------Valence Technology December 1998----REVISED's #'s--- Folk's, in light of all the talk now changing from IF they can produce batteries to discussions debating p.o.'s I felt it was time to pull up one of Fred's(FMK) March analysis of VLNC potential. THANKS FRED!! This will do until I, and others, can revise....
----------
(Using 5 mln laptop batt/year/high speed line (earlier value)until 7 mln can be verified.) What should we expect for December 1998? Obviously not as much as the company had indicated in 1997. Based on their plans for adding 1 assembly line per quarter, I had projected, with an engineering approach, 5 production lines in operation by December '98. We know there have been setbacks. However, this time the company has confirmed their production schedule via press release, which should be considered a milestone. Here are some possible scenarios based on more recent information, including some calculations and the assumptions behind them. I am using the higher-margin, higher watt-hr-per-assembly-machine values for laptop batteries since it appears likely that the company will direct its efforts there. I have compared my capacity figures with others doing similar calculations. Here is the consensus:
Line 1 - 2.4 mln laptop batteries/yr at 2 shifts/day.
Lines 2 & 3 - 5 mln laptop batteries/yr at 2 shifts/day.
The 11/97 preliminary product data sheet indicates 4mm, 6mm, and 8mm thick versions of the 4x4" cells. Energy storage is proportional to the thickness. The production rate is inversely proportional to the thickness per cell because the cells are assembled at a constant number of bi-cells/minute. The batteries/yr figures are assumed to represent the 6mm thickness which would be consistent with 6.4 mm for the single size depicted in May 97. It is further assumed that batteries consist of 3 cells, 17.5 watt/hr each for a total of 52.5 watt-hr/ battery. Sales price per battery has been recently estimated from $40 to $80. I will use $40. Profit margins will be higher for laptop than for cellphone applications. The company's early goal has been stated as 40%. I was told that 50 %to 90% would not be unreasonable for being first to market with quantity and it would be safe to assume 50%. I will use 40% regardless. The remaining factor is yield, which allows for the occasional bad batch of laminate or for a machine breakdown that makes a few hundred scrap batteries before the problem is noticed. I will use 80% for this figure. I believe the company would not be happy long-term with less than the upper 90's.
In November 97 the company indicated that they were successful at 100% speed with both lines 1and 2. However, line 2 was running cellphone batteries at the time and neither was tested at 100% for an extended period. They had previously solved all known assembly machine problems at 50% speed. It would be highly unlikely not to be near 100% in December, but here are some potential earnings for a 50% speed scenario.
Dec '98 - lines 1 -2 -3 50% speed at 2 shifts per day
Line 1-------- 1.2 mln/yr x $40 x .40 x .8 = $15.3 mln/yr
Line 2-------- 2.5 mln/yr x $40 x .40 x .8 = $32.0mln/yr
Line 3-------- 2.5 mln/yr x $40 x .40 x .8 = $32.0 mln/yr
-----------------subtotal--------------------- $79.3 mln/yr
-----------------operating cost---------------($25.0 mln)
----------------Irish taxes-------------------($3.2 mln)
-------------other taxes-----guess------------($16.5 mln)
-------------net profit------$34.6 mln/23.7mln sh = $1.46/sh
Here is a 100% speed scenario with 2 shifts/day
Line 1---------2.4 mln/yr x $40 x .40 x .8 = $30.7 mln/yr
Line 2---------- 5 mln/yr x $40 x .40 x .8 = $64.0 mln/yr
Line 3---------- 5 mln/yr x $40 x .40 x .8 = $64.0 mln/yr
-----------------subtotal--------------------- $158.7 mln/yr
-----------------operating cost--------------($27.0 mln)
-----------------Irish taxes------------------($6.3 mln)
---------------other taxes-----guess---------($40.0 mln)
---------------net profit-----$85.4 ml/23.7mln sh = $3.60/sh
(cont.) |
