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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: mooter775 who wrote (1253)	11/4/1997 3:46:00 PM
From: I. N. Vester	Read Replies (2) \| Respond to of 27311

Red Chip Numbers EPS numbers. I've re-read the report & I'm still scratching my head! Can someone please check out the numbers below? They claim that their .60 annualized earnings IS based on full 3 shift production from 3 lines, I think. At least they say that the 4Q98 (CY 1Q98) numbers assume just 1 shift with gradual intro of the full 3 lines. But they say the 4Q99 numbers 'assumes a gradual increase in utilization and additional production shifts added'. I'd assume that if they have 3 shifts operating in 4Q98, then a full year laster they'd all be running full blast, wouldn't you? He quotes full production @ 3 shifts/day will yield 2-3m units of laptop which at $20/unit is $40-60m pa total, and 7-8m cell phone units at $8 is $56-64m pa. So 3 lines should yield at least in the neighborhood of $150m pa by his numbers. By mooters 40% margin -> 20% net profit -> $1m revenue yields .01/share earnings, we should get annualized earnings of 1.50/shr, using redbooks assumptions on yields and line capacity. Does anyone see anything wrong with my math? I think we should try to pass these numbers to the analyst and ask him where he thinks we are wrong. I may not be the best person to do this because I sent them a nasty complain last friday on the report because their numbers at the top had all quarters in 1999 in () indicating losses in all quarters - the numbers don't add up, tho they make sense if you convert the last 2 quarters into positive numbers. There is a serious discrepency between what we come up with based on full production using his numbers and his .60/year - that's about 1/3! He does state very clearly that he expects production to ramp up and bases profitability at the end of CY98 on that basis. According to my calculations he's off very significantly using his own numbers. Is this just another hallucination on my part or do you others agree with the $1.50/year number? I can't fault him for not including the other possible sources of significant additional earnings which are: 1) profits from joint ventures. Note that given the ramp up time (they are just building the plant in Korea now, right?), i wouldn't expect them to turn much profit by 1Q of CY99 (FY 4Q99). 2) 4th line going into production. this is a bit more likely to add significantly even by FY 4Q99. Still, I find his numbers very squishy - either he's projecting MUCH smaller margins or his 'ramping up to full 3 shift/day production' will take more than 1 yr which seems rather unlikely. What do you all think? If you agree I think it's very appropriate to have some dialog with the analyst. Don't you agree?