In my view, we have a reasonably high quality electrical company with established and relevant products, competent management, net cash and a positive outlook with earnings still on an upward trajectory in this cycle. Why look to sell? There are plenty of ASX companies with similar levels of profitability ($10m) with market capitalisations beyond $150m. Sadly, the ECL market capitalisation reached $61m in 2015 and is barely more than 10% above that today, despite profit doubling over that period of time with fewer shares on issue. This seems to be a scenario where investment markets place a discount on the relative valuation of this company, that discount possibly being a function of: (1) An ongoing incoherent strategy and message about the surplus capital held by the holding company. ie capital mismanagement. (2) The company choosing not to provide investors with any meaningful presentations and insights into the electrical business, its market position, dynamics and its prospects. If we see a change on these two fronts we may not need a suitor and we can continue to own a company delivering solid returns on our invested funds.
ECL Price at posting:
$2.39 Sentiment: None Disclosure: Held
