Here is the exact line we found in Trio-Tech (TRT)'s 10-K filing (numbers are in thousands), "During Fiscal 2024, we incurred professional fees of approximately $307 related to the identification and evaluation of potential divestment opportunities. These fees were primarily associated with advisory services aimed at optimizing our portfolio and aligning our strategic focus. While these costs impacted our operating expense for the year, they are considered non-recurring and directly linked to our ongoing efforts to streamline operations and enhance shareholder value. Excluding these expenses, total general and administrative expense was lower on a trailing twelve-month basis, reflecting our rigorous cost-saving efforts across our organization."
Here is a quote from Trio-Tech (TRT)'s CEO in their earnings press release, "Trio-Tech’s strategy to focus on opportunities to grow our manufacturing and distribution segments significantly contributed to our strong fourth quarter results. We continue to carefully evaluate the path forward for each of our operating segments to concentrate our resources on products and markets with the greatest growth potential. Supporting this strategy, we have increased our sales efforts and introduced new products and services in our manufacturing and distribution businesses. Additionally, we are evaluating potential acquisitions and divestitures as well as direct investments and joint development projects with key partners that can contribute to Trio-Tech’s long-term success and increase value for our shareholders."
It sounds like this:
1) They are focusing on their manufacturing and distribution businesses, which have the strongest growth, with each of these businesses growing by 60% and 30% year-over-year in the most recent quarter respectively.
2) Their test services business might be holding back the valuation of the company since its revenue declined year-over-year. If not for the test services division the overall company would have reported significantly higher fiscal 4Q revenue growth. It sounds like they may divest of their test services business, but because it is very profitable, they will likely sell it for an amount that exceeds the current enterprise value of the company.
3) The best way to optimize its portfolio, align its strategic focus, streamline operations, enhance shareholder value, and concentrate its resources on products and markets with the greatest growth potential, would be by acquiring their key partner CTS GmbH. Instead of being the exclusive distributor of all CTS products in Asia-Pacific nations and earning gross margins of approximately 20% on these product sales, they'd be able to earn high gross margins of 50%+ if they also manufacture these products. They'd also be able to enter new markets with the greatest growth potential and profit from CTS product sales all around the world.
4) TRT's manufacturing business could then collaborate with CTS GmbH on the joint development of new products.
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is meant for informational and educational purposes only and does not provide investment advice.
Preparing Americans for Hyperinflation
