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Technology Stocks : Nam Tai Elec. (NTAI) -- Ignore unavailable to you. Want to Upgrade?

To: Hectorite who wrote (1495)	9/17/1998 3:37:00 PM
From: Norman H. Hostetler	Read Replies (1) \| Respond to of 1696

"Gearing" is British English and means "leverage" in American English. At present, there is apparently $4.36 of debt for every $1 of capital. Leverage (or "gearing") can dramatically increase your return on equity, provided that the percentage net profit earned on invested debt exceeds the interest rate on the debt. Fluctuations in interest rates or profitability can produce dramatic losses, too. High leverage substantially increases risk. Think of it in the same way as using margin to buy more stock--this can be very profitable as long as stocks are going up rapidly, but it's a disaster in stagnant or falling markets. The very low net profit margin that several people have commented on would make me want to look very closely at how the debt is being used by this company--it doesn't seem to be producing significant profits. Therefore, either the company needs to be restructured to focus on more profitable areas, or the debt has to be substantially reduced (and a reduction to 356% of equity does not strike me as substantial) in order to reduce interest expense. If reducing interest expense increases net profit margin, then for sure the company has not been investing debt wisely. =+=+=Norm

To: Hectorite who wrote (1495)	9/17/1998 3:58:00 PM
From: Ron Bower	Respond to of 1696

Hectorite, Was composing my answer when I found that Norm had already. Albatronics was on the verge of bankruptcy and still is after the cash infusion by NamTai. They are one of the NPLs (non-performing loans) that everyone is referring to when discussing Japanese banks. According to the most current balance sheet I can find, nearly all of their debt is current. It may be that NamTai intends to sell off various interests of the company - they are spread out with interests in many other companies - to reduce the debt. With the 3.65 debt load and current economic conditions, most any interest rate would be hard to overcome. NamTai had better be sure of the bookkeeping before they get in too deep. Albatronics debt is equal to approximately 60% of NamTai's cash. I haven't bought yet as this deal hasn't come together for me. Due to weak consumer demand and competition, NamTai has projected a large reduction in their sales. Then they go out and buy into a competitor that's deep in debt, not showing earnings, and also operating well below capacity. They're paying an amount equivalent to BV and I'm sure that's less than the company is actually worth, but... FWIW, Ron