Ecolab Inc. (ECL) announced early Friday morning that as apart of its actions to develop a more efficient supply chain infrastructure and improve their European profitability, it has completed the sale of its plant in Valby, Denmark. The sale will result in an after-tax special gain of approximately $23M to be recorded in Ecolab’s 2Q of 2008’s results. The plant, which was built in 1930 when the area was an industrial park, operated in a suburb of Copenhagen which has become increasingly residential. Production and logistics will be transferred from the Valby plant to other facilities. Additionally, earlier this month, Ecolab confirmed that their board approved a quarterly dividend of $0.13. The company stated that the dividend is payable on July 15th to shareholders of record as of June 17th. And finally, earlier this month Ecolab announced that they raised more than $118,000 for the National Restaurant Association Educational Foundation (NRAEF) at the 2008 Chairman’s Reception and 6th Annual Silent Auction on May 18th. Ecolab is one of the NRAEF’s largest supporters having contributed more than $1M to the non-profit organization over the past six years. The NRAEF provides high school seniors and college undergraduate students with scholarships to pursue a restaurant and foodservice education. The scholarships are presented to select qualified applicants who have been accepted into an eligible restaurant and/or foodservice management collegiate program. Since 2003, more than 150 students have been awarded scholarships as a result of Ecolab’s financial support. Shares of Ecolab traded higher by the close, finishing up $0.18, or 0.4%, at $44.83.
Ecolab, Inc. develops and markets products and services for the hospitality, foodservice, healthcare, and light industrial markets in the United States and internationally. The company offers cleaning and sanitizing products and programs, as well as pest elimination, maintenance, and repair services primarily to hotels and restaurants, healthcare and educational facilities, quick service units, grocery stores, commercial and institutional laundries, light industry, dairy plants and farms, food and beverage processors, and the vehicle wash industry. Its products include specialized cleaners and sanitizers for washing dishes, glassware, flatware, foodservice utensils, and kitchen equipment; food safety products and equipment, dishwasher racks, and related kitchen sundries; pool and spa treatment programs; chemical dispensing device systems; cleaning and floor care products; and detergents, general purpose cleaners, carpet care, stone care, furniture polishes, disinfectants, floor care products, hand soaps, and odor counteractants. The company provides general purpose hard surface cleaners, degreasers, sanitizers, polishes, hand care products, and assorted cleaning tools; lubricants and animal health products, as well as cleaning systems, electronic dispensers, and chemical injectors for the application of chemical products; antimicrobial products used in direct contact with meat, poultry, seafood, and produce; process control systems and facility cleaning systems; infection prevention/healthcare products; vehicle appearance products, including soaps, polishes, sealants, wheel and tire treatments, and air fresheners; and water and wastewater treatment products, services, and systems for commercial/institutional customers. In addition, it offers services for the detection, elimination, and prevention of pests; and commercial cooking and refrigeration equipment repair and maintenance services. Ecolab, Inc. was founded in 1923, currently employs more than 26,000 people and is headquartered in St. Paul, Minnesota.
Ecolab is a model of consistency. The company enjoys steady demand from the continuous efforts of business to comply with sanitary requirements particularly with regard to germs such as Salmonella. The company has been recognized for its ethical leadership and corporate social responsibility. The company retains some 90% of their clients largely because of a business model that emphasizes high-touch service from their salespeople who work directly with their clients ' employees. Despite what seems like a fairly mundane business, at least superficially, the business has shown excellent growth with revenues compounding at 16.2% over the last five years and EPS at about 15% over the same period. About half of its sales are made outside of the U.S. Ecolab is the biggest player in this industry, but despite their size and scale, they still represent less than 20% of the market. Not a great deal of downside for this company unless a recession really demolishes discretionary spending in the hospitality industry, and there still is an international opportunity for improvements. They have a good balance sheet that supports acquisitions and dividend increases and share repurchases as needed. They have a management team that is very aggressive and they have a culture within the company that is very aggressive when it comes to getting new business, and market share gain is really what drives the performance of this company.
