KeyStone's by shuifanglj


                                                                                                                                                                                                                      noVember 2007

                                              Small-Cap Stock Report
                                                                                                      editor:ryanIrvine,bba(Finance)                                                                Senioranalyst:Jeffbevan,cFa

                                                                                                                        Initial Coverage: Dynex Power Inc.
                                                                                                                                                                           Price: $0.235 (November 28/07)
                                                                                                                                                                                                Symbol: DNX:TSX-V
                                                                                                                                                                                           Near term: SPEC BUY
                                                                                                                                                                                          Long term: SPEC BUY

                                     Summary                          Dynex Power Inc. (DNX:TSX-V), headquartered and operating out of the UK, with its roots dating back
                                                                      over 50 years ago, specializes in the production, sale and service of power semiconductors and integrated
                                                                      circuit products. The company’s products are utilized to increase efficiency in many power-related activities
                                                                      including power transmission and distribution, alternative power generation, marine and rail propul-
                                                                      sion, aerospace, medical equipment, heavy industry, telecommunications and electric vehicles. Dynex
                                                                      manufactures a wide range of power semiconductors to fit many applications and also offers design and
                                                                      build services to provide a complete solution to its clients..

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    KeyStone’s Small-Cap Stock Report                                                        Initial Coverage                                                                                November 2007

Dynex Power Inc.                                                              Closing Price (november 27/07): $0.235
DnX:TSX-V                                                                                                   reCommenDaTIon: SPeC bUY
Shares Outstanding ������������������������������������������������������������������������������������������������������������������������������������������ 33,348,566
Fully Diluted Shares Outstanding ������������������������������������������������������������������������������������������������������������������� 33,769,033

Selected Quarterly data                                   Summary of Operations                                                                                            ratInGS
                                                          Dynex Power Inc. (DNX:TSX-V), headquartered and operating out of the
                                                          UK, with its roots dating back over 50 years ago, specializes in the production,
Income Statement            Q3 2007         Q3 2006       sale and service of power semiconductors and integrated circuit products. The                                    Value
Revenues                 $8,706,374     $5,706,698        company’s products are utilized to increase efficiency in many power-related
                                                                                                                                                                           EPS (TTM)                        $0.04
Net Earnings               $915,249      $(132,633)
                                                          activities including power transmission and distribution, alternative power
                                                          generation, marine and rail propulsion, aerospace, medical equipment, heavy                                      P/E (TTM)                         5.88
EPS                            $0.03          $0.00       industry, telecommunications and electric vehicles. Dynex manufactures a
Fully Diluted EPS              $0.03          $0.00       wide range of power semiconductors to fit many applications and also offers                                      PEG Ratio (TTM)                   N/A
FCF                      $(753,209) $(1,229,603)          design and build services to provide a complete solution to its clients.
                                                                                                                                                                           P/S (TTM)                         0.27
FCF/Share                    $(0.02)         $(0.04)
                                                          Financial Highlights & Key Areas of Growth                                                                       P/FCF (TTM)                       N/A
                                                          Dynex has enjoyed a return to profitability in its latest two quarters. Increasing
Balance Sheet               Q3 2007         Q3 2006       demand for its products and a continued effort by management to keep costs in                                    EV/EBITDA (TTM)                   6.61
Current Assets          $14,074,785 $11,633,024           check has made the profitability possible. Revenue from each of the company’s
                                                                                                                                                                           BV/Share                          0.02
                                                          segments, Bipolar Discrete Group, Power Modules Group, Power Electronic
Total Assets            $14,763,220 $12,057,548
                                                          Assemblies Group and Integrated Circuits have increased in 2007 and, with                                        Value                             3.75
Current Liabilities     $10,459,374      $7,890,114       the exception of the Power Electronic Assemblies Group, have a forecasted
Long-Term Debt           $2,106,954     $3,664,869        strong outlook to end the year. The demand for the company’s products has
                                                          been driven by the increasing awareness of global climate change and the need                                    Growth
Total Liabilities       $14,056,067 $13,245,794
                                                          for companies to look for ways to reduce their consumption of power. The                                         Revenues                         20%
Shareholders' Equity        $707,153 $(1,188,246)
                                                          increase in demand has not come without challenges, as it has put pressure on
                                                          material costs. Through more effective material procurement, management                                          FCF                              -18%
                                                          has been able to manage the increased costs. This combined with a favourable
                                                                                                                                                                           EPS                               N/A
                                                          product mix has allowed the company to successfully increase its gross margin.
                                                          Dynex is also strengthening its research and development programs and is                                         Growth                            3.75
                                                          working with its customers, suppliers and academic knowledge-based part-
                                                          ners on a number of European initiatives. These initiatives are slated to bring
                                                          future growth to the company. The rise in the Canadian dollar, the company’s
Selected annual data                                                                                                                                                       rISk/lIQuIdIty
                                                          reporting currency, against the Sterling has muted reported growth compared
                                                          to growth based in Sterling terms. Revenue for the latest quarter, Q3 2007, rose                                 D/E                               5.53
Income Statement                2006           2005       52.5% over Q3 2006 revenue of $5.7 million to total $8.7 million. Year to date
                                                          (YTD) revenue of $22.5 million is an increase of 32.0% over the same period                                      Current Ratio                     1.35
Revenues                 $23,713,165 $22,760,665
                                                          a year prior. Gross margin for Q3 2007 was 25.5%, a sharp improvement from
Net Earnings              $(273,449) $(1,788,260)         gross margin of 18.2% in Q3 2006. YTD gross margin was 22.0% up from 17.3%                                       SGR                               2.10

