Stock Quickie – ANO:ASX

Advance Nanotek Ltd – ANO:ASX

How did we get here?

Showed up while looking through stock screeners: Australian Solid Balance Sheet and Fundamentals (Simply Wall St).

What do they do?

They make high grade Zinc Oxide powder for supply to the global healthcare industry. In the last few years, their profit margins have spiked significantly, presumably off the back of a major distribution contract. They currently produce over 3000 tonnes of Zinc Oxide and are hoping to increase capacity to 5k. 

Weighing machine

RoE of between 0.9-52%, that has been increasing lately, and the last year 2 years have been record breaking (>46%). Margins, have been similarly all over the place, ranging from negative numbers up to 50% in the last year. It should be noted that their numbers are strange, from their reported PBT in FY19, an EPS of about 5c would be expected. But reported EPS was 17c. There are probably some depreciation or accounting shenanigans going on here. More examination needed.

Debt is usually nil, but recently some was taken out (5% ratio). In the last 10 years, growth has been flat, but has risen sharply in the last 3 (>100% p.a.), with no dividend yield. Extremely high insider ownership (~60%, $150M in shares), with some recent buying activity. This one is hard to classify, I guess I’d call it a “turnaround”.

Have managed to grow negative earnings, and flat book value, for the past 10 years, and the extreme growth of the past 3. 

Voting machine

They are quite popular, currently trading at about 23xPE, higher than the market and sector averages (~15x and 20x respectively). Historical range fluctuates between 8-200x, which shows the large fluctuations in their business model. 

Other options

TTT, ZNO

Worth looking further?

Yes. It seems to have a high quality product. Their sales growth has been exceptional for the past few years. It would be interesting to see what was driving that. Is this just a blip? Or do they have a competitive advantage in this space.