On a valuation basis, the stock is a little rich selling at about 25.42-times sustainable earnings per share. With an enterprise value of about $12.12B, debt represents only about $1.3B. Return on invested capital (ROI) is healthy at about 16.5% and revenues per dollar of invested capital have improved steadily over the last few years. Return on equity (ROE) is just over 24%, in-line with its historical averages. Operating working capital now represents only about 4% of revenues whereas it had been averaging around 9 to 10%. The cash cycle has improved quite dramatically to turn every 12 days, down from about 20 days. Capital expenditures now represent about 8% of revenues, in line with the past, and the current dividend yield is 1.2%. The five year dividend growth has been about 9.5%. The appeal is that this company through good times and bad delivers on expectations. They grow their top line organically in the high single digits. With currency and acquisitions the growth is very often in the double-digit range. They grow their earnings at about a 15% clip. They have a very high return on equity north of 20%. They are cash flow positive. So you are looking at a company that's growing close to double digits, that has a 50% plus gross margin, that has a 20% plus return on equity and 15% average growth in earnings in a very predictable, stable way and investors have been willing to pay a higher multiple for that predictability. And again, given the lack of economic sensitivity of this company, Ecolab has an appeal to both growth investors as well as those looking for a safe haven.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, May 30, 2008
Thursday, May 29, 2008
BetterTrades looks at Mechel Open Joint Stock Company - May 29, 2008
U.S-traded shares of Mechel Open Joint Stock Company (MTL) slipped a little on Wednesday, a day before the Russian mining and metals company is scheduled to report its 4Q and 2007 results. The Moscow-based company will post its results before the U.S. markets open on Friday. On average, analysts expect an annual profit of $2.09 per share on $6.21B in revenues. Mechel's American Depositary Receipts, or ADR, nearly quadrupled in value in 2007, rising to $32.38 from $8.49, on a split adjusted basis, while they nearly doubled in the 4Q. In 2008, shares have climbed another 59%, reaching an all-time high of $58.66 on May 19th. The company changed the way it calculates its ADR on May 20th, to show that the ADR-to-share ratio is now one-to-one rather than one-to-three. ADRs are shares of foreign companies trading on U.S.-based exchanges. The 4Q is the start of a major shift in Mechel's profits, with a larger contribution from the coal business. Mechel finished its buyout of coal company Yakutugol in October, and coal prices in Russia and several other key markets increased during the quarter. Mechel ADRs dropped $1.25, or 2.3%, to $54.24 in today’s trading.
Mechel, incorporated in March of 2003, is an integrated mining and steel company. Its mining business is focused on mining products used in the production of steel, primarily coking coal, iron ore and nickel. Mechel also produces a significant amount of steam coal. Its business consists of two segments: mining and steel. In 2007, the Company produced 6,603 tons of coking coal concentrate, 6,728 tons of steam coal, 2,885 tons of iron ore concentrate and 12 tons of nickel. Its mining products are marketed domestically primarily through Mechel Trading House, and internationally through Mechel International Holdings. During the past year, the five largest customers of the Company's mining products were Glencore International (nickel, iron ore), MMK (coking coal), ZapSib (iron ore), Evrazresurs (coking coal) and NLMK (coking coal), which together accounted for 59% of its mining segment sales.
Mechel ships its coking coal concentrate from its coal washing facilities, located near its coalmines and pits, by railway directly to key customers, including steel producers. Iron ore concentrate is shipped through railway directly from Korshunov Mining Plant to customers. Its exports of steam coal are primarily to Switzerland, Japan, Slovakia, Turkey and Spain, which together accounted for 52% of its total steam coal sales and 12% of its total mining segment sales. Mechel's steel business comprises production and sale of semi-finished steel products, carbon and specialty long products, carbon and stainless flat products, and value-added downstream metal products, including hardware, stampings and forgings. Its steel business is supported by its mining business, which includes coal (steam and coking coal), iron ore, nickel and limestone. With the exception of the Company's foreign subsidiaries, Mechel manufactured almost all of its steel products using internally sourced coke, pig iron, raw steel and semi-finished steel products. The Company's steel segment sales outside of Russia were principally to Europe and Asia. Sales in Europe accounted for 28.5% of the Company's total steel segment sales.
