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No. of Recommendations: 5
April 17, 2019 ($2.18) Thesis:

I originally bought for our clients on ~4/28/15 for ~$2.79, and then again on ~4/22/16 for ~$2.06. Our average cost is $2.36, and it is currently < 1.2% position of our total managed assets.

This is a speculative investment. Balance sheet remains strong, yet a few quarters of continued falling revenues can cure that. Revenues have been flat. MNDO has a trailing price earnings ratio of 8.07X. We do not have any earnings estimates for F2019. ROA (NI/TA) is at 19.8% and ROE of 24.47%. There is Insider ownership of ~17%. Researching is more difficult because it is an Israeli company. Revenues are lumpy, and catalyst would be greater institutional ownership, revenue growth, etc. This is under researched and hence the positioning is correspondingly small. I like the small cap nature, as market cap is $42M. I could certainly see increasing the allocation but would like to see more clarity. I sense that won’t occur, and if anything, revenues and number of employees are shrinking over the years.

ROIC, ROA and ROE have been consistently strong over the years.

Institutional holders according to Nasdaq site are 14.89%. We own 306,266 shares (1.58% of the company), and based on Edgar, that would be the third largest shareholder.

Short interest is higher than typical with 51,364 shares short. It was negligible as of March 29, 2018, with 6,129 shares short. Days to cover is 1.35 according to Nasdaq.com.

April 16, 2019 ($2.16) – Review of F2018 Financials

We have a ~1.19% portfolio allocation, with a cost of ~$2.36.


As of December 31, 2018, the Registrant had outstanding 19,439,218 Ordinary Shares. This equates to a market cap of $42.0M.

4Q18 Revenues of $4.5 million, were similar to revenues in the fourth quarter of 2017.

Full year F2018 revenues of $18.1 million, same as in 2017.

In 2018, they derived 82% of their revenues from the sale of software and related services to telecommunications service providers.

As of December 31, 2018, they had 221 employees, compared to 240 as of December 31, 2017.

“Our flat 2018 revenues reflect the expected and previously announced negative impact of a few customers under maintenance or SaaS agreements that decided to exit their business, offset by increased orders from other existing customers. We continue to be challenged by the shrinking relevant telecom markets and strong competition. We expect additional terminations of maintenance agreements in 2019 that will have a negative impact on our revenue and profitability in 2019. We believe that we made the necessary adjustments to our workforce to prepare for this.
As previously announced, during our over twenty years of operation, we have experienced similar market trend changes and we executed successfully in shifting our focus towards new opportunities.”

The company continues to invest in Research and Development. R&D was 20.7% of revenues in F2018. The company does not capitalize any R&D costs.

The company has paid out $1.15 in dividends for the past 4 years (2016-2019). This is interesting to see, when comparing price, we paid to the current price.

Deferred revenues decreased to $1,788, from $3,556. I am concerned of the material reduction in this liability. The revenue concerns have been highlighted every year. We still are not seeing light at the end of the tunnel and might not ever with this company.

The Company’s independent auditor is Brightman Almagor Zohar & Co., certified public accountants in Israel and a member of Deloitte Touche Tohmatsu Limited.

You can read my entire chronological notes at this link: https://rbcpa.com/mind-rbs-investment-notes/

Here were my Fool.com notes from March 2017: https://boards.fool.com/mndo-quick-notes-and-thesis-32632101...

Here were my Fool.com notes from April 2018: https://boards.fool.com/my-notes-to-mndo-33041186.aspx?sort=...
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