Wednesday, August 8, 2012

Wi-Lan Inc

On my other blog are some comments on "Selling SAP, Buying ALA". See comments blog.

I own not own this stock (TSX-WIN), but I used to when it was considered an up and coming company. However, it crashed with the 2000 bear market and I lost over 99% of my invested money. Good job I only bought a few hundred shares and did not loss that much in actual money terms. Wi-Lan has been trying to recover ever since the 2000 bear market, but the stock price is still only some 94% off the highs of 2000.

The company has been recovering from the after bear lows. Looking at the total return on this company over the last 5 and 10 years you have really great figures. The 5 and 10 year total return come to 26.5% and 10.68% per year, respectively. Some of this is dividends as the company started to pay dividends in 2009, but it is a very small portion.

At first when they started to pay dividends, the Dividend Payout Ratios were really awful. However, for 2011 the DPR for earnings was 35% and it is expected to be 28% this year. The DPR for cash flow was 19% in 2011. The most recent dividend increase was in 2012 and it was for 20%, which is a very good increase.

Dividend yield has been going up. The 3 year median dividend yield is just 1.2%, but it is currently at 2.46%.

As part of their recovery, Wi-Lan started to focus its business on the development, protection and monetization of patented inventions. They had a cash flow problem for many years. (That is mostly cash flow was negative.) They also had earnings losses for a number of years. These problems were, for the most part, turned around in 2006.

Over the past 5 and 10 years there has been a big increase in shares with the 5 and 10 year growth both at around 15% per year. This, of course, affects the per share values for this stock. Revenues for the company are up over the past 5 and 10 years at 119% and 16% per year. However, Revenue per Share is up over the past 5 and 10 years at 90% and 0% per year.

EPS is not a great story for this company. EPS are down 3% per year over the past 5 years. I cannot get any sort of fix on a 10 year period as earnings were negative for so many years. Because Cash Flow per share was also negative for many years, I can only get a 4 year growth period on cash flow, but this shows good growth at 29% per year. However, Cash flow was also negative or very low in 2009 and 2010.

It is only the book value per share that I can get really good figures from and the 5 and 10 year growth is at 30% and 17% per year.

Return on Equity has not been great. The ROE for 2011 is ok at 9.6%. However, the ROE based on comprehensive income is only 6.6%. When the ROE for net income and comprehensive income has this sort of difference, it might call into question the quality of the company's stated earnings. Wi-Lan only started to give out comprehensive income in the 2011 statement.

One good thing about this company is that the debt ratios seem to always have been quite good. The current Liquidity Ratio is 9.18. (They just paid off some debentures.) The 5 and 10 year median Liquidity Ratios are at 9.49 and 6.66. The Debt Ratio is also very high at 9.05. The 5 and 10 year median Ratios are 9.08 and 6.73. The company basically has no debt.

The current Leverage and Debt/Equity Ratios are at 1.12 and 0.12. For these ratios, lower is better and they are quite low.

Of course, even with the recovery of this stock, I would still not even come close to what I had paid for it 2000. I paid far too much this stock when I bought it. Prices were inflated in 2000. It was nothing they did particularly to have it valued so highly in 2000. It was not making any money and it had not made any money. The 2000 stock bubble was a tech bubble and this stock took part in the general huge rise in stock prices.

Company is probably still a rather risky investment, but they have done a great job of turning the company around. It is hard to know how secure the dividend is. I would like to see some more years of good Dividend Payout Ratios to feel good about their ability to continue good dividends.

Wi-Lan was founded in 1992 to commercialize technology inventions that made low-cost, high-speed wireless networking a reality. Proven through several generations of products manufactured by Wi-Lan and applied in multiple technology standards, Wi-Lan's inventions were, by 2005, commercialized in millions of wireless networking devices worth many billions of dollars. Realizing the value that its intellectual property brought to industry, Wi-Lan chose in 2006 to focus its business on the development, protection and monetization of patented inventions. Its web site is here WiLan. See my spreadsheet at win.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. In used to work for the Wi Lan group. The founder was a total crook and I don't trust them at all. Do some digging about Cell Loc and the debt to their Vancouver suppliers they refused to pay. The staff they promised things to and then laid off. Now they are reduced to making a nuisance of themselves and threatening people with law suits hoping to get money to go away. They never made a success of any product.