Also released on Thursday, was the company’s financial results for the full year which ended December 31st, 2007. Net revenues in 2007 jumped 52% to $6.7B from $4.4B in 2006. Operating income surged 92.6% to $1.4B, or 20.9% of net revenues in 2007, compared to operating income of $725.7M, or 16.5% of net revenues in 2006. For 2007, Mechel reported consolidated net income of $913.1M, or $2.19 per ADR / diluted share, an increase of 51.4% over consolidated net income of $603.2M, or $1.48 per ADR / diluted share, in 2006. Consolidated EBITDA jumped 55.3% to $1.7B in 2007, compared to $1.1B in the year ago period, reflecting the positive impact of favorable market conditions, new assets acquisitions, entering into more effective market segments and a structured expense management approach.
Mining segment revenues for 2007 totaled $1.8B or 28% of consolidated net revenues, an increase of 41.3% over segment revenues of $1.3B, or 30% of consolidated net revenue in the 2006. The increase in revenues reflects production growth at their principal coal producer Southern Kuzbass, production growth at Yakutugol, and the acquisition of the remaining assets of Yakutugol, the largest Russian coking coal producer. These factors resulted in strengthened market position and increased sales of mining products to third parties for the year. Operating income in the mining segment in 2007 increased by 177.9% to $886.7M, or 34.7% of total segment sales, compared to operating income of $319.0M, or 19.0% of total segment sales a year ago. Earnings in the mining segment in 2007 increased by 146% to $995.7M compared to earnings of $404.7M in 2006. The earnings margin of the mining segment was 38.9% for the 2007 full year period, versus 24.1% in 2006. Revenues from Mechel's steel segment increased by 42.5% in 2007 to $4.3B, or 65% of consolidated net revenues, from $3.0B, or 69% of consolidated net revenues, in 2006. Operating income in the steel segment increased by 37.3% to $558.2M, or 12.6% of total segment sales, compared to operating income of $406.5M, or 13.2% of total segment sales, in the 2006 full year period. Earnings in the steel segment for 2007 increased by 10.6% to $733.5M over the $663.2M earned in 2006. The earnings margin of the steel segment was 16.5% in 2007 compared to 21.5% in 2006.
This company may be considered a diamond in the rough, although companies like this are stellar, even though it is due to sell off 20% the next time some publication says the commodities boom is dead. Mechel, Russia's sixth-largest steel maker has expanded its presence in Romania by acquiring rebar and wire rod producer Ductil Steel for $221M. The integration of Ductil Steel's production and marketing facilities will allow Mechel to further develop its steel business, particularly in Romania and eastern Europe. Mechel, also Russia's largest coking coal miner, has earmarked $2.7B by 2011 to increase steel production by 26% and improve its coal, iron ore and nickel mining operations. The company has also been on an acquisition spree recently. In the last year it has bought the Bratsk Ferro-Alloy Plant and large coal deposits in the Russian Far East, as well as agreeing to the $1.5B acquisition of ferrochrome producer Oriel Resources. Russia has a strong growing economy and as a BRIC (Brazil, Russia, India, and China) stock, is one of the four horsemen for worldwide investment opportunities. Russian stocks have become so popular that some alcoholic drinks are named after Russian stocks.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Mechel, incorporated in March of 2003, is an integrated mining and steel company. Its mining business is focused on mining products used in the production of steel, primarily coking coal, iron ore and nickel. Mechel also produces a significant amount of steam coal. Its business consists of two segments: mining and steel. In 2007, the Company produced 6,603 tons of coking coal concentrate, 6,728 tons of steam coal, 2,885 tons of iron ore concentrate and 12 tons of nickel. Its mining products are marketed domestically primarily through Mechel Trading House, and internationally through Mechel International Holdings. During the past year, the five largest customers of the Company's mining products were Glencore International (nickel, iron ore), MMK (coking coal), ZapSib (iron ore), Evrazresurs (coking coal) and NLMK (coking coal), which together accounted for 59% of its mining segment sales.
