XMH Holdings

[sykn]

I chanced upon this counter and found something quite unusual - ROE consistently around 20%+ for the last 4 years, and yet Owner's Earnings (OE - Buffett's Way) have not grown at all in this period - I find this highly unusual (first time I come across). On closer examination of its balance sheet, I discovered that its dividend payout ratio is around 45%, so for each year of its $8M net earnings, about half is paid out as dividends. Then it also engages in quite aggressive share buy backs (good thing?) of around $2M; not sure what are the dynamics of doing this; hence only $2M left as retained earnings which explains why its OE growth is not happening! I also noticed its $11.4M goodwill booked on acquisition of MPG and the FY13 foreign exchange translation loss of $5.87M. This is the first case where I see high ROE in a company but dare not jump in to invest. Thanks to all my value-buddies for your contributions!