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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: Gordon Quickstad who wrote (4123)9/9/1998 9:26:00 AM
From: FMK  Read Replies (2) of 27311
 
From Valence management-
Assembly line 1 should be able to conservatively turn a profit with less than 2000 laptop batteries per day. It can produce over 500 per hour because the actual rate is twice the 5 per minute initial rate mentioned in the conference call.

This implies that line 1 can easily break the company even by running just four hours per day, neglecting any revenues from other sources. My guess is that it takes about $20 million to break the company even. If they ran line 1 two shifts per day they should make about $80 million. Subtracting the first $20 million to break even and the remaining $60 million divided by 27 million shares = over $2 per share profit, just from running two shifts on a single production line.

$2 per share earnings times a conservative multiple of 20 would indicate a $40 stock price, just from running the first of several production lines. We know there are now about 115 regular employees in Northern Ireland and more production staff are being hired, which should be more than enough to operate one production line. The downward revison from 3000 batteries per day to less than 2000 per day implies that they have been discussing "...terms and conditions, prices and delivery schedules" as mentioned during the August 12 conference call, which apparently gave them an indication of what customers are willing to pay.

Try adding a third shift for line 1 and then add more production lines and about $1 per share per line and then some joint venture income. I don't think this is wildly optimistic. Instead, its a reasonable way to look at the eventual results of bringing more production on line. That first purchase order from one of the 20 or so OEM's that have been testing should be a strong indication that these projections are not unreasonable.

Why is Don Wolanchuk's next $100 stock selling for under $4? Its a very good question asked by a naysayer on another bulletin board.
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