Mechel ships its coking coal concentrate from its coal washing facilities, located near its coalmines and pits, by railway directly to key customers, including steel producers. Iron ore concentrate is shipped through railway directly from Korshunov Mining Plant to customers. Its exports of steam coal are primarily to Switzerland, Japan, Slovakia, Turkey and Spain, which together accounted for 52% of its total steam coal sales and 12% of its total mining segment sales. Mechel's steel business comprises production and sale of semi-finished steel products, carbon and specialty long products, carbon and stainless flat products, and value-added downstream metal products, including hardware, stampings and forgings. Its steel business is supported by its mining business, which includes coal (steam and coking coal), iron ore, nickel and limestone. With the exception of the Company's foreign subsidiaries, Mechel manufactured almost all of its steel products using internally sourced coke, pig iron, raw steel and semi-finished steel products. The Company's steel segment sales outside of Russia were principally to Europe and Asia. Sales in Europe accounted for 28.5% of the Company's total steel segment sales.
Also released on Thursday, was the company’s financial results for the full year which ended December 31st, 2007. Net revenues in 2007 jumped 52% to $6.7B from $4.4B in 2006. Operating income surged 92.6% to $1.4B, or 20.9% of net revenues in 2007, compared to operating income of $725.7M, or 16.5% of net revenues in 2006. For 2007, Mechel reported consolidated net income of $913.1M, or $2.19 per ADR / diluted share, an increase of 51.4% over consolidated net income of $603.2M, or $1.48 per ADR / diluted share, in 2006. Consolidated EBITDA jumped 55.3% to $1.7B in 2007, compared to $1.1B in the year ago period, reflecting the positive impact of favorable market conditions, new assets acquisitions, entering into more effective market segments and a structured expense management approach.
Mining segment revenues for 2007 totaled $1.8B or 28% of consolidated net revenues, an increase of 41.3% over segment revenues of $1.3B, or 30% of consolidated net revenue in the 2006. The increase in revenues reflects production growth at their principal coal producer Southern Kuzbass, production growth at Yakutugol, and the acquisition of the remaining assets of Yakutugol, the largest Russian coking coal producer. These factors resulted in strengthened market position and increased sales of mining products to third parties for the year. Operating income in the mining segment in 2007 increased by 177.9% to $886.7M, or 34.7% of total segment sales, compared to operating income of $319.0M, or 19.0% of total segment sales a year ago. Earnings in the mining segment in 2007 increased by 146% to $995.7M compared to earnings of $404.7M in 2006. The earnings margin of the mining segment was 38.9% for the 2007 full year period, versus 24.1% in 2006. Revenues from Mechel's steel segment increased by 42.5% in 2007 to $4.3B, or 65% of consolidated net revenues, from $3.0B, or 69% of consolidated net revenues, in 2006. Operating income in the steel segment increased by 37.3% to $558.2M, or 12.6% of total segment sales, compared to operating income of $406.5M, or 13.2% of total segment sales, in the 2006 full year period. Earnings in the steel segment for 2007 increased by 10.6% to $733.5M over the $663.2M earned in 2006. The earnings margin of the steel segment was 16.5% in 2007 compared to 21.5% in 2006.
