NEW YORK, N.Y., Dec 14, 1999 /PRNewswire via COMTEX/ -- The following
is being issued by Preston Langley Asset Management, Inc., a member of
the National Association of Securities Dealers, CRD number 35733:
Preston Langley today released its research report on Lumenon
Innovative Lightwave Technology Inc. (OTC Bulletin Board: LUMM) with a
sell recommendation in a 2 page research report entitled "Fundamentals
Do Not Support Current Valuation; Buyers Beware."
PRICE OBJECTIVE: $20.00 RECENT PRICE: $37.00 PER SHARE
SYMBOL: LUMM(OTCBB) CAPITALIZATION: SEPTEMBER 1999
RECOMMENDATION: SELL COMMON STOCK: 23,000,000 SHARES
FULLY DILUTED: 37,209,000 approx.
FUNDAMENTALS DO MARKET CAP:
NOT SUPPORT CURRENT (Fully Diluted) $1.37 Billion
VALUATION.. ESTIMATED approx.
PUBLIC FLOAT: 6,000,000
RISK RATING: EXTREMELY 52 WEEK RANGE: $1/4 TO $43
SPECULATIVE
From inception to June 30, 1999: LOSS PER SHARE: $(0.04) (CAN$)
(six months)
NET LOSS: $(1,037,060)
(CAN$)
The shares have enjoyed a meteoric rise in price on the basis of its
development of a new chip purportedly capable of expanding the
bandwidth capacity for the telecommunications industry. Basically it
permits telecommunications operator to increase the signal capacity of
fiberoptic cables that have reached their maximum, without the need to
install new transmission lines.
According to Lumenon's Form 10 filing with the Securities and Exchange
Commission, it believes its chips can provide low cost high quality
DWMD (Dense Wavelength Division Multiplexing), which will enable
carriers to increase their bandwidth. However, at the present time, the
company is still in the testing stage with its product. Sales next year
must exclusively be distributed through Molex Corp. (MOLX), which has
provided the majority of the $10 million in new capital raised through
equity financing this year. Under the joint venture with Molex, all
production will be sold by Molex at a small gross markup. It is not
until 2001 that the company will be able to market its chips at market
prices either through Molex or other avenues. Thus, for the next year
sales may be under $1 million and a net loss is envisioned. An
additional $18 million in capital is needed to construct a new plant to
produce chips and raise capacity from the current 20 chips per day to 1,
000 chips per day by the end of 2001. Since ground has yet to be broken
on this new facility management believes production will be 500 chips
per day by the end of 2001. It can not be discerned whether this
forecast can be achieved on schedule. Moreover, the $18 million
financing is not yet in place to fund the building of this plant.
The company estimates it will be able to sell its chips below
comparable chips with prevailing market prices of $9,000-$10,000 per
unit, and still realize a 50% markup or better. However, the company
clearly states in its SEC filings that it's patent position is
uncertain at this time and involve complex legal and factual questions.
There is no present assurance that all necessary patents will be issued
or that any issued patents will provide protection against competitive
technologies or possible infringe upon existing patents of others.
Current competitors to LUMM are E-Tek Dynamics (ETEK), Corning Glass
(GLW), Ciena (CIEN) and Photonic Integration Research. Other emerging
companies that may compete include Kymata Ltd., Bookham Technology Ltd,
Silkroad Corp, Nanovation Technologies and Avanex Corp. (AVNX). Avanex
produces a similar product and just announced a $96 million common
stock offering with Morgan Stanley as the lead underwriter. While it is
difficult to determine which products will achieve successful market
penetration there are competitive companies in the company's operation
field that have greater resources.
For the aforementioned reasons we believe the shares are trading at a
substantial premium and may be vulnerable to both profit taking by
earlier investors who bought shares at low prices this year or a market
correction in this highly volatile sector. An analysis of revenues and
earnings (or losses) in 2000 as they are posted may generate a further
review of the company.
The Company does not think a market cap of $1.3 billion is justifiable
for a development stage company with insignificant revenue and
therefore the Company believes it is overvalued and the stock should be
sold.
All investments involve risk. The risk inherent in a particular
security may not be appropriate for you. Please consult with your
Preston Langley executive to obtain assistance in selecting appropriate
investments.
This report is published for information purposes only and is not to be
construed as an offer to sell or buy the security. The information
contained herein is based on sources that we believe to be reliable,
but we make no guarantee or representation about the completeness of
the statements or summaries of available data contained herein. This
information is provided as of the date of this report, is subject to
change without notice. Furthermore, the information in this report
should be considered outdated 90 days after publication, or such
earlier date as circumstances may require, and should not be relied
upon thereafter to develop investment strategies. Preston Langley does
not make a market in the securities of Lumenon Innovative Technology
Inc.
Preston Langley Asset Management, Inc. is a full service broker/dealer
based in New York. Preston Langley may at times maintain positions both
long and/or short or may have maintained such a position in the past or
may take such a position in the future in the security mentioned.
SOURCE Preston Langley Asset Management, Inc.
(C) 1999 PR Newswire. All rights reserved.
prnewswire.com
-0-
CONTACT: Robert Lisnoff of Preston Langley Asset Management, Inc.,
212-944-1400
(LUMM)
GEOGRAPHY: New York
INDUSTRY CODE: FIN
SUBJECT CODE: OTC |