EPS                           $(0.01)        $(0.07)      for the comparable period 2006. Net earnings for the quarter totaled $915,000                                    Risk/Liquidity                    3.00
Fully Dilluted EPS            $(0.01)        $(0.07)
                                                          or $0.03 per share compared to a Q3 2006 loss of $133,000 or $0.00 per share.
                                                          YTD the company has earned $1.1 million or $0.03 per share compared to a                                         Overall                            3.5
FCF                       $(374,248) $(2,574,695)         loss of $696,000 or $0.02 per share in the first nine months of 2006.
FCF/Share                     $(0.01)        $(0.10)
                                                                                                                                                                           Company Contact Info
                                                          Conclusion                                                                                                       Dr. Paul Taylor, President and
Balance Sheet                   2006           2005
                                                          The company’s Q3 2007 profit, $915,000, was in stark contrast to the loss                                        Chief Executive Officer
                                                          sustained last year. Management has given a strong outlook going into Q4
Total Assets             $13,652,026 $12,798,406          2007, including a total year revenue of over $30.0 million and the first an-                                     +44 1522 500 500,
Total Liabilities        $14,424,614 $14,082,930          nual profit since 2002. This forecast is backed up by a strong order book of                           
Working Capital           $4,155,827 $3,034,337           $23.5 million. The stock experienced significant spikes after each of its last
                                                          two quarter profit announcements. Since its latest spike, the stock has once
Long Term Debt            $3,570,847 $3,048,252
                                                          again pulled back, giving us the opinion that those investors with a shorter-
Book Value                $(772,588) $(1,284,524)         term and higher-risk attitude may find Dynex an attractive buy in the low
ROE                               N/A           N/A       $0.20 level with the anticipation that another projected strong quarter and
                                                          solid annual results will offer an exit point to positions in early 2008. We are
                                                          recommending Dynex as a short-term Spec Buy.

2                                                                           copyright2007KeyStoneFinancialpublishingcorp.
  KeyStone’s Small-Cap Stock Report                                                                      Ratios and Ratings                                                                                                                November 2007

            BV (BV/Share): Book value (book value per share)                                                                                                     Net working capital
Book value per common share calculated as total shareholder’s equity less                                                               A measure of the company’s ability to carry on its normal business com-
preferred equity, and divided by the number of common shares outstand-                                                                  fortably and without financial stringency, to expand its operations with-
ing. Should the company decide to dissolve, the book value per common                                                                   out the need of new financing, and to meet emergencies and losses. Cal-
share indicates the dollar value remaining for common shareholders after
                                                                                                                                        culated by deducting current liabilities from the current assets.
all assets are liquidated and all creditors are paid.

