Conference call info on customers
TI is 48.4% of sales in the latest Q, and Sharp is 30%. All the other customers add to 20% of sales. The pricing on these products fell 15-20% in the 1st quarter and will fall another 15-20% in the 2nd quarter.In response to one question, they have been making Matsushita first generation smart cards in relatively small volumes; Matsushita(parent company of Panasonic, if you don't know them) is currently working on the second generation product, and they hope to produce this product in the future. Koo also said that they do expect new customers by the fourth quarter.
my comments: Looks like sales to Casio, Sanyo, etc have fallen off significantly so now two customers dominate sales. Also Koo implied the full 98 year will show 20% growth (over 97). This is an incredible statement, given that he said pricing will drop another 15 to 20% in the 2nd quarter and the 3rd Q also looks weak. He said the 4th quarter will be stronger due to new customers and other product lines.
Just how big will the 4th Q have to be to get 20% growth for the year?
In 97 Nam Tai did $133M in sales. In the 98 1st Q, sales were $26.3M. Next quarter they'll do lucky to get $28M, given a 20% drop in pricing, this assumes a 25% increase in unit volumes over the the just completed quarter. In the 3rd quarter, expect maybe $30M. This means to get a 20% year over year growth and hit $160M, the company will have to do $76M in the 4th quarter versus $30M in 97 4th Q (no way!!). Koo is bullshitting us again. This company will be lucky to show any growth in revenues or operating earnings this year over last year.
The company isn't growing, its shrinking as the pricing on the products they make deteriorates. Also they are becoming more and more dependent on two customers. I think they know this, and this is why they are looking for acquisitions.
Finally, I don't like the sale of Deswell stock. That well managed company looks like it will easily grow 30-40% this year, and earn almost $2.80 a share or better. The shares are about to pay 30 cents a share dividend with the record date in about a week. This was a great place to park some of our cash instead of buying Koo's personal shares back for 20% more than we sold them to him 3 months ago (using $14 for the stock value and $3 for the warrant value). If the company reported this way, the loss on the share repurchase from Koo is over $1.6M, or about 15 cents per share.
All said and done, there still is no reason for this stock to trade so close to book, except for Koo's thoughtless short-sighted self enrichment schemes. When times are tough, Koo screws the shareholders.
Paul |
