Some wisdom from another thread.
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DrProcrustes Oct 15 1998 11:18PM EDT
Since the August conference call it would appear the company has been producing hundreds and lately thousands of batteries per day. Potential customers should have been receiving large volumes of samples for weeks. With more production lines arriving and on order, there's a good chance the warehouse could get pretty full.
An economist I recently spoke with suggested a solution- that they should sell these batteries! Just like Johnny Carson explained Chrysler's mode of operation when times were tough. When the first K-car came off the assembly line, Lee Iacocca said that when they sold that one, they were going right back in and build another one!
Chrysler stock was a steal then, just as Valence is now.
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Comments:
The inventory buildup should prepare them for shipping in volume under terms of upcoming contracts. As I recall, once $4 million in product is shipped, Valence can begin to draw on the $35 million subsidy available from the Irish Government. At 5000 batteries per day x $65 each it would take 4,000,000/325,000/day or about 12 days or 24 days at 2500 batteries per day to fulfill this requirement.
A recently posted machine capacity table indicated that Valence's first three assembly machines have a combined capacity of about 300 million watt-hours per year. If they produce half that and sell it for half ULBI's suggested $4-$5 per watt hour($2 per watt hour to be conservative), half capacity would produce $300 million in revenue.
This should work out to over $100 million in profit for the 25.5 million shares or almost $4 per share profit. Apply a 25PE and and Wolanchuk's $100 share price is indicated! (neglecting joint venture or royalty income, and not factoring in the rebate of over $1 per share!)
Divide by 2 and you have a joint-venture partner's outlook after he shares half the profits with Valence-still good reason for Hanil Telecom to continue starting up their facility in South Korea. As of the last conference call, prices and delivery schedules were already being discussed with several who were testing the batteries.
I continue to believe its wise to accumulate while the stock is in single digits! The plant is ready for analysts to witness automated production of these batteries. I suspect they will be working with similar numbers and draw similar conclusions!
Regards, FMK |
