Thread,
Some free time so I thought I'd post my current thoughts for thread consideration.
We've seen reports from InterTel, VTech, and Namtai, but don't have anything on Mita or Behringer, two of Deswell's largest customers.
InterTel is growing at over 20%. Much of this growth is not in the products Deswell makes so I doubt if there's been much growth in InterTel sales. I make the presumption that InterTel sales are flat but there may be some growth because InterTel has just introduced some new products and they are optimistic about sales going forward. InterTel stock has been steadily rising in the last couple of months in spite of dilution from the secondary stock offering.
I posted the VTech report and their growth is major, particularly in the remote phones that Jetcrown is producing. Deswell has reported growth from 8% to 14% of revenues for VTech and I imagine this growth has continued into this Quarter. With VTech's strong presence in the US and Europe and plans to enter the China market next year, I see them having major potential for Deswell. If Deswell performs, they might also get some of the Educational products that VTech produces.
Behringer - I think Behringer has reached a saturation point. Last year they were moving products into the US and other areas, but they have now put the products into distributors inventories and the sales growth will be far less than last years rate. I presume the Behringer flat even though it's probable there's some growth.
Mita - When it comes to Asian stocks, the market is putting far more weight on negatives than justified. While Mita is a major customer, a 50% drop in orders from them is not a factor that would cause a major drop in earnings.
Mita will continue to have a major position in the copy machine market and, just before their problems emerged, they had plans to produce a new line of copy machine/printers. The bankruptcy has caused a temporary disruption in production as they were forced to lower inventories but this production cannot stay low or they will have their distributors running out of units to sell - a situation they must avoid.
Mita Hongkong was major investment, but a profitable operation. Having reduced these orders early in September, I feel they must be increasing them by now. I don't expect Mita sales to reach prior levels near term because of world economies, but do expect them to get near these levels.
Last year VTech was not a customer. The VTech sales have grown enough that they likely offset any loss of business with Mita and Namtai. There may be lower revenues due to lower raw material pricing but margins should remain strong and, as pointed out on the Yahoo thread, interest income is steadily increasing.
Earnings grew 10% the first six months. Fully diluted EPS was (my numbers) $1.18. I feel strongly that they will earn the same or higher EPS in the last two Quarters resulting in a year end EPS of at least $2.36. (I actually expect EPS to exceed $2.50) I also look for an end of the year Special Dividend resulting in a slightly higher total dividend than in fiscal 1998.
None of this includes provisions for potential new customers they referred to in the Annual Meeting.
JMHO,
Ron
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