Excellent board, thanks, some SYNA stuff I collected
Hi guys,
Sorry for such a long post.
Really good reading on this board. I am a SYNA investor. Like Jim M, I also was introduced to SYNA via GG. I bought only because of Foveon, and all other reasons became a big bonus for me. Good or bad, I did load up last week for accounts I manage and for my own accounts. I generally like to hold for long periods of time. I go by the alias of rbco at Gildertech.com. I do not follow SYNA as close as I do other companies.
Here are my simple thoughts so far. If sell sides are speculating in their statements, then i think they could be wrong. If sell sides have info that public does not yet have, then they are correct. I do not believe that any of the sell sides are conspiring or doing anything wrong. I don’t think they are trying to drive down price in order to purchase more. Analysts have substantially reduced their estimates. I really have never seen this done before by a few majors, where the info turned out to be false. Did SYNA give any guidance, or did they just remodel their spreadsheets?
I was just toying with some numbers and projections. These numbers are really working with some revised analyst reports, and I am hoping that they are near worst-case scenarios. I have a feeling that if these numbers turn out to be too optimistic, that Wall Street will quickly revalue SYNA to a much greater devalued situation. Hence, if numbers are overstated in analyst projections, most investors will have no time to exit positions prior to any news. With that said, here goes a back of the envelope analysis (keep in mind that First Call has not updated their reports for the new expectations by several firms.
Eps
I used a 10% growth rate (arbitrary after 2007)
2005***1.12
2006***1.10
2007***1.00
2008***1.10
2009***1.21
2014***1.95
If eps is 1.95 in 2014 and multiple was say 15X eps, you would have 2014 share price of 29.25
Putting in the following in my TI BA II Plus:
29.25 FV
23.00 PV (price i just bought at , yet i carried a cost of 7.00ish prior to repurchase)
10 N
Computed annualized return becomes 2.43% for 10 years. Hence, using a bad case scenario, one can try to reason that risk/ reward is not awful right now.
I know that Jim asks for a formula, which brings in discount rate and risk rates, but I really don't use those formulas. The above, I will use as a roadmap, and hope that the 2014 eps projections and multiple of 15X are higher than this projection. Also, hoping that a minority interest in Foveon pays off.
FYI here was some previous thoughts from my quick analysis in November 2004. At this time, I was trying to develop a decision whether to sell off my positions, which increase around 4 fold at the time, or just hold. I generally held, unless portfolios were too highly concentrated in SYNA. Incidentally, I bought NSM and SYNA at similar times (going from memory). I completely exited NSM, i think in 2003 or
2004 (near her highs). I kept SYNA only because of the GG Foveon connection.
Here was my previous analysis:
I used a 15% growth rate (arbitrary after 2007)
2005***0.80
2006***1.00
2007***1.25
2008***1.56
2009***1.79
2014***3.60
If eps is 3.60 in 2014 and multiple was say 18X eps, you would have 2014 share price of 64.80
Putting in the following in my TI BA II Plus:
64.80 FV
23.00 PV (price i just bought at , yet i carried a cost of 7.00ish prior to repurchase)
10 N
Computed annualized return becomes 10.91 % for 10 years.
The following is a collection of data I just found, including notes I took several months ago.
Here is what briefing.com said about SYNA today.
" 08:54 SYNA Synaptics estimates, target cut at CSFB (22.50 )
Firm cutting its EPS estimates and price target based on expectations SYNA is in line to lose a substantial portion of its business with Apple over the next twelve months. On Feb 9, firm confirmed Cypress Semiconductor (CY) has won design contracts for at least some of the next generation iPods, likely due out in the late summer or fall of 2005. The iPod business was expected to represent approx 30% of SYNA's
revenue in fiscal 2006, and 45-50% of operating income. While firm has limited info regarding the extent of the Cypress win, CSFB anticipates Synaptics could retain between approx 40% and 50% of future unit volume. Firm believes the presence of another competitor in the personal digital entertainment space will impact the future gross margin SYNA can achieve in its non-PC segment. With these assumptions
in mind firm reducing its FY2006 EPS est to $0.95 from $1.30 and FY07 est to $1.05 from $1.47. Firm's new estimates result in a $28 price target (down from $42). "
Fleckenstein mentioned SYNA briefly in his last article on his site. Here are the minor mentions.
fleckensteincapital.com I don't think that Fleck follows SYNA at all, but that he envisions the tear apart in the chips, could be similar to SYNA last week.
" SYNA: The Chip Roadmap Overnight markets were quietly higher, ditto our equity futures, as they completely ignored the disappointment at Dell and a couple other companies. Dell, like Cisco, was a disappointment, not a disaster, as it struggled a bit to make the estimates that had been set. Beneath
the hood, a few line items continued to look somewhat iffy, but nothing worth delving into."
" Chart types are piling into Sox stocks because they figure the charts tell them everything's okay. Sometimes that is the case. Other times, it's the case of what recently happened to Synaptics. That is the roadmap that I believe lies ahead for most of the chip companies I follow, as well as many of the speculative highfliers, if not the market itself."
This is what Cody Willard at TSC said on 2/9/05 (might have misinformation?)
