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Technology Stocks : Flextronics International (FLEX)
FLEX 62.91+2.2%Nov 12 3:59 PM EST
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To: Twombat who wrote (363)10/1/1997 9:48:00 PM
From: kolo55   of 1422
 
I interpret this news positively overall.

I don't think the market reacted well to the fact that the secondary will be for 1.900M plus 0.285M over-allotment. Most people expected 1.750M or even a reduction to 1.500M shares.

But the pricing of 47 is very positive. Apparently there is enough demand to place the larger number of shares at that price. Originally, this secondary was announced in March at a price of about 21-23. By raising $83M, and perhaps $12M more in the over-allotment, this should pay off $69M in bank borrowings and give Flextronics $26M to meet future cashflow needs. There was almost $231M in debt and other current liabilities according to the last balance sheet I saw (JunQ report). Assuming the company is generating cashflow of about $8-9M per Q, then the current debt and other current liabilites will be reduced about $103M to about $128M. The equity will be increased to about $190M, so the D/E= 0.67!!! This is an enormous improvement. the Debt/D+E ratio will be 0.40 .

Micheal Marks will have borrowing power to go looking again. I predict more deals before year end. Also there was some talk of doing a bond issuance of about $100M.

I suspect the recent leveling of the stock the last week or so was due to this secondary. Once the secondary is out of the way next Monday, the next piece of news should be the earnings announcement, unless the bond issuance comes first.

I don't think the SepQ earnings will be great, but I think they will be OK and show increased revenues over the last Q. Next Q should be a great quarter.

Still very bullish, Paul
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