Cemtrex Highlights Value of Recently Announced Exchange Offer for Key Tronic Shareholders
September 13 2017 - 9:45AM
Cemtrex, Inc. (Nasdaq: CETX, CETXP, CETXW) today responded to the
September 6, 2017 press release from Key Tronic Corporation
(Nasdaq: KTCC) regarding the exchange offer made by Cemtrex on
September 5, 2017 to acquire all outstanding shares of Key Tronic
by offering to exchange each outstanding share of common stock of
Key Tronic for one share of Cemtrex common stock.
Cemtrex believes that a combination of the two companies will
unlock significant shareholder value for both companies, by
enabling cost savings, higher earnings per share and a more
attractive price to earnings ratio than either company is currently
maintaining. Additionally, since Key Tronic shareholders are not
being asked to sell their shares for cash, but instead
exchange their shares for Cemtrex shares, the exchange offer will
allow them to own Cemtrex while continuing to own Key Tronic as Key
Tronic will become a subsidiary of Cemtrex.
Cemtrex recognizes that the market price of Key Tronic common
stock is higher than Cemtrex’s common stock price. However, on a
fundamental valuation basis, Cemtrex’s offer is of significant
value that is not readily apparent when simply looking at each
company’s stock price alone. A comprehensive review of various
metrics and ratios commonly used by investment professionals to
evaluate the efficiency, growth, financial strength and management
effectiveness of the two companies is outlined below.
When evaluating financial strength, Cemtrex holds $1.26 more in
cash per share than Key Tronic. A deeper look at revenue growth
shows that Cemtrex’s 5 Year TTM Revenue CAGR is 50% compared to
only Key Tronic’s 4%. And looking at profitability, Cemtrex’s 5
Year EPS growth rate stands at 62.4% compared to a negative 19% for
Key Tronic. Finally, an analysis of management effective reflects
Cemtrex’s 5 Year Average Return on Equity at 75% compared to Key
Tronic’s 5%.
In regards to the value of either company’s current shares, it
could be argued that the current trading volume of Cemtrex’s and
Key Tronic’s shares do not constitute an efficient market and
therefore the shares prices do not accurately reflect the intrinsic
value of the businesses. Cemtrex’s Board believes that
bringing the two companies together will provide a much more
enticing investment opportunity for a larger base of shareholders,
thereby generating more significant trading volume and an efficient
market. As a result, we would expect to further unlock shareholder
value.
The following includes our full analysis:
Cemtrex Inc. (CETX) vs. Key Tronic Corp. (KTCC)
Comparison of Metrics & Ratios |
|
Data as of September 8, 2017 |
Valuation Ratios |
CETX |
KTCC |
Analysis |
Price to Earnings Ratio "PE" (TTM) |
|
5.96 |
|
|
13.67 |
|
CETX trades at a 56%
discount to KTCC from a PE ratio perspective |
Price to Earnings to Growth Ratio "PEG" (TTM) |
|
0.09 |
|
n/a |
CETX's PEG ratio is
favorable vs. KTCC PEG ratio cannot be calculated due to negative
earnings growth rate during the trailing year |
Price to Sales ratio "PS" (TTM) |
|
0.25 |
|
|
0.16 |
|
KTCC trades at a 36%
discount to CETX on a Price to Sales ratio |
|
|
|
|
Financial Strength (Leverage & Credit
Ratios) |
CETX |
KTCC |
|
Cash & Equivalents Per Share |
$ |
1.29 |
|
$ |
0.03 |
|
CETX had $1.26 cash per
share more than KTCC at the end of their most recent quarters |