                     D/E: Debt-to-equity ratio                                                                                                                  P/B: Price-to-book ratio
A measure of a company’s financial leverage calculated by dividing long                                                                 Calculated as a stock’s market value (current closing price) divided by its
term debt by shareholders equity. It indicates what proportion of equity                                                                latest quarter’s book value. While a lower P/B ratio could mean that the
and debt the company is using to finance its assets.                                                                                    stock is undervalued, it could also serve as a sign of weak fundamentals,
                                                                                                                                        and as with most ratios, this varies a fair amount by industry.
                              Current ratio
One of many ratios designed to evaluate short-term liquidity of a com-                                                                                                  PEG ratio
pany. Calculated as current assets divided by current liabilities, this ratio                                                           The price/earnings to growth, or PEG ratio is calculated as P/E ratio di-
gauges the level of cash resources relative to current liabilities as a mea-                                                            vided by a company’s annual EPS growth. The PEG ratio is used to deter-
sure of cash obligations.                                                                                                               mine a stock’s value while taking into account earnings growth.
                                                                                                                                                            P/FCF: Price-to-free cash flow ratio
Earnings before interest, taxes, depreciation, and amortization. EBITDA
                                                                                                                                        Calculated as a company’s current share price divided by its free cash flow
is calculated as revenue minus expenses (excluding tax, interest, deprecia-
tion, and amortization).                                                                                                                per share (i.e., free cash flow divided by the number of company’s shares
                                                                                                                                        outstanding) over the last four quarters (called “TTM,” or “trailing 12
                        EPS: Earnings per share                                                                                         months” calculation). It is a measure of the market’s expectations regard-
A company’s earnings available to common shareholders, also known as                                                                    ing a firm’s future financial health.
net income or net profit, divided by the number of shares outstanding.
                                                                                                                                                                  P/S: Price-to-sales ratio
                          EV: Enterprise value
Enterprise value is calculated as market capitalization less cash and                                                                   It is calculated as a stock’s current market price divided by its sales (rev-
equivalents, plus debt. Evaluation of EV relative to the company’s trailing                                                             enue) per share. When calculating this ratio, we use the company’s rev-
EBITDA is used in identifying potential takeover targets.                                                                               enue from its latest four quarters, or on a TTM basis.

                              FCF: Free cash flow                                                                                                                ROE: Return on equity
Capital expenditures are subtracted from cash flow from operating activi-                                                               A measure of a corporation’s profitability, calculated as net income di-
ties to arrive at free cash flow, which intends to measure the cash available                                                           vided by shareholder’s equity. ROE is often useful in comparing the prof-
to a company after making all cash outlays necessary to maintain existing                                                               itability of a company to other firms in the same industry.
productive capacity (as measured by capital expenditures on a company’s
cash flow statement).

               Featured companies in KeyStone’s Small-Cap Stock Report are evaluated on a scale of 1 to 5 on each of the following criteria:

          Value:           1 - poor investment value                                                                                    Risk/Liquidity:                    1 - high exposure to liquidity concerns
                           5 - excellent investment value                                                                                                                  5 - low exposure to liquidity concerns

      Growth:              1 - poor growth potential                                                                                           Overall:                    1 - poor fundamental characteristics
                           5 - excellent growth potential                                                                                                                  5 - excellent fundamental characteristics

                                                                                 Stock Holding                                                                                                                            Other
  Companies                                           KeyStone                              KeyStone Employees                          Related Companies                         Investment Banking Client              Related Company Business Relationship
  Dynex Power Inc.                                    NO                                    NO                                          NO                                        NO                                     NO


                                                                                          copyright2007KeyStoneFinancialpublishingcorp.                                                                                                                           3

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