Mike,
Decided to post some of my work on Deswell. Breakdown of prior Qs
explains many things that have been happening. If you get the chance
to talk to Mr/ Lau, you might try to clarify some of the conclusions
I've come to at the end.
Contribution to earnings Approximate Revenue
(In thousands)
Q K&K Jetcrown Total K&K Jetcrown Total
4Q97 538 1694 2232 6355 6320 12676
1Q98 584 2095 2679 6766 7817 14584
2Q98 828 2399 3227 9132 8951 18083
3Q98 1344* 2853* 4197 8348 10645 18993
4Q98 533 2335* 2868 5797 8712 14509
1Q99 701 2461 3162 6264 9182 15447
2Q99 748 2582 3330 6160 9675 15795
3Q99 159! 1989 2048 5187 7425 12612
The numbers are not exact because I based the individual rev
numbers on average margin percentages, but they should be reasonably
close to the actual numbers.
If you add the '98 Qs, you'll see more revs to Jetcrown than listed in
reports. The sales from Jetcrown to Kwanasia are eliminated in the
combined book accounting and the above puts the revs back to Jetcrown
rather than to Kwanasia.
(*)
2Q & 3Q98 Kwanasia was given a large order by a customer, (InterTel?)
that inflated revs and earnings.
Jetcrown began supplying VTech in the 4Q of 99.
In the 3Q of 99, Mita reduced orders by 50%, VTech slowed orders,
Namtai was down. This is reflected in Jetcrown's revs and earnings.
BUT! Look at K&K earnings contribution in 3Q99. What has happened? Mr.
Lau stated that it was due to lower PCB sales,
but - there were prior Qs with revs not much higher that did not have
earnings this low.
When I compare the 3Q to the 2Q, The Gross Profit margin has stayed
consistent, GS&A numbers have increased slightly in spite of a 20%
sales drop, taxes payable suddenly jump from 101K to 433K and taxes
receivable drop from 366 to 228. This tax adjustment lowered earnings
by 470K - around 9 cents a share.
Guessing-
K&K taxes were mistated in the prior Qs and the next Q will not have
this adjustment (Taxes are complicated in HK/China so this is likely
an honest mistake). Kwanasia is paying lease on two facilities. They
are writing off the $2M invested in the new Kwanasia facilities and
this will continue to effect earnings but not cash generated.
Going forward. K&K earnings will be higher. I think the Lease on their
old facility has now expired. Taxes should now be right. Even at the
low sales level, I expect K&K to contribute at least 300K/Q.
Jetcrown - Three major items on the Balance sheets.
Inventory last 3 Qs of $8,354K, $6,615K, $5,485K
Prepaid expenses of $2,454K, $1,972K, $4,159
Customer Deposits of $4,508K, $3,697 to $4,293
My interpretation-
Inventory - drop due to low completed product = lower sales
Prepaids - Jetcrown has bought resin to lock in price for new orders
Customer Deposits - customers paying for molds for new products
This would be consistent with the 'mold making division being at full
capacity' and buying new machines - also consistent with the info
provided by HK_Traveler that plastics production is near full capacity.
Putting all of this together, I've estimated 4Q revs for Jetcrown
around $9M and for K&K slightly under $5M, combined earnings around
$2.6M or .47 EPS. I also expect revs and earnings to increase the
rest of the year.
JMHO,
Ron
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