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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: kolo55 who wrote (2064)	5/10/1999 7:31:00 PM
From: MGV	Respond to of 2542

You most likely missed his point. Why would you short a stock that is growing in a sector that is favored by secular trends tied to a company that is one of the top tier in the sector? Both FLEX and CLS will do well going forward. Why short one, especially if it has no superior hedging value? And that doesn't even get to the point of relative valuation. Incidentally, on that point, since your relative valuation scheme was questioned, an independent party fueled questions about your call. WDR rates both FLEX and CLS a strong buy. It also rates the upside higher for CLS than FLEX from here by a 2 to one margin. 38 to 50 (32%) versus 51 to 59 (16%). I'm not the only one who would question your relative valuation scheme.

To: kolo55 who wrote (2064)	5/10/1999 10:33:00 PM
From: Marc	Respond to of 2542

From April 27th report, the good thing is i don't have to rewrite it: Here's the latest Merrill Lynch report on Celestica: EPS ahead of expectations Celestica has rapidly built one of the leading contract manufacturers, through robust internal growth and acquisitions. Fundamental Highlights: Celestica reported Q1 adjusted EPS at $0.27 vs. $0.15 a year ago, which was three cents above our estimate and consensus expectations. Sales rose 46% to $1.08 billion from $739 last year driven mainly by internal growth in Canada and Europe along with the inclusion of the IMS operations. We estimated $1.0 billion. We are maintaining our adjusted EPS estimates for 1999 and 2000 until after the conference call. However, we expect to increase our 1999 EPS estimate to at least reflect the three cents better than expected results in Q1. Q1 EPS better than expected Celestica reported Q1 adjusted EPS at $0.27 vs. $0.15 a year ago, which was three cents above our estimate and consensus expectations. Adjusted net earnings rose substantially to $21.9 million from $5.8 million a year ago. The higher than expected adjusted EPS was primarily due to sales exceeding our $1.0 billion estimate by $82 million. Celestica is reporting robust growth in sales and earnings due to continued growth in shipments to existing customers and the introduction of new projects in the telecom equipment and medical markets. In addition, the company's acquisition of IMS (12/98) reported substantially higher than expected sales at $141 million vs. our estimate at around $100 million in Q1. The IMS acquisition quickly provided Celestica with an established manufacturing presence in Asia to complement the company's existing manufacturing base in Europe and North America. As a result, Celestica can better serve the high volume segment of the electronic equipment market (i.e., primarily PCs and peripherals). However, the margins in this operation tend to be lower than Celestica's corporate average due to product mix as evidenced by the 2.5% EBITA margin reported for Asia vs. 3.1% for the total company in Q1. Q1/99 Sales rose 46% to $1.08 billion from $739 last year driven mainly by internal growth in Canada and Europe along with the inclusion of the IMS operations. IMS added about $141 million in sales in the quarter. This more than offset lower sales in the US and Mexico, which we believe was due to declines in certain Hewlett-Packard products. Gross margins widened to 7.0% vs. 6.5% in Q1/98. On a sequential basis gross margins declined from 7.5% and were 50 basis points below our estimate. Offsetting the lower gross margin was lower SG&A as a percentage of sales at 3.9% vs. 3.6% a year ago. It was lower than our 4.4% estimate due to the higher sales levels. Operating margins widened 60 basis points vs. the prior year and was in line with our expectations. The EBITDA rose nearly 60% to $47 million from $29 million a year ago. EBITDA margins rose to 4.3% from 4.0% in Q1/98.