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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: - with a K who wrote (18463)	1/20/2004 5:11:08 PM
From: - with a K	Respond to of 78507

KTEC up 7.5% to new 52-week high on over 6 times average volume. FWIW, my response to a recent PM: I haven't seen KTEC's products in action but sure did get an indication of their impressiveness by listening to the Needham presentation. The ability to pick and eliminate a product with a defect while sustaining such high volume is indeed impressive. Regarding the depressed stock price in the past, I would guess it was the same concerns I had: low volume/small float, it took some time to digest and benefit from the acquisition and the cyclical nature of their business. But I have to agree with you as far as big customers going with the #1 vendor, not unlike the 70's joke about not being fired for choosing IBM. A rise in capex spending will benefit KTEC, as I see numerous references in past press releases and other documents about deferred spending and customer schedule changes. I'm encouraged there is a new, younger CEO who appears to have some vision for new markets and good energy. (Their CEO of 21 years retired in August.) New CEO Kirk Morton had been President and COO since 2001 and came from Stein, a unit of FMC Corp., of which I know nothing. I was impressed with their sales gains in poultry, pet food, and snack food, so market diversity seems to have helped. Annual report: "Sales growth was notable for the breadth and depth across our product lines, geographic areas, and market segments." They seem pleased with the market reception of the new, smaller footprint inspection system they call "Optyx." Snip from their 10-K: In fiscal 2001, the company developed and introduced its new automated inspection system named Optyx. The sorter has the power and sorting capabilities of a large sorter in an economical and compact machine. Optyx employs the advanced camera, lighting, image processing, and ejection technologies used in the Tegra and Prism products. The lower cost Optyx system is ideal for smaller processors and lower volume processing lines which were previously unable to justify the expense of a larger sorter. Present and potential applications include the Company’s traditional potato, fruit, vegetable and tobacco markets. The Company is pleased with the market acceptance of this product. In a 10/2/03 press release they mention selling multiple unit of Tegra and Optyx to two customers for $6mil. Tegra appears to be positioned as a solution for the "challenging" sorting applications. I was stunned to read in their 10-K that they have 52 employees doing R&D and "sustained engineering." That's what, 11% of their total employees? Besides all the patents, maybe that's what it takes to be number one in so many markets! About the time the stock took off, a Yahoo message post from April 24, 2003 mentioned the "huge numbers" of .23 a share and a record backlog. That seems to have been the catalyst to move it about $4. Then on June 27, 2003 I found this post: "Provident Equity Research initiated coverage with Strong Buy. .... If the company meets our revenue estimates, EPS could reach $0.92 and $1.15 respectively. Given the above scenario, we believe the company can trade at 17X the $1.15/share estimate. ....Management believes that demand for its optical inspection systems from overseas processors will serve as a catalyst for growth. Foreign-based processors need to produce export quality goods to compete in the marketplace. The acquisitions made in FY 2000 resulted in a pro-forma revenue rate of $90 million on a full-year basis. However, the economic downturn hid these benefits. Now, KTEC appears poised to grow significantly from the acquisitions. Industry growth appears to be rebounding after tough years in 2000 and 2001. At least one other competitor has seen strong growth year-to-date." Thanks again for your note.