j,
The Toshiba machines aren't a major factor. They paid $2M for 20 machines or $100K per machine. This indicates that they aren't large units (the big machines run upwards to $8M each). As I remember it, they had +/-140 machines and added these 20, but I calculated the capacity increase around 5%. This increase would put them at the $3.00 level for coming year.
The 200,000SF facility expansion for Kwanasia appears to be for assembly work. This would be for the growth of Behringer business and it appears Mita. They've been their largest customer and (according to David and Nesbett) Kwanasia is to start doing assembly for them. This, and the VTech sales, would not only push this years earnings to the $3.50 area, it indicates strength into 1999.
I've sure you are concerned about the Asian situation as I am. I have been following events as closely as I can and see no reason to think that they will adversely effect Deswell. China has set a goal of $140B export surplus in '98 to improve their economy ($40B in 1st Q), but devaluing currency to get the exports would work against the goals. The devaluation might have a positive effect on exports, but it would have a negative impact on imports. They won't benefit exporting widgets at a lower price if they have to pay more for imported grain. They made the major devaluation a few years ago and it was successful, but it was the beginning of an Asian crisis that compounded when Asian governments failed to compensate for the changes taking place in China. They all saw China as a new customer, but didn't realize that they were faced with a major competitor.
The entire ECM and plastics sectors are now being upgraded by the analysts. We have been fortunate to have Paul advising us of the situation well ahead of the 'Pros'. Deswell hasn't been recognized, but sooner or later, it will be. They are outperforming most of the companies being upgraded.
Paul got in early on some companies that have performed very well (and some that haven't). Had it just been the Asian situation, Deswell would likely be well over 30 today. But- we've had Namtai selling of Deswell stock plus the Insider shares plus the warrant call and there were just too many shares on the market. These things have allowed us to buy in at a discount. It was nerve racking, but opportunity. It's all over now. The shares in the float are all the available shares. Fund buying has absorbed a major portion. 'Investors' have been buying for long term hold. I conclude that Deswell share prices have no direction to go but up!
This got far longer than I intended when I started and I apologise. These are just my opinions. I'm a layman and not qualified to be taken as an authority on any of it!
Ron
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