This company may be considered a diamond in the rough, although companies like this are stellar, even though it is due to sell off 20% the next time some publication says the commodities boom is dead. Mechel, Russia's sixth-largest steel maker has expanded its presence in Romania by acquiring rebar and wire rod producer Ductil Steel for $221M. The integration of Ductil Steel's production and marketing facilities will allow Mechel to further develop its steel business, particularly in Romania and eastern Europe. Mechel, also Russia's largest coking coal miner, has earmarked $2.7B by 2011 to increase steel production by 26% and improve its coal, iron ore and nickel mining operations. The company has also been on an acquisition spree recently. In the last year it has bought the Bratsk Ferro-Alloy Plant and large coal deposits in the Russian Far East, as well as agreeing to the $1.5B acquisition of ferrochrome producer Oriel Resources. Russia has a strong growing economy and as a BRIC (Brazil, Russia, India, and China) stock, is one of the four horsemen for worldwide investment opportunities. Russian stocks have become so popular that some alcoholic drinks are named after Russian stocks.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, May 28, 2008
BetterTrades looks at G. Willi Food International Ltd. - May 28, 2008
G. Willi Food International Ltd. (WILC) one of Israel's largest food importers and a single-source supplier of one of the world's most extensive range of quality kosher food products, today announced its financial results for the 1Q ending March 31st, 2008. First quarter 2008 results included, for the first time, consolidated results of Shamir Salads, an Israeli distributor and manufacturer of Mediterranean style salads, as well as the results of a newly acquired dairy distributor and manufacturer based in Denmark. Revenues for the quarter increased 49% to $30M compared to revenues of $20.1M in the 1Q of 2007. This increase was driven by the consolidation of the results of Shamir Salads and the dairy distributor based in Denmark, as well as by growth in the company's business. Gross profit for the 1Q of 2008 increased by 47.3% to $8.5M compared to gross profit of $5.8M in the 1Q of 2007. The recent quarterly gross margin for the company was 28.5%, in line with gross margins of 28.8% for the same period in 2007. Willi-Food's operating income for the quarter increased by 46.2% to $4.2M from $2.8M reported in the comparable quarter of last year. The company's net income was $2.7M, or $0.24 per share compared to a net income of $1.8M, or $0.14 per share, recorded in the 1Q of 2007. Willi-Food ended the quarter with $15.9M in cash and securities and approximately $4.2M in short-term debt. By the close of today’s trading session, shares of G. Willi moved higher, up $0.14, or 2.5%, to conclude at $5.65 a share.
G. Willi Food-International, Ltd. engages in the design, import, marketing, and distribution of food products in Israel. It offers approximately 160 preserved food products, including canned vegetables and pickles, fish, and fruits; and approximately 300 non-preserved food products, such as edible oils, dairy and dairy substitute products, dried fruit, nuts, and beans. The company also provides other products, including instant noodle soups, coffee creamers, fruit juices, jams, confitures, halva, Turkish delight, tahini, cookies, vinegar, sweet pastry and crackers, sauces, corn flour, pastes, rice, rice sticks, rice crackers, pasta, spaghetti and noodles, ketchup, mayonnaise, sugar cubes, breakfast cereals, corn flakes, instant coffee, white oats, rusks, coconut milk, couscous, ouzo, and vodka. These products are primarily imported from the Netherlands, Germany, Romania, Italy, Greece, Belgium, the United States, Scandinavia, China, Thailand, Turkey, India, South America, and Argentina. It markets and sells its products to supermarket chains, mini-markets, wholesalers, manufacturers, and institutional consumers under Willi-Food and Gold Frost brand names. The company was founded in 1994 as G. Willi-Food, Ltd. and changed its name to G. Willi-Food International, Ltd. in 1996. G. Willi-Food International is headquartered in Yavne, Israel. G. Willi Food-International, Ltd. is a subsidiary of Willi-Food Investments, Ltd.
Towards the end of last year, one major accomplishment for the company was the signing of a term contract with a Russian dairy distributor in that they were a leading supplier and importer of dairy products throughout Russia. Together the two companies formed a new joint company in which Willi Foods would hold a 51% interest in the new company. To date, the company has sold roughly 36,000 tons of cheese products to over 1,000 customers in Russia, and should generate an estimated $120M in sales in 2008. G. Willi has made a big push into the Russian food market, as it has become clearer that with growing wealth and more disposable income, Russian consumers have created a large demand for imported, premium products. According to market data, over 650,000 tons of cheeses are consumed in Russia each year of which roughly 50% is imported. We believe that NewCo, the name of the newly formed company, will provide a well-developed distribution platform for Willi Food and its subsidiaries to drive market demand for dairy products in all categories including premium branded products, kosher and healthy living styled dairy products, as well as other categories.
