Hi Gordon, here is more food for thought.
Previous derived production rates(see previous post).https://www.siliconinvestor.com/readmsg.aspx?msgid=4585092
Assembly line 1 - 2.4 mln laptop batteries/yr at 2 shifts/day.
Line 2 - 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 were assumed to represent the 6mm thickness which would be consistent with 6.4 mm for the single size depicted in May 97. However a 4mm thickness was mentioned during the conf call which would imply a 50% higher production rate due to fewer bi-cells.
I would also estimate that energy storage with the new technology version has increased by about 40%. It is therefore assumed that batteries consist of 3 cells, 15.4 watt/hr each (4mm version) for 46.2 watt-hr/ battery.
From earlier projections, OEM's should pay about $1.65 per watt hour or $76 per battery and 50% to 90% profit would not be unreasonable for being first to market with quantity. It should be safe to assume 50%. The remaining factor is yield, which allows for defective product. I will use 80% for this figure. I believe the company would not be happy long-term with less than the upper 90's.
Laptop Batteries Only - 4x4" x 4mm thickness
lines 1 -2 at 50% speed at 2 shifts per day
Line 1-------- 1.5 mln/yr x $75 x .50 x .8 = $45 mln/yr
Line 2-------- 3.0 mln/yr x $75 x .50 x .8 = $90mln/yr
-----------------subtotal--------------------- $135 mln/yr
-----------------operating cost---------------($30.0 mln)
-----Irish taxes-offset by rebate----------------($0 mln)
other taxes offset by loss carried forward--($10 mln)
-------------net profit------$95 mln/23.7mln sh = $4.00/sh
For many months some investors have used $1 to $1.25 per share earnings capability per production line. I have previously posted computations based on the $1.25 figure The earnings figures, of course, would not show up until the end-of-quarter report several
months later and could be reduced by additional equipment and interest expense etc. The above figures therefore represent the rate of earnings production by the NI facility and have mostly neglected the $32 mln Irish rebate and any joint venture income or income from other products and sources.
Remember Don Wolanchuk's target of $80 to $100 /sh 12 to 24 months after Nov '97? What is a prudent PE for a high-growth company? 50 perhaps? If we use a PE of 20 we can arrive at $80 per share with $4 per share earnings. He may have been a few months early, but perhaps he was not so optimistic after all!
Another point to keep in mind is that the JV partners such as Hanil Telecom ran the numbers and decided their investment was still attractive after sharing 50% of the profits with Valence. As you can tell, 50% of the above $4 per share with two production lines is still a nice return! As before, I would encourage anyone to make his own assumptions and calculations. Remember also that there are other applications such as camcorder, PDA, portable tool and cellphone batteries plus an 8 x 10 inch version to fit laptop covers!
Best Regards from FMK
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