Steven,
Your concerns could be much better answered by David or some others, but I'd like to give my thoughts as a layman economist.
$HK - The $HK has been strong due to it's ties to the $US. The efforts to protect it is an effort to protect HK asset values. Deswell owns very little property and, unless I'm mistaken, keeps cash deposits in $US. A decline in $HK would have minimal effect on their assets.
Sales - As they sell in $HK to other SE Asia companies, they run into the same difficulties as US companies with a strong $US. A decline in the $HK would actually make them more competitive. As the $PRC is being supported, these expenses would remain constant relative to the $US, but increase to the $HK. This is the adverse impact I see, but I feel it to be minimal and more than offset by the growth potential.
NTAIF or others entering as competition? I don't feel this to be a valid point. Deswell has competition and is doing very well in the market. They can anticipate the competition growing and may be forced to lower some prices. However, they have been getting a very high margin and can do very well at lower numbers if the lower prices increase the revs. Granted NTAIF is a major customer, but Deswell has expanded it's customer base to lower reliance on NTAIF and the opportunities in China offer major potential for future growth.
IMO -It would be wise for NTAIF to acquire Deswell, but it would not be a good move to enter competition against them. If they do acquire, I will sell my holdings.
Recent actions by NTAIF caused me to get out of it a month ago. I just didn't understand what they were trying to do and it bothered me. I find Deswell to be uncomplicated, selling and producing their products, growing within their financial ability.
For what it's worth,
Ron
PS - I bought some ROC last week at 8.625 and sold it Thur at 10.125. I will be buying it back as it is substantially undervalue. The Taiwan and Singapore economies are very strong and declining for the wrong reasons. This is offering bargains. Also watch CREAF for a buy. |
