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Technology Stocks : Deswell Industries (DSWL) -- Ignore unavailable to you. Want to Upgrade?

To: kolo55 who wrote (469)	2/20/1998 3:31:00 PM
From: mod	Respond to of 1418

Trading is thin on both sides. 500 share trades seem to be able to move both the bid and offer. I think it will come down to who shows up first, a big seller or a big buyer? Either one will move the stock quickly. Dennis

To: kolo55 who wrote (469)	2/20/1998 5:58:00 PM
From: Ron Bower	Read Replies (5) \| Respond to of 1418

You asked - not a good thing to do with me because I'm always ready with an opinion -g-. My first run thru of the report leads me to these conclusions: Sales of $19M indicates to me that Deswell is running at or near full capacity. This is very little improvement over last quarter. The big increase is again from Kwanasia. This would be from the circuit board production and assembly work. I do not believe Kwanasia or Kwanta are any where near capacity, but are being held up by Jetcrown not getting plastic components to Kwanasia. They really need to get the machines purchased from Toshiba into production (not until late March). I always look to 'raw material' inventory as an indicator of backlog. It has gone up and is higher than I can recall them ever reporting. I don't know the percentage of cost for this, but I do take it as an indication that they have high order visibility. As I stated before, the big increase in margin surprised me and I was suspicious. I looked for a big decrease in an item and found it in S&A. Aha, I say, they've fudged to boost the numbers. Wait a minute, Lau wouldn't do that. Why would it go down? Then I remembered that they had been outsourcing R&D and in the expansion report stated that they would be doing it inhouse and had purchased new software for the R&D. This explains the lower G&S and part of the capital outlays that I also didn't remember them mentioning. If it's going to save them $500K per quarter, I'd say it's a pretty good investment. IMO - this report indicates a Q with the company operating as well as they can with current equipment absent the expansion expenses effecting prior quarters. The next Q (4Q) will have costs of the newly acquired facility plus shipping and installing of the Toshiba machines. Even if they can repeat this Qs results, there will be these added expenses and I look for earnings more in the $3-3.2M area. Even this would be a substantial increase from last year and they should end the fiscal year with a fully diluted earnings in the $2.50 area. With the expanded operation going, this year should show growth similar to the past year. One other point. Why I don't know, but there were some warrants that weren't exercised and there must be some stock options issued because the dilution has increased to 5.480M from the 5.412M reported last Q. My opinion is they deserve it. Well done Deswell! Don't ask me what the price will do because I haven't the faintest idea. The market has had me baffled. I'd like for one of the more experienced players to tell me what Monday likely holds. BTW Paul, thanks again for the post you made about market reaction to a warrant call. It has really made a difference in my position. I am now at 6K+4K and a position of 15.50 versus the 19.50 I had before the call. This is a difference of $40K, from 30 loss to - well you can figure it out. And of course more thanks to Mike, Richard, David, j, Dennis - ah, you all know who are. (I wonder if dorethy hung in there or bailed?) For what it's worth, Ron WAKE UP MIKE!! THERE'S THINGS HAPPENING HERE!!!