Quick Ratio (TTM) |
|
1.50 |
|
|
0.84 |
|
CETX has a 79%
healthier Quick Ratio |
Current Ratio (TTM) |
|
2.55 |
|
|
2.29 |
|
CETX has a 11%
healthier Current Ratio |
|
|
|
|
|
|
|
|
Growth Rates based on 5 Yr. CAGR |
CETX |
KTCC |
|
Revenue |
|
50 |
% |
|
4 |
% |
CETX's 5 Year TTM
Revenue CAGR was approximately 46 percentage points greater than
KTCC's |
Profit |
|
79 |
% |
|
-19 |
% |
CETX has a greater
growth rate of net profit over the TTM 5 years vs KTCC decline in
profits |
Assets |
|
112 |
% |
|
9 |
% |
CETX's 5 Year TTM Asset
CAGR is 93 percentage points greater than KTCC's |
|
|
|
|
Profitability |
CETX |
KTCC |
|
Gross Profit Margin (TTM) |
|
32.4 |
% |
|
8.2 |
% |
CETX has a 24.2% higher
gross profit margin than KTCC for the trailing year |
Gross Profit - 5 Yr. CAGR |
|
94.2 |
% |
|
1.3 |
% |
CETX has a 92.9% higher
annual growth of gross profit margin over the last 5 years |
EBITDA Margin |
|
7.3 |
% |
|
3.6 |
% |
CETX's EBITDA Margin as
% of Revenue was 105% greater than KTCC's for the trailing
year |
EBITDA - 5 Yr. CAGR |
|
75.7 |
% |
|
-6.3 |
% |
CETX's 5 Year EBITDA
CAGR was 1299% greater than KTCC's |
EPS - 5 Yr. Growth Rate |
|
62.4 |
% |
|
-19.7 |
% |
CETX's 5 Year EPS
Growth Rate was 417% higher than KTCC's |
|
|
|
|
Efficiency |
CETX |
KTCC |
|
Revenue/Employee (TTM) |
$ |
162,400 |
|
$ |
98,000 |
|
CETX has $64,400 more
revenue per employee than KTCC for the trailing year |
Receivable Turnover (TTM) |
|
9.64 |
|
|
7.37 |
|
CETX's Receivable
Turnover was 30.8% greater than KTCC's in the trailing year |
Inventory Turnover (TTM) |
|
5.41 |
|
|
4.12 |
|
CETX's Inventory
Turnover was 31.3% greater than KTCC's in the trailing year |
|
|
|
|
Management Effectiveness |
CETX |
KTCC |
|
Net Profit Margin (TTM) |
|
4.1 |
% |
|
1.2 |
% |
CETX's Net Profit
margin was 237% greater than KTCC's as a % of revenue in the
trailing year |
Net Profit - 5 Yr. CAGR |
|
78.8 |
% |
|
-18.9 |
% |
CETX's Net Profit 5
Year CAGR was 517% greater than KTCC's |
Return on Equity (TTM) |
|
20.2 |
% |
|
5.1 |
% |
CETX's Return on Equity
was 298% greater than KTCC's in the trailing year |
Return on Equity - 5 Yr. Avg |
|
75.2 |
% |
|
7.6 |
% |
CETX's 5 Year Average
Return on Equity was 893% greater than KTCC's |
Return on Assets (TTM) |
|
6.5 |
% |
|
2.5 |
% |
CETX's Return on Assets
was 157.5% greater than KTCC's in the trailing year |
Return on Assets - 5 Yr. Avg |
|
12.5 |
% |
|
3.9 |
% |
CETX's 5 Year Average
Return on Assets was 222.7% greater than KTCC's |
Return on Capital (TTM) |
|
8.8 |
% |
|
3.9 |
% |
CETX's Return on
Capital was 129% greater than KTCC's in the trailing year |
Return on Capital (5 Yr.) Avg |
|
16.3 |
% |
|
5.9 |
% |
CETX's 5 Year Average
Return on Capital was 179.3% greater than KTCC's |
|
|
|
|
Defined Terms |
|
|
|
|
TTM -
Trailing Twelve Months |
CAGR - Compounded
Average Growth Rate |
|
MRQ - Most
Recent Quarter |
EBITDA - Earnings
Before Interest, Taxes, Depreciation and Amortization |
|
Qtr -
Quarter |
EBIT - Earnings Before
Interest and Taxes |
|
Yr. - Year
|
ROE- Return on
Equity |
|
Avg -
Average |
ROE- Return on
Assets |
|
|
ROC -
Return on Capital |
In a comparison of the above ratios and metrics Cemtrex achieved
a superior result in 24 out of 25 categories than Key Tronic. As
such, Cemtrex maintains its belief that the exchange offer of one
common stock of CETX for one common stock of KTCC is an attractive
offer for KTCC shareholders.