As one of Israel’s fastest growing food companies, it has been in a relatively small channel of late and yesterday saw a closing price of $5.51. Although the stock is currently trading at a high P/E Ratio, 103.1, the company does post a more respectable PEG Ratio of 0.84, which allows the stock to look very cheap compared with much of their direct competitors. The company is also able to boast other intriguing aspects for a solid investment play in the company. First is that the company is an Emerging Market stock at a decent value with some additional growth opportunities in the U.S, and the company has a healthy balance sheet, with management currently making strides to continue to improve that by restructuring some of their current debt. And finally, the latest cash balance of $27.84M, representing about $2.711 a share or about 45% of the company’s market cap. If you are looking for a small food company that’s about to explode onto the global scene, many have suggested to take a long look at G. Willi. The stock has taken a hit over the past year or so, but it looks attractive as a long-term investment.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
G. Willi Food-International, Ltd. engages in the design, import, marketing, and distribution of food products in Israel. It offers approximately 160 preserved food products, including canned vegetables and pickles, fish, and fruits; and approximately 300 non-preserved food products, such as edible oils, dairy and dairy substitute products, dried fruit, nuts, and beans. The company also provides other products, including instant noodle soups, coffee creamers, fruit juices, jams, confitures, halva, Turkish delight, tahini, cookies, vinegar, sweet pastry and crackers, sauces, corn flour, pastes, rice, rice sticks, rice crackers, pasta, spaghetti and noodles, ketchup, mayonnaise, sugar cubes, breakfast cereals, corn flakes, instant coffee, white oats, rusks, coconut milk, couscous, ouzo, and vodka. These products are primarily imported from the Netherlands, Germany, Romania, Italy, Greece, Belgium, the United States, Scandinavia, China, Thailand, Turkey, India, South America, and Argentina. It markets and sells its products to supermarket chains, mini-markets, wholesalers, manufacturers, and institutional consumers under Willi-Food and Gold Frost brand names. The company was founded in 1994 as G. Willi-Food, Ltd. and changed its name to G. Willi-Food International, Ltd. in 1996. G. Willi-Food International is headquartered in Yavne, Israel. G. Willi Food-International, Ltd. is a subsidiary of Willi-Food Investments, Ltd.
Towards the end of last year, one major accomplishment for the company was the signing of a term contract with a Russian dairy distributor in that they were a leading supplier and importer of dairy products throughout Russia. Together the two companies formed a new joint company in which Willi Foods would hold a 51% interest in the new company. To date, the company has sold roughly 36,000 tons of cheese products to over 1,000 customers in Russia, and should generate an estimated $120M in sales in 2008. G. Willi has made a big push into the Russian food market, as it has become clearer that with growing wealth and more disposable income, Russian consumers have created a large demand for imported, premium products. According to market data, over 650,000 tons of cheeses are consumed in Russia each year of which roughly 50% is imported. We believe that NewCo, the name of the newly formed company, will provide a well-developed distribution platform for Willi Food and its subsidiaries to drive market demand for dairy products in all categories including premium branded products, kosher and healthy living styled dairy products, as well as other categories.
As one of Israel’s fastest growing food companies, it has been in a relatively small channel of late and yesterday saw a closing price of $5.51. Although the stock is currently trading at a high P/E Ratio, 103.1, the company does post a more respectable PEG Ratio of 0.84, which allows the stock to look very cheap compared with much of their direct competitors. The company is also able to boast other intriguing aspects for a solid investment play in the company. First is that the company is an Emerging Market stock at a decent value with some additional growth opportunities in the U.S, and the company has a healthy balance sheet, with management currently making strides to continue to improve that by restructuring some of their current debt. And finally, the latest cash balance of $27.84M, representing about $2.711 a share or about 45% of the company’s market cap. If you are looking for a small food company that’s about to explode onto the global scene, many have suggested to take a long look at G. Willi. The stock has taken a hit over the past year or so, but it looks attractive as a long-term investment.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, May 27, 2008
BetterTrades looks at Nike Inc. - May 27, 2008
The Nike Foundation, a nonprofit supported by athletic footwear and apparel maker Nike Inc. (NKE), made it known Tuesday that the company will partner with the NoVo Foundation on a $100M grant aimed at helping adolescent girls in developing countries. Peter and Jennifer Buffett run the nonprofit NoVo foundation, and Peter Buffett is the son of billionaire investor Warren Buffett, who in 2006 said he would give each of his three children $1B in Berkshire Hathaway stock for their foundations. The grant is aimed at supporting and educating girls in impoverished communities. In impoverished communities, lack of resources drives girls out of school and into early marriage, childbirth, and HIV infection at rates dramatically higher than boys. The results are irreversible for girls, and devastating to communities caught in intergenerational cycles of poverty. Yet when girls gain a different path, one of supported, education and empowerment, everyone benefits. The NoVo Foundation will contribute $45M over three years, its largest grant since it received stock from Warren Buffett. Nike Inc. will add a $55M investment in the Nike Foundation through fiscal 2011. That is in addition to the $36M already invested in the Nike Foundation to date for programs supporting girls in countries including Ethiopia, Kenya, Bangladesh, Liberia and India. Funds from NoVo and NIKE, Inc. will be managed by the Nike Foundation, which has focused on the issue of girls and poverty since 2004. Together, their goal is to mobilize exponentially more resources from public and private sources directly to adolescent girls through advocacy, awareness and impact programs.
