Looks about right- but check top line revenue growth.
You have revenues growing to 92.5M from 66.2M this last year; this is a 40% year over year revenue growth. I know you show only 25% growth in sales per share, since you're using 6.2M shares out versus 5.3M shares (17% more shares). An estimate for 40% top line growth seems high, but I think there is a good chance Deswell will do it this year. I base this on the new capacity added at Jetcrown, the fast growth at Kwanta, and new capacity being added at Kwanasia. Still, I'm sure the market is having a hard time swallowing 40% top line growth for Deswell in a year of Asian turmoil. But that signals opportunity to me, to find a fast grower at a very reasonable price that was thrown out with the bath water in Asia. The current quarter will be key, to see the revenues rebound to the $20M target implied in your forecast from only 14.5M this past quarter. We only have about 9-10 weeks to hear how this quarter went, as Deswell should report in late July.
Then for the following year, you have revenues growing to 128M from 92.5M, another 38% growth for the top line. This is too optimistic. Essentially in two years the revenues almost double. I know this is what Deswell did when revenues were at 21M in 1995 (went to 44M in two years), and 30.6M in 1996 (went to 66M in two years), and we expect it to happen this year(1999) as revenues hit 92M up from 44M in 1997. But as the company gets larger, it will be harder to double revenues every two years, especially absent acquisitions. I suggest you use 30% top line growth for 2000 fiscal year, as a conservative case.
In summary though, your number show why Deswell is one of my largest holdings, and why I intend to hold long term.
Paul |
