Flextronics International (FLEX) Message Board

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Technology Stocks : Flextronics International (FLEX)

FLEX 57.38

-2.3%

3:49 PM EST

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To: 18acastra who wrote (341)	9/9/1997 2:15:00 AM
From: kolo55	of 1422

Thanks for the info on San Jose ops. I am just sitting and letting this one run. I think its got a long way to go yet. Another glimpse at Flextronics deal making: In the recent 10K, there were some interesting numbers on the FICO Plastics stock purchase from last December. Flextronics bought 40% of FICO stock. FICO is an injection plastic molder in China. We find that Flextronics paid $5.2M for the position, along with an option to buy the rest of the shares in 1998, at a price set by FICO's financial performance this year (through Dec97). From the time FICO was purchased in mid to late December until March 31,1997, Flextronic's share of FICO's earnings was $241k. This is one of the slowest periods of the year for the FICO business. So Flextronic's earnings from their 40% FICO stake this year could easily top $1.0M on a $5.2M investment. Almost a 20% return the first year. But wait; Flextronics is using debt with an interest cost of about 8% to fund many of these deals. Considering the amount of debt FLEXF is carrying, the return on invested capital is well over 40%!! Seems to me Marks got a pretty good deal here. And he has an option to pick up the rest of FICO. The whole operation should add EBIT of about $2.5M a year. Finally, FICO occupies 120,000 square feet plant in Shenzhen. Flextronics plans to move this operation to the Doumen campus. So Flextronics has added a significant operation to Doumen. Looks like a terrific deal for Flextronics. Hopefully its indicative of how Marks and his team can make lucrative deals. I just wish I could put together similar numbers for the Ericsson and Astron purchases. Paul BTW- Looks like nice rally in Sanmina; good call.

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