Nike, Inc. incorporated in 1968, is engaged in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. Nike sells athletic footwear and athletic apparel. Its product portfolio includes running, training, basketball, soccer, sport-inspired urban shoes and children's shoes. It also markets shoes designed for tennis, golf, baseball, football, lacrosse, walking, outdoor activities, skateboarding, bicycling, volleyball, wrestling, cheerleading, aquatic activities and other athletic and recreational uses. The Company sells its products to retail accounts, through NIKE-owned retail stores, and through a mix of independent distributors and licensees, in over 180 countries worldwide. In April 2008, Nike completed the sale of its Bauer Hockey subsidiary. The Company’s athletic footwear products are designed primarily for specific athletic use, although a large percentage of the products are worn for casual or leisure purposes. Nike sells sports apparel and accessories covering most of its product categories, which include sports-inspired lifestyle apparel, as well as athletic bags and accessory items. It also markets apparel with licensed college and professional team, and league logos.
The Company’s wholly owned subsidiary, Converse Inc., designs and distributes athletic and casual footwear, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star and Jack Purcell trademarks, and footwear under the Hurley trademark. Nike’s wholly owned subsidiary, Hurley International LLC, designs and distributes a line of action sports apparel for surfing, skateboarding and snowboarding, youth lifestyle apparel, and accessories under the Hurley trademark. The Company’s wholly owned subsidiary, Exeter Brands Group LLC, sells athletic footwear and apparel in retail channels to consumers, and markets licensed athletic footwear and apparel under the Starter brand name and S logo. Virtually all of the Company’s products are manufactured by independent contractors. Virtually all footwear and apparel products are produced outside the United States, while equipment products are produced both in the United States and abroad. During fiscal 2007, contract suppliers in China, Vietnam, Indonesia and Thailand manufactured 35%, 31%, 21% and 12% of total Nike brand footwear, respectively. The Company also has manufacturing agreements with independent factories in Argentina, Brazil, India, Italy and South Africa, to manufacture footwear for sale primarily within those countries.
In the company’s recent earnings report, released in late March, Nike Inc.'s 3Q profits jumped more than 30% because of strong sales overseas and a weak dollar. Nike stated that their net income grew to $463.8M, or $0.92 per share, up from $350.8M, or $0.68 per share, in the same period a year earlier. Revenues for the quarter increased 16% to $4.54B, up from $3.93B a year earlier. Changes in currency exchange rates accounted for 6 percentage points of revenue growth for the quarter. Revenues grew 20% or more in overseas markets, with particular strength in Asia and Europe. Company officials said Nike has already hit its goal of more than $1B in annual sales in China. By comparison, U.S. revenues increased only 5%, with gains in shoe and apparel goods but a drop in equipment sales. The company saw its future orders, for products to be delivered from March through July grow, up 11% for the quarter. Expected marketing expenses for major sporting events, such as the Beijing Olympics and the European Championships, will be reflected in the 4Q, which should be released in mid-to-late June.
