Greg, you mentioned the Army's OICW (high tech rifle) and I was looking through some old posts for some notes. I found my bullish prediction for the end of 1999 that included revenues for the rifle. It has taken longer than I could have imagined for Valence to arrive at today's state of affairs.
exchange2000.com
I will take the liberty of changing the title:
Prediction for May 31 2000
estimate $96
Assumptions
1-Additional financing will occur with dilution to about 35 million
shares.
2-The financing is for the purposes of rapid expansion.
3-They have it right now and it's time to increase the scale of
operations.
4-There will be larger contracts, $100 million or higher.
5-There will be multi shift production on a minimum of 5
production lines in NI by late '99.
6-Valence's role in supplying batteries for the Army's OICW will
be officially announced.
7-Valence's role in supplying batteries for other government
applications will be announced.
50% profits on 1mln cellphone batteries/mo from Hanil JV
---$20mln/35mln sh = ----------------------------$0.57/sh
100% profits on 1mln cellphone batt/mo by Valence on identical
Arcotronics line-----$40mln/35mln sh----------$1.14/sh
50% profits of additional production line from Hanil JV
-----------------------------------------------------$0.22/sh
90% profits on the army's $15,000 OICW (objective individual
combat weapon) that an Alliant Tech spokesman stated that
Valence will build batteries for, to replace the now-standard M16
rifle. No telling when govt will announce.
Est 300,000 rifles x $200/batt x 33% profit = $19.8 mln/35mln
-----------------------------------------------------$0.43/sh
50% of other Alliant/Valence JV profits on Seal propulsion,
combat vest batteries etc.
very rough estimate 50% of
$30mln--------------------------------------------$0.45/sh
Possible laminate sales to GM Delphi automotive and royalties for
SLI (starting lights ignition) batteries replacing conventional
lead-acid batteries on certain GM models-----$0.27sh
Laminate sales to GM Dephi for Vehicle propulsion
batteries------------------------------------------$0.30/sh
2.5 mln laptop batteries from line 1 at $75 each x 33%
profit/35mln--------------------------------------$1.78/sh
10 mln unnamed application batt at $6 each x 33% profit/35mln
----------------------------------------------------$0.57/sh
25,000 unnamed application batt at $1000 each x 33% 35mln
----------------------------------------------------$0.22/sh
Estimated total (max) at 35 mln sh ------$6.00/sh
Since these are maximum figures, I will assume reaching 80% of
this capacity by Mid 2000. Although production has started, I will
assume a straight line ramp up from zero to 80% capacity,
resulting in an earnings forecast of $6 x .8 x 0.5 or $2.40 per share.
Possible license agreements were not included. I have heard
estimates that revenue from license agreements could exceed
earnings from Valence's own production. If so, add at least another
$2 per share, but we would have to wait for licensee plants to be
built etc.
With a fast-track growth rate I would use a PE of 40 and therefore
predict a $96 share price before splits, for mid year 2000.
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Comments-
1-Yields may have passed the 90% mark.
2-A new large assembly machine(line 4) may be brought on line soon that can turn out laptop batteries at 4x the rate of line 1.
3-Chemistry improvements may be even greater than the overall 40% increase in energy storage per weight and volume. I believe we will hear about 200 wh/kg before long.
4-Revenues from the JV's may take longer to show up.
5-Valence may be producing now to help Hanil supply a large customer in time for a new product line. Revenues may come more directly to Valence and therefore help short term cash flow and perhaps trigger the start of the approx $40 million subsidy from the Irish government.
6-My estimate of 300,000 rifles was likely high. 75,000 or so might be more appropriate for the time period.
7-We should hear about more developments from Alliant, including the Mars program and contracts with a large Airplane and aerospace manufacturer.
I will look for more details on the Rifle. I know it was written up about a year ago in Popular Science. |
