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Technical Analysis
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Nostradamus
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30-Sep-2006 22:19
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The top cover business which is running at 50,000 units per month vs installed capacity of 7m units per month will not likely to turn around any time soon. This reflects its inability to penetrate Seagate's top cover business as current supplier Seksun has a stronghold there and is gaining market share from Metalform. Qualification is an issue and lead time for Seksun and Metalform to add metal stamping machine is not an issue. Brilliant is currently serving Samsung and as Samsung switches more of their volumes from die cast top covers to stamped top covers and relocates more production from Korea, utilization rate is expected to gradually improve. Due to the loss making position of this division for the foreseeable future, management expects $18.79m worth of goodwill to be written down in 4Q ending Sep 06 (write down value would range between $10-18.79m, depending on the requirements of the auditor). The base plate business, which is still running some final volumes for Maxtor, look more promising as they have started to serve Seagate for one 2.5" program last month and will be starting to serve Seagate for a couple of new 3.5" programs (called Hawk) next month. This division will also serve Hitachi, Fujitsu and Excelstore. Based on customer's projections, management is expecting to increase their production capacity from 12m units per quarter currently to 18m by Dec '06 quarter, 21m by Mar '07 and a further 24m by end '07. In terms of pricing, they're about 10-15% cheaper than existing Seagate suppliers. By end Sep '07, mgt expects Seagate to account about 50% of their volumes, while Samsung, Hitachi, Fujitsu and Excelstore will account for the rest. 80% of their volumes are expected to be accounted for by 3.5" drives while the other 20% by 2.5" drives. The above expansion plan is expected to cost around $30m which mgt hopes to be financed by the sale of the remaining 36m units of Cambridge REIT when the moratotium expires in Jan '07 as well as some borrowings. Current cash holdings total $16m vs debts of $26m. Brilliant has always been manufacturing 3.5" base plates, hence their ability to successfully deliver 2.5" base plates remain to be seen. And as they have only served Maxtor in the past, but now have to see to the needs of 5 different customers, raising execution risks. The goodwill write down would result in a significant loss in 4Q ending Sep '06. Last year's 1 cent per share dividend id not expected to be repeated this year (had already been cut from previous year's 3 cents). At $0.285, price to sales is 1.6x. This compares unfavourably to Seksun (7x PE vs 100% growth, 1x price to book and 6% yield). |
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Nostradamus
Supreme |
10-Jul-2006 20:48
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Issued a profit warning. Expects a loss in Q3 FY06 and revenue for the same quarter to be substantially lower than the corresponding period last year. This is due to a sharp decline in sales volume of hard Disk Drive base plates and top covers from a major customer who is expected to discontinue its product lines prematurely. As orders from the existing major customer is expected to progressively decline over the rest of FY2006, the Group has stepped up its business development efforts and secured five new multinational customers. The Group has commenced mass production of HDD base plates to these new customers, with higher volumes expected in the second half of 2006 and thereafter. The Group is currently finalising its agreement with these new customers. |
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Gallen
Senior |
26-Feb-2006 13:52
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available at http://kelongstocks.blogspot.com |
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