Sure some they import and some they manufacture, but they prefer to control the product from start to finish. In other words, everything from manufacture/import to marketing and sales, packaging and distribution; they manage the entire process and perform all the individual tasks themselves, from start to finish. Even new DSTV installations. Well ok, that they outsource, but you can still go to their website and arrange it through them.
Starting with the part that everyone probably already knows; Ellies imports and manufactures electrical products ranging from light-bulbs to DSTV remotes. Included in this list are things like; alarm systems, power-surge protection accessories, terrestrial and satellite receivers, generators, you get the idea. Generally all things that are, well, needed for everyday life in Africa. Then on the more industrial side of things, Ellies manufactures large and small power generation and power management solutions, as well as electrical switch-gear and mini-substations. So that means that they make the everyday things that none of us realise we need, as well as the everyday things that none of us realise we're using.
Another interesting observation regarding Ellies is that they take ownership of the entire supply chain of their products. Sure some they import and some they manufacture, but they prefer to control the product from start to finish. In other words, everything from manufacture/import to marketing and sales, packaging and distribution; they manage the entire process and perform all the individual tasks themselves, from start to finish. Even new DSTV installations. Well ok, that they outsource, but you can still go to their website and arrange it through them.
Further,
they are making inroads into Africa via their
Megatron business which manufactures those power management solutions and large, large generators mentioned earlier. This
business looks promising when seen in the light of the continual development of the African
continent. Also worthy of note is that they supply data centre solutions as
well, which should provide for good organic growth as the internet spins it webs across our continent.
Then onto some
of the more well known activities of the company. These are the Eskom Power Save
project and the SABC Digital Terrestrial Television project.
Starting with the Power Save project; it is a joint venture between Ellies Renewable Energy (a division of Ellies Holdings Ltd) and Eskom to distribute power efficient light bulbs and geyser timers by leveraging off Ellies' existing distribution network. The project started in February 2012 and to date has created roughly 3000 jobs, removed about 75 Mega Watts from the power grid and installed geyser timers and halogen light bulbs (free of charge) to about 410 000 households. Naturally, Ellies expects that this project will continue into the near and foreseeable future.
Starting with the Power Save project; it is a joint venture between Ellies Renewable Energy (a division of Ellies Holdings Ltd) and Eskom to distribute power efficient light bulbs and geyser timers by leveraging off Ellies' existing distribution network. The project started in February 2012 and to date has created roughly 3000 jobs, removed about 75 Mega Watts from the power grid and installed geyser timers and halogen light bulbs (free of charge) to about 410 000 households. Naturally, Ellies expects that this project will continue into the near and foreseeable future.
Next up is the Digital Terrestrial Television project; SABC has committed, along with various other role players and broadcasters in the CEMEA region (Central Europe, Middle East and Africa) that it
will transmit all terrestrial television broadcasts digitally by 2015. Ellies is
positioned to supply the STB (Set to Boxes) to the public via retail channels as
these will be required to receive and decode the digital signal. There are just
over 10 million television watching households in South Africa with about 80%
coverage rollout planned over 2 years starting in 2013 and ending in 2015. This
means that most people will have to go out and buy one of these units and
therefore, Ellies stands to make healthy profits from this
rollout.
Looking at some of the financial ratio’s we see that Ellies offers a Return on Equity of 21.62 and Retrun on Assests of coming in at 20.52. These aren't the greatest numbers in the world, but it is good. Currently the PE Ratio is at 15.6, which is a little high, but once the income from the Digital Terrestrial Television starts coming in, we suspect that this ratio will drop, but only momentarily as investors scramble to jump on board.
Turning our attention to Technical Analysis; we can clearly see the the impact the Power Save project had on the share price and the sentiment surrounding Ellies, which could perhaps explain the inflated PE Ratio, none the less it has formed a very healthy and strong uptrend.
Looking slightly closer, at a daily chart, we see that there is a strong primary trend in place as well as a slightly steeper secondary trend. Do not let a break of the secondary trend scare you, it is the primary trend that is the most important. Perhaps that secondary trend does not break any time soon and continues to hold for some time into the future? It would then be a good idea to buy some stock now, as it is in that area where you would like to be accumulating. However, if you buy now and it does break the secondary trend, do not fear as (was mentioned) the primary trend is the one to watch.
As always, please feel free to leave comments and questions and we will be happy to get a conversation going.
Turning our attention to Technical Analysis; we can clearly see the the impact the Power Save project had on the share price and the sentiment surrounding Ellies, which could perhaps explain the inflated PE Ratio, none the less it has formed a very healthy and strong uptrend.
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| ELI - Weekly Chart |
Looking slightly closer, at a daily chart, we see that there is a strong primary trend in place as well as a slightly steeper secondary trend. Do not let a break of the secondary trend scare you, it is the primary trend that is the most important. Perhaps that secondary trend does not break any time soon and continues to hold for some time into the future? It would then be a good idea to buy some stock now, as it is in that area where you would like to be accumulating. However, if you buy now and it does break the secondary trend, do not fear as (was mentioned) the primary trend is the one to watch.
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| ELI - Daily Chart |
As always, please feel free to leave comments and questions and we will be happy to get a conversation going.
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ReplyDeleteIs Ellies a good buy at current levels (85c) for the long term? They proceeding with a 2nd rights issue. Will DTT still take place this year? I see Allan Gray have increased their stake in the company which could suggest a good long term buy...
ReplyDelete