Cemtrex continues to be optimistic about its own growth outlook
over the long term. The Company is aggressively pursuing many
initiatives, both organic and inorganic, that it believes will lead
to strong shareholder value over the years to come. The Company
expects that its annual revenues for fiscal 2017 will be between
$118 - $122 Million, an increase of approximately 30% over fiscal
2016 results of $93 Million.
About the Exchange Offer
The exchange offer is conditioned upon, among other things, the
registration statement for the issuance of Cemtrex common stock in
the exchange offer being declared effective by the Securities and
Exchange Commission and the approval by Cemtrex stockholders of any
required increase in its authorized common stock and, to the extent
required by the rules of the Nasdaq Stock Market, stockholder
approval of the issuance of Cemtrex common stock in the offer,
which the executive officers and directors of Cemtrex have the
voting power to approve. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission but has not yet become effective. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective.
This press release is for informational purposes only and is
neither an offer to sell nor a solicitation of an offer to buy any
securities. Any exchange offer will be made only through a
registration statement and related materials. Investors and
stockholders of Key Tronic are advised to read this registration
statement and other disclosure materials (including other
disclosure materials when they become available) carefully because
they will contain (and will contain) important information.
Investors and stockholders may obtain a free copy of the disclosure
materials and other documents filed by Cemtrex with the Securities
and Exchange Commission at the SEC’s website at www.sec.gov.
A free copy of the disclosure materials and other documents of
Cemtrex may also be obtained from Cemtrex upon request by directing
such request to Okapi Partners LLC, the Information Agent for the
exchange offer:
Okapi Partners LLC1212 Avenue of the Americas,
24th FloorNew York, NY 10036Banks and brokerage firms, please call:
(212) 297-0720Stockholders and others call toll-free: (855)
208-8901E-mail: cemtrex@okapipartners.com
About Cemtrex
Cemtrex, Inc. (NASDAQ:CETX) is a world leading diversified
industrial and manufacturing company that provides a wide array of
solutions to meet today's technology challenges. Cemtrex provides
manufacturing services of advanced custom engineered electronics
design and manufacturing services, comprehensive industrial
services, monitoring instruments for industrial processes and
environmental compliance, and systems for controlling particulates,
hazardous gases, emissions of Greenhouse gases, and other regulated
pollutants. The Company is also in the process of developing its
own proprietary IoT and wearable devices.www.cemtrex.com
Forward-Looking
Statements
This release contains forward-looking statements relating to
Cemtrex’s exchange offer for all of the outstanding shares of Key
Tronic common stock and Cemtrex’s expectations with regard to the
proposed transaction. These forward-looking statements are
based on Cemtrex’s current intent, expectations, estimates and
projections and are not guarantees of future performance.
These statements involve risks, uncertainties, assumptions and
other factors that are difficult to predict and that could cause
actual results to vary materially from those expressed in or
indicated by them. In addition, some factors are beyond
Cemtrex’s control. Factors that could cause actual results to
differ materially from the statements made in this release include,
among others: (i) the willingness of Key Tronic shareholders to
tender their shares in the exchange offer and the number and timing
of shares tendered; (ii) the satisfaction, or waiver by Cemtrex to
the extent legally permissible, of all conditions to the exchange
offer; (iii) Cemtrex’s and Key Tronic’s ability to receive any and
all necessary approvals, including any necessary governmental or
regulatory approvals; and (iv) other factors as described in
filings with the Securities and Exchange Commission, including the
factors to be discussed under the heading “Risk Factors” in
Cemtrex’s prospectus included in its registration statement on Form
S-4 as filed with the Securities and Exchange Commission on
September 5, 2017.
Investors Relations
Cemtrex Inc
Phone: 631-756-9116
Investors@cemtrex.com
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