Stay tuned for more Creative suits

Stay tuned for more Creative suits

By: 
The Edge Singapore
18/08/17, 10:56 am

SINGAPORE (Aug 18): Creative Technology, the company that was famous for its Sound Blaster sound cards more than 20 years ago, had quite an eventful week.

On Aug 16, the company was awarded $36 million in damages from a lawsuit brought against Huawei Technologies Co. The following day, shares in Creative surged as much as 19% to $1.25, before ending the day at $1.19.

Why did the stock react that way? For starters, $36 million is quite a significant amount of money compared to Creative’s market capitalisation of $83.7 million as at Thursday, or $74 million just before the judgement was announced.

Moreover, the company is already loaded with cash. As at June 30, it had cash and cash equivalents of US$75.3 million ($102 million) and no bank debt. Add the $36 million in damages and that figure would inflate to $138 million, or $1.96 a share.

Since FY2016, the company has received some 81 US cents a share in damages from its patent infringement lawsuits. And, there could well be more on the way.

The big question is whether Creative can continue doing this.

Clearly, to keep suing other companies for patent infringement, it has to keep investing in new patents. However, its spending on R&D appears to have fallen over the years. The company spent US$15.3 million on R&D in FY2016, compared with US$66.4 million in FY2011.

Meanwhile, Creative is not generating much operational earnings. In fact, it has been booking losses for years: Its revenue of US$84.6 million for FY2016 is half that for FY2013.

Still, with its stock trading well below the value of the cash it has on its books, and with possibly further damages from ongoing lawsuits coming in, Creative could be a very interesting company to watch in the months ahead.

To get this story and other interesting investing ideas, get your copy of The Edge Singapore (Issue No. 793, Aug 18).

To subscribe to The Edge Singapore

Ex-remisier Ng denies being coached; RHB trader Alex Chew admits to telling the whole truth only in third statement

SINGAPORE (Apr 23): In Day Six of the trial of John Soh Chee Wen, the defence wrapped up their cross examination of the prosecution’s first witness, former OCBC Securities remisier Ng Kit Kiat. Ng had on Monday admitted to having performed trades without third-party authorisation. The trades performed without third-party authorisation included those based on orders given by a certain Ang Cheau Hoon Alice and Kent Eng Peng Huat, both of whom are remisiers at UOB Kay Hian, for accounts held by Ang's husband Poh Sian Hong as well as Eng's wife Yew Yong Mei. When asked by Soh’s defenc....
Read More >>

Singapore's pre-election cabinet change sets Heng up for top job

(Apr 23): Singapore’s Finance Minister Heng Swee Keat was promoted to deputy prime minister on Tuesday, a move that further positions him to succeed Prime Minister Lee Hsien Loong. Heng will become Lee’s deputy on May 1 while retaining the finance post, the prime minister’s office said in an emailed statement. He will also continue chairing the Future Economy Council and National Research Foundation. The sole cabinet promotion bolsters the odds that 57-year-old Heng will be the ruling People’s Action Party’s choice for prime minister after the general elections, which may come ....
Read More >>

OUE dumps stake in Nuvest Capital with no profit or loss

SINGAPORE (Apr 22): OUE announced it had sold its 33% stake in Nuvest Capital for US$1 million ($1.36 million). The buyer was Aje Kumar Saigal who owns the other 67% of Nuvest Capital. OUE acquired its 33% stake in Nuvest Capital in 2015 for US$1 million, so it has neither made a gain nor a loss. But in 2014, OUE invested US$200 million in Nuvest Real Return Fund which is managed by Nuvest Capital. Last Nov, OUE’s executive chairman had told analysts that the company plans to redeem the fund soon as it had not been profitable. In its FY2014 annual report, OUE's investment in t....
Read More >>