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Technology Stocks : THREE FIVE SYSTEM (TFS) - up from here? -- Ignore unavailable to you. Want to Upgrade?

To: N. Saliba who wrote (1491)	5/21/1998 10:03:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

Hi N. Saliba... I think it is too early to tell whether LCaD will be a "giant" product. Certainly, if one is to go by the market's "Ho-hum" reaction, one could conclude that either the announcement was already discounted, or the consensus forecast (either rightly or wrongly) doesn't expect all that much from it. More important to us now, I think, is the absence of any additional production order announcements, which have been scarcer than a "blue hen's tooth." It is already known that TFS: 1) accelerated deployment of the Chinese plant, 2) had senior officers note that the company would be capacity constrained by this year's second half, 3) has seen the announcement by the President/Chairman that he was kicking himself upstairs in the next month or two...it is hard for me to believe that he would leave operational control to V Hren at a time where the company wasn't on a clear uptick, 4) planned expansions of every single production facility this year. These moves are plain enough to see, so my working assumption is that dramatic sales gains are likely throughout the second half and on into next year. Still, one has the gnawing feeling/question...."Where are the production orders?" Perhaps the lack of clarity on that issue is what is truly responsible for the "doggy" action of TFS's stock. Certainly, in comparison to every other display technology company's stock, we have woefully underperformed. Maybe management just enjoys keeping us guessing. My continued principal worry stays the same....How do we get paid for our patience if the company finally hits its stride when the bull market has totally run its course? If one accepts the current analytic assumptions (presumably blessed by management prior to publication), and one makes adjustment for this year's first quarter (which was clearly transitional), and the expensing of all the pre-opening expenses in China (which takes 7-8 cents from us after tax in quarter two), then with a small amount of mental gymnastics... ...Assuming the fiscal year ends not on December 31st, but on March 31st... ...the quarterly earnings of the year we have recently "started" should approximate 25 cents, 30 cents, 37 cents, and 25 cents, respectively, for a total of $ 1.17. (Remember, this "guesstimate" requires the alterations listed above!) Moreover, the ensuing year could easily be 30% higher. So, at a closing price slightly north of $19, the shares trade at only about 16 times earnings, less than two-thirds that of the average stock. The best that can be said for us at the moment is that this company has to be on some takeover screens at a variety of investment bankers. Its capitalization is quite small (today less than $ 160 million), so it is within the budget of lots of companies. And, to actually buy it in an unfriendly tender offer? A raider company might not even have to pay the average market multiple. It certainly is food for thought. If someone was willing to pay 25 times earnings for the largest independent LCD manufacturer in the western hemisphere, shareholders would get just a tick under $ 30 per share...a full 50% above the current market price. So, what do you think, Mr. Saliba? We can all dream, can't we? Have a good evening.