Bonso Electronics International Inc. (NASDAQ:BNSO) stock was a big mover in Thursday trading session after its net income for the full year ended March 31, 2016 more than doubled to highs of $2.87 million. With the stock trading at highs of $2.65 a share it awaits to be seen if it will build up on the recent momentum and close in on its 52-week high of $4.25 a share.

 Core Business Weakness

While the full year report was an encouraging one for investors, the same also pointed out underlying challenges that the core business might be facing.  A good chunk of the revenue, $1.48 million, to be specific was rental income accrued from the sale of part of the land in use and residential unit.  Net sales from the core business of producing electronic products was down by 17.5% from $28.9 million to lows of $23.9 million.

Bonso Electronics has already warned that cost pressure going forward could significantly hurt its profit margins. Increased labor and raw material costs is a point of concern according to chief executive officer Antony So.

Costs Pressure

 “In the coming year, we believe that we will continue to face increasing cost pressure as the result of inflation, increased prices of raw materials and increased labor costs. In addition, we expect that growth in the demand for our products will be limited.  We will focus on research and development efforts and cost control initiatives to cope with the challenging environment us face,” said Mr. So.

Bonso needs to find a balance between its operational costs and the amount of money it spends on research and development if it is to prevent a potential slid in earnings going forward.  While the recent rally is good news for investors, the company faces an uphill task to hold on to the upward momentum especially on admitting that its core business faces a significant amount of challenges.

 Even though Bonso Electronics International Inc.(NASDAQ:BNSO) has rallied by more than 3% since April, it has underperformed the S&P by 27.95% an indication that it still has a long way to go.

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Steve Kanaval: Portfolio Manager/Writer/ Market Analyst Steve began his career in the Trading Pits in Chicago making markets at the Chicago Mercantile Exchange (NYSE:CME) the Chicago Board of Trade and the CBOE in the early 80’s. He ran the Morgan Stanley Derivative Prop Trading for the firm specializing in Index Arbitrage. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90’s managing large portfolios. Steve is known as an expert in MicroCap Technology Stocks and the emerging Digital Currency markets as a Portfolio Manager for his Family Office. Steve has managed portfolio’s in volatile asset classes for 3 decades as a commodity trader, hedge fund manager and digital currency trader and miner. Steve publishes his views on the asset classes in a public forum and has published more than 10,000 articles simplifying these complex and volatile assets for readers. His work is published on multiple sites including Bloomberg,,, CryptoCurrencyNews as a paid contributor. His work includes research, journalism and archived video on important market volatility related to stocks, digital currency and other volatile misunderstood asset classes. He offers a humorous, unique insight and the related back stories and drivers for readers interested in volatility and emerging market assets. Full disclosure Steve is long 25 digital currencies and sits on the board of multiple public companies involved in digital currencies, and owns shares in these companies from time to time.