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Efficient E-Solutions Bhd (XKLS:0064) Earnings Power Value (EPV) : RM-0.06 (As of Sep24)


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What is Efficient E-Solutions Bhd Earnings Power Value (EPV)?

As of Sep24, Efficient E-Solutions Bhd's earnings power value is RM-0.06. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is N/A.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


Efficient E-Solutions Bhd Earnings Power Value (EPV) Historical Data

The historical data trend for Efficient E-Solutions Bhd's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Efficient E-Solutions Bhd Earnings Power Value (EPV) Chart

Efficient E-Solutions Bhd Annual Data
Trend Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21 Dec22 Dec23
Earnings Power Value (EPV)
Get a 7-Day Free Trial Premium Member Only Premium Member Only -0.04 -0.07 -0.03 -0.08 -0.09

Efficient E-Solutions Bhd Quarterly Data
Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23 Mar24 Jun24 Sep24
Earnings Power Value (EPV) Get a 7-Day Free Trial Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -0.07 -0.09 -0.10 -0.08 -0.07

Competitive Comparison of Efficient E-Solutions Bhd's Earnings Power Value (EPV)

For the Specialty Business Services subindustry, Efficient E-Solutions Bhd's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


Efficient E-Solutions Bhd's Earnings Power Value (EPV) Distribution in the Business Services Industry

For the Business Services industry and Industrials sector, Efficient E-Solutions Bhd's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where Efficient E-Solutions Bhd's Earnings Power Value (EPV) falls into.



Efficient E-Solutions Bhd Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

Efficient E-Solutions Bhd's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 16.29
DDA 2.12
Operating Margin % -64.15
SGA * 25% 3.43
Tax Rate % 17.53
Maintenance Capex 1.95
Cash and Cash Equivalents 30.22
Short-Term Debt 0.14
Long-Term Debt 0.30
Shares Outstanding (Diluted) 873.30

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = -64.15%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = RM16.29 Mil, Average Operating Margin = -64.15%, Average Adjusted SGA = 3.43,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 16.29 * -64.15% +3.43 = RM-7.022681068 Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = 17.53%, and "Normalized" EBIT = RM-7.022681068 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = -7.022681068 * ( 1 - 17.53% ) = RM-5.7913241695369 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 2.12 * 0.5 * 17.53% = RM0.185720128 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = -5.7913241695369 + 0.185720128 = RM-5.6056040415369 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Efficient E-Solutions Bhd's Average Maintenance CAPEX = RM1.95 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Efficient E-Solutions Bhd's current cash and cash equivalent = RM30.22 Mil.
Efficient E-Solutions Bhd's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 0.30 + 0.14 = RM0.437 Mil.
Efficient E-Solutions Bhd's current Shares Outstanding (Diluted Average) = 873.30 Mil.

Efficient E-Solutions Bhd's Earnings Power Value (EPV) for Sep24 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( -5.6056040415369 - 1.95)/ 9%+30.22-0.437 )/873.30
=-0.06

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( -0.062028275528533-0.205 )/-0.062028275528533
= N/A

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


Efficient E-Solutions Bhd  (XKLS:0064) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


Efficient E-Solutions Bhd Earnings Power Value (EPV) Related Terms

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Efficient E-Solutions Bhd Business Description

Traded in Other Exchanges
N/A
Address
No. 3, Jalan Astaka U8/82, Taman Perindustrian Bukit Jelutong, Seksyen U8, Bukit Jelutong, Shah Alam, SGR, MYS, 40150
Efficient E-Solutions Bhd is a business process outsourcing company that provides data and document management solutions primarily in Malaysia. It operates through segments which are Records Management, IT Services and others. The company offers imaging and data capture solutions that convert handwritten, typed, and printed Web forms into electronic forms for indexing and intelligent data capture purposes; archival and retrieval solutions, which offer multiple capture and document management systems for the processing and retrieval of digitalized documents. IT Services segment offers IT system integration, shared, and support, as well as other IT-related services.

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