Subj: La Guardia visits SETO, Briarcliff Manor, NY
Date: 5/7/99 8:46:49 PM Mid-Atlantic Daylight Time
From: comercio@riogrande.net.mx (comercio)
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LA GUARDIA GFS MEETS WITH SETO CHAIRMAN
EUGENE PIAN AND
CORPORATE DIRECTOR TAN HUN CHIN
La Guardia GFS met with SETO Holding's President Eugene Pian and Corporate Director Tan Hun Chin in Briarcliff Manor, New York this past May 4th to review their current business plans, to talk about products, vision of the future of the company, prices and forecasts for their stock price, and to take a look at their new facilities in that city.
We found that the company is running a great business with high margins on their different product lines, an almost captive market on some of their business ventures and an expanding client base through new and aggressive market strategies for their cell phone battery production line. Another discovery was the soon to be released incorporation of a new product line of cellular telephone accessories which will offer an even greater amount of margin than some of their other products and will go hand in hand with the company's battery operation. These business efforts allow SETO to create a deeper penetration into the cellular telephone accessories market since they will not be limited to just batteries. Other ventures include the creation of a new electronic mall, which is soon to be open on the Internet. At La Guardia we believe this new line of business will have a major positive impact on the company's volume of sales and profit margins since they are a direct manufacturer of most of the products on the new web site, and will be selling directly to the final consumer. This is exciting news, particularly when you consider the mass markets that can be reached through the Internet. Their new electronic market will incorporate not only batteries and accessories for cellular telephones but will also include new high tech products that may include audio and video components, which will be new to the U.S. market. Other products that SETO will eventually handle on their web site include laptop batteries and camcorder batteries which will be manufactured directly by SETO's wholly owned subsidiary, Fuji Fabrication (Panang, Malaysia) and sold at more affordable prices than others in the market. This will allow the customer to shop around for many more goods on a single web site, making it more attractive to them. While at the same time creating an opportunity for SETO to capitalize on people looking for products like laptops and High Tech electronics on the internet and exposing otherwise unknowing consumers to SETO's main products, the batteries and the accessories.
As was mentioned before SETO has an almost captive market for the fabrication of semiconductor diamond cutting tools since there are only 3 fabricators of these blades in the world, and one of them is SETO who distributes these products through East Coast Sales. This beneficial market situation creates an almost competitor free environment. There is no other method for cutting chip wafers available in the world today. In addition, SETO runs a value added service of cutting other company's ceramics for them in which they have a considerable competitive advantage to other companies in the same line of business. This superior market position is derived from the fact that they manufacture their own blades which cost them about 1 to 3 U.S. dollars, whereas the competition has to pay up to 60 or 80 dollars per blade which last only about a day. So not only do they have a very high margin on the blades they sell, but also on the ceramics that are outsourced to them from other companies. Each cut they make is input into a computerized saw which measures they size of the cuts to be made. Usually the finished product is less than a quarter of an inch long and that still might be to big. Each batch of raw material that is inserted into the computerized saw will yield hundreds of tiny copies of an identical ceramic product which has a margin of anywhere between 10 and 60 cents per piece. Considering that they can output thousands of copies a day we would dare to say that SETO is in the right business at the right time, and has an excellent cash cow with this business.
Slider plates also offer big margins since they are not reusable and are extensively used in the drive head industry. Drive heads are usually made from a titanium alloy and are started off at the beginning of the process very much like a micro chip would start it's process. The drive heads are originally nothing more than a big wafer which must run through a process of coating and embedding and finally cutting. Each slider plate has a wafer of drive heads glued to it while it goes through the manufacturing process. In order for the equipment to hold onto the plate and not the wafer itself, therefore avoiding any damage to the goods. Since the slider plates are usually weakened throughout the process, especially after the cutting process which usually cuts into the slider plate itself, it would be unwise to reuse them and are therefore discarded. Drive heads are manufactured by the millions each year creating an equally massive demand for slider plates to be able to handle the massive amounts of hard drives being produced daily. This market niche has therefore established SETO in a high margin commodities market, which makes us feel confident will guide the company through tough times since there is always a need for these products and the demand is growing every day.
Although SETO financials were delayed and earnings had been a bit lower than had been expected for the fiscal year ending January 31, 1999, we found that the results were justifiable. The main reason behind this situation was due to high expenses for the PR, capital fund raising efforts, extra expenses attributable to the dissolved acquisition of TTH Holding, Sdn. Bhd. in September 1998, and moving and set up expenses of the new SETO HOLDINGS, INC. headquarters and manufacturing/warehouse facility in Briarcliff Manor, New York. After reviewing the 10K we found that the earnings before these one time expenses would have been around two hundred thousand dollars higher than those reported, therefore placing the EPS around .045 which should be used reflect a true valuation of the stock price. At a reasonable P/E ratio of 30 times earnings, this would give the stock a currently valuation of $1.35/share.
Mr. Pian also informed us that he will be doing an online interview with the Wall Street Reporter Today, Friday, May 7, 1999 at 3 p.m. Eastern time but it will not be available to the public until sometime mid week at www.wallstreetinterview.com . The interview will be a question and answer session that will last about 15 to 20 minutes where Mr. Pian will talk about company products, vision of the company, Prices and forecasts, and what they are expecting in terms of investments.
The complete 10K with all the relevant information is now ready and available to the public at stidiamond.com for those of you who may wish to take a closer look at SETO's financials.
There is also Full corporate review of the company available at the Dos Comercios web site at doscomercios.com
La Guardia has been compensated by SETO to manage their investor relations ($5k cash retainer / 150k shares of restricted stock, said stock is restricted until March 12, 2000). In addition to the above listed compensation, La Guardia GFS has purchased in excess of 200k shares of stock on the open market over the past 60 days, and will continue to acquire additional shares in SETO as our portfolio management protocol will allow.
As always, we encourage and recommend highly that any investor do their own due diligence prior to making any investment, and we do not advocate purchasing shares in any company based on this recommendation and/or technical analysis alone.
Please Contact La Guardia GFS at 800.292.1361 or
COMERCIO@DOSCOMERCIOS.COM
With any questions pertaining this e-mail.
Or visit our web site at www.DosComercios.com |
