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

To: Shane M who wrote (767)	5/29/1998 9:25:00 AM
From: Ron Bower	Read Replies (2) \| Respond to of 1418

Shane, Excellent and well thought out projections. Thanks. Considering current Asian and World turmoil, 25% growth will be very difficult for any company. Deswell has a better chance than most because of it's low overhead and strong financial condition. Current dilution is 5.48M. Likely stock options will add 125-150K per year for an estimated dilution of 5.65 and 5.8M in 1999 and 2000. Does BV take into consideration the dividends they'll pay? This is also a factor to consider in stock pricing as dividend paying companies will become more attractive. The PE of 7.9 is the low. This past year we have had special conditions that has kept the price down. Added to the float the last 12 months has been Namtai selling +/-500K, the warrant call for another +/-575K, and Insider sales of +/-200K. These shares caused a doubling of the trading float and, with the Asian situation, has put a lot of pricing pressures on the stock. This situation should not be repeated in 1999 as all of the dilution is out except for some unexercised stock options. The average PE last year without extraordinary events was 12-13. Going forward, I believe the price range will be at 10-14 PE on trailing earnings. If they show growth over the next couple of Qs, it will be higher because there will be few companies getting any growth and the market will reward those that can achieve it. Again, good work. Thanks. JMHO, Ron

To: Shane M who wrote (767)	5/29/1998 10:57:00 AM
From: kolo55	Read Replies (1) \| Respond to of 1418

Looks about right- but check top line revenue growth. You have revenues growing to 92.5M from 66.2M this last year; this is a 40% year over year revenue growth. I know you show only 25% growth in sales per share, since you're using 6.2M shares out versus 5.3M shares (17% more shares). An estimate for 40% top line growth seems high, but I think there is a good chance Deswell will do it this year. I base this on the new capacity added at Jetcrown, the fast growth at Kwanta, and new capacity being added at Kwanasia. Still, I'm sure the market is having a hard time swallowing 40% top line growth for Deswell in a year of Asian turmoil. But that signals opportunity to me, to find a fast grower at a very reasonable price that was thrown out with the bath water in Asia. The current quarter will be key, to see the revenues rebound to the $20M target implied in your forecast from only 14.5M this past quarter. We only have about 9-10 weeks to hear how this quarter went, as Deswell should report in late July. Then for the following year, you have revenues growing to 128M from 92.5M, another 38% growth for the top line. This is too optimistic. Essentially in two years the revenues almost double. I know this is what Deswell did when revenues were at 21M in 1995 (went to 44M in two years), and 30.6M in 1996 (went to 66M in two years), and we expect it to happen this year(1999) as revenues hit 92M up from 44M in 1997. But as the company gets larger, it will be harder to double revenues every two years, especially absent acquisitions. I suggest you use 30% top line growth for 2000 fiscal year, as a conservative case. In summary though, your number show why Deswell is one of my largest holdings, and why I intend to hold long term. Paul