Stephen: Thanks for posting that article. A few observations are in order. Today's price decline does not bother me as it was to be expected. Anytime a stock is halted, it attracts daytraders who get on board anything they believe is going to move. Mind you, trading had to be halted because this contract is definitely material in nature. When the stock opened lower this morning, these daytraders all bailed out and drove the price down. Most of them have probably left. Good riddance. Once they are all gone, the market will price Derlan according to its justified inherent value.
The press is not very keen on covering this company. In fact, the last big article I saw on Derlan was back in the early 90s, in the now defunct Financial Times. The Street is not a fan of Derlan either, viewing management's strategy over the years as a big failure. Analysts are also quite wary, as management has failed to adequately explain its latest move, away from their old strategy of investing in disparate industrial companies with a view to enhancing value, to the new focus on core competencies. It has to be said that analysts were not big fans of this strategy, and those who followed the company were very critical over the years. If the press, the investment community and the analysts are not on your side, you have big problems.
The latest announcement is a very big plus for Derlan. It not only bolsters their claim to being a world-class aerospace company, it makes them a more attractive takeover target. I hope the company is being sincere when they say they are trying to enhance shareholder value by exploring all possibilities.. I personally believe they are, but we shall see. This latest contract with the world's biggest aerospace company has without doubt increased the value of the company significantly. The market is still skeptical, but given time, that will change.
The change in perception will be helped along by completing the divestiture program. There are still a number of divisions that remain to be sold, not the least of which is the semiconductor division. As I mentioned in an earlier post, selling the semi division seems to be a sticking point. I understand that Tokyo Electron is not that interested, so selling the this division will be a big weight off their shoulders. Most shareholders will be happy once they have divested themselves of the semiconductor division, as well as K & M Electronics. The company will be a more tempting target once the divestments are complete.
We should learn more about this at the upcoming annual meeting. |