" I mentioned on Monday that I was "nibbling a little bit of Synaptics (SYNA:Nasdaq), adding to a very small position" as I put it at the time. I don't care how small a position is (and this one is one of my smallest at less than 1% of my fund), it hurts to have a stock down 21%. The company lost the touchpad business for Apple's (AAPL:Nasdaq) Powerbook line to Cypress Semiconductor (CY:NYSE) today. That alone wouldn't account for a 21% drop in the stock except that now there are lots of concerns about the company's bread and butter growth segment, which is supplying the touch pad on the iPod. And if SYNA's lost the Powerbook business, what's to stop them from losing the iPod, too? Frankly, I don't think SYNA is losing the iPod business (though to be clear, that is certainly a risk, and I was wrong about the stock when I wrote about it on Monday). I've doubled up on my still small position in the name down here.
Net long AAPL, SYNA"
Here are some notes I previously took on SYNA. Please note I see that my last sentence mentions jon stone, he recently did sell around $400 to $500k worth.
December 1, 2004
I just read a report on SYNA from Behind the Numbers. Here are some notes of that report. I’m not so certain that author fully understands SYNA based on my notes of October 25, 2004. Nevertheless, something to watch.
1. operating cash flow has dropped , while earnings have increased. this has not been there historic fashion. this was caused by increase in accounts receivable and inventory increase which was planned by management. Quarters sales were allegedly made at end of quarter.
2. cash flow includes around $1mil in tax benefits of stock options.
3. company outsources, hence cash flows should be positive.
4. DSO's up considerably. concern over payment terms being given to less worthy customers? who are the two largest customers. I think one is Apple, who is the other?
5. did SYNA loosen payment terms or incentives to strengthen quarter?
6. are warranty cost reserves too low. reserve is now 1.6% of revenues, previously 3.3%.
7. A/r reserve has decreased from 1% of receivables, to 0.60%.
October 25, 2004
If you project revenues for F2005 of $170M and shares o/s of 29,200,000, you get sales per share of $5.82. Keep in mind that I am not projecting $170M of revs, nor am I projecting F2005 share count of 29.2M.
Accounts Receivable at September 30, 2004 went up 34% QoQ, whereas sales went up a little more than 8%. On a YoY basis accounts receivable has increased 124%, whereas sales went up 29%. DSO should be watched here. There are some potential warning signs. On 1Q05 CC, SYNA
claims that DSO went to 70 days from 56, because of back loaded quarter.
Inventory went up 17.76% QoQ.
Market cap with shares of 27,693,808 and price of 29.85 is $826,660,169.
Insider Trading
a. Day, Shawn owns 65,509 shares. He owned 100,009 April of 2003. Seems to be on a regular sale program.
b. See report, there is an awful lot of insider selling.
c. Knittel, CFO owns 3065 shares, He owned 40,584 April of 2003.
Fully diluted shares outstanding is increasing at about an 8 to 11% annual rate.
1Q05 CC Notes
CFO claimed on 1Q05 CC that “revenues from new market applications increased more than 81% sequentially to approximately 33% of total revenue.”
I haven’t seen an R&D projection. For now, I will use $6m per quarter.
Per CC for 1Q05 headcount will increase. Currently stands at 199.
Stock option exercises and esop contributions brought in $1M for 3 months ended September 30, 2004.
ASIC inventory increased to a “targeted 6 month supply.
Revenue growth for 2Q05 is expected to be in range of 35% to 45%. This is expected to come from strong demand in portable music players.
Revenue growth in 3Q05 expected to be in excess of 1Q05, yet not increasing at the guided rate of 2Q05 because of seasonality. Much of this depends on new product introductions.
Gross Margins expected to be similar to 1Q05, which were 45%. Target is 40 – 45% moving forward.
Net income for 2Q05 expected at $0.27 - $0.30.
Operating expenses expected to be up sequentially in 2Q05, because of increased staffing levels.
Observations
Tangible book value at September 30, 2004 is $4.075 per share.
Need to see 10Q for Statement of Cash Flows. In 1Q05 CC, SYNA mentioned cash flow from operations at $175,000, yet Capex was at $246,000. This of course is negative free cash flow.
Flow ratio is 1.59, desirable to be less than 1.25 generically speaking. At June 30, 2003 it was 1.41 and at June 30, 2004 it was 1.49.
according to 10K, there are 1,321,422 rule 144 shares. The total shares outstanding are 25,113,208. Hence 5.26% of outstanding is held by insiders. Yahoo profile indicates 4.43%. Perhaps that includes subsequent sales.
SYNA owns 17% of Foveon Corporation as of June 30, 2004 as discussed on page F-16 of 10K.
as of June 30, 2004, there were 226,273 Stock Option Shares Outstanding. The weighted average stock price for those shares were $15.98.
The stock price on June 30, 2004 was 19.32. The 10k listed these shares as “antidilutive” . I need to look to see why these are antidilutive, when in fact they seem to be above water.
Some Insider stuff. nasdaq.com
a. Shawn Day, currently owns 65,509 shares , he owned 100,009 on April 22, 2003. He has automatic selling in place, and the share price has increased substantially since 4/03. Hence, this is just something to watch.
b. Donald Kirby has around 7000 shares. His selling is only option related.
c. Russell Knittel, CFO, currently owns 3065 shares , he owned 40,584 on April 22, 2003. that appears to be more than option related selling.
d. Thomas Spade, currently owns 18,004 shares (i think the site has an error, whereas, i think he only owns 3004 shares. it does not appear that the recent sale of 15k shares was reduced) , he owned 40,004 on April 22, 2003. that appears to be more than option related selling.
e. William Stacy, currently owns 1 share , he owned 55,001 on January 23, 2004.
f. Jon Stone, currently owns 24,575 shares, does not look like he has ever sold ! |