Analyst views remain strong for Nike as many have reiterated a “Buy” rating ahead of the 4Q results, which are seen as the next positive catalyst for shares. Many analysts think Nike's recent pull back is creates a buying opportunity, and based on weekly store checks and data, experts confirm that Nike continues to take U.S. market shares and lead the top sellers list in athletic footwear retail. Nike was also named "coolest brand" in a survey of 12- to 19-year-olds conducted by Teen Research. Additionally, Goldman Sachs’ price target has been placed at $73 based on a risk/reward analysis and the analytical firm sees a 14% upside, while others are looking for Nike to give upwards of 15% in 2008; most of it coming from boost in media attention around the Summer Olympics, Beijing 2008. However, there is a strong possibility that a slowdown in the company’s U.S. revenue growth, along with input cost increases, and an increase in selling, general & administrative expenses may hurt the bottom line in the upcoming quarter and for the full-year outlook.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Nike, Inc. incorporated in 1968, is engaged in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. Nike sells athletic footwear and athletic apparel. Its product portfolio includes running, training, basketball, soccer, sport-inspired urban shoes and children's shoes. It also markets shoes designed for tennis, golf, baseball, football, lacrosse, walking, outdoor activities, skateboarding, bicycling, volleyball, wrestling, cheerleading, aquatic activities and other athletic and recreational uses. The Company sells its products to retail accounts, through NIKE-owned retail stores, and through a mix of independent distributors and licensees, in over 180 countries worldwide. In April 2008, Nike completed the sale of its Bauer Hockey subsidiary. The Company’s athletic footwear products are designed primarily for specific athletic use, although a large percentage of the products are worn for casual or leisure purposes. Nike sells sports apparel and accessories covering most of its product categories, which include sports-inspired lifestyle apparel, as well as athletic bags and accessory items. It also markets apparel with licensed college and professional team, and league logos.
The Company’s wholly owned subsidiary, Converse Inc., designs and distributes athletic and casual footwear, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star and Jack Purcell trademarks, and footwear under the Hurley trademark. Nike’s wholly owned subsidiary, Hurley International LLC, designs and distributes a line of action sports apparel for surfing, skateboarding and snowboarding, youth lifestyle apparel, and accessories under the Hurley trademark. The Company’s wholly owned subsidiary, Exeter Brands Group LLC, sells athletic footwear and apparel in retail channels to consumers, and markets licensed athletic footwear and apparel under the Starter brand name and S logo. Virtually all of the Company’s products are manufactured by independent contractors. Virtually all footwear and apparel products are produced outside the United States, while equipment products are produced both in the United States and abroad. During fiscal 2007, contract suppliers in China, Vietnam, Indonesia and Thailand manufactured 35%, 31%, 21% and 12% of total Nike brand footwear, respectively. The Company also has manufacturing agreements with independent factories in Argentina, Brazil, India, Italy and South Africa, to manufacture footwear for sale primarily within those countries.
In the company’s recent earnings report, released in late March, Nike Inc.'s 3Q profits jumped more than 30% because of strong sales overseas and a weak dollar. Nike stated that their net income grew to $463.8M, or $0.92 per share, up from $350.8M, or $0.68 per share, in the same period a year earlier. Revenues for the quarter increased 16% to $4.54B, up from $3.93B a year earlier. Changes in currency exchange rates accounted for 6 percentage points of revenue growth for the quarter. Revenues grew 20% or more in overseas markets, with particular strength in Asia and Europe. Company officials said Nike has already hit its goal of more than $1B in annual sales in China. By comparison, U.S. revenues increased only 5%, with gains in shoe and apparel goods but a drop in equipment sales. The company saw its future orders, for products to be delivered from March through July grow, up 11% for the quarter. Expected marketing expenses for major sporting events, such as the Beijing Olympics and the European Championships, will be reflected in the 4Q, which should be released in mid-to-late June.
Analyst views remain strong for Nike as many have reiterated a “Buy” rating ahead of the 4Q results, which are seen as the next positive catalyst for shares. Many analysts think Nike's recent pull back is creates a buying opportunity, and based on weekly store checks and data, experts confirm that Nike continues to take U.S. market shares and lead the top sellers list in athletic footwear retail. Nike was also named "coolest brand" in a survey of 12- to 19-year-olds conducted by Teen Research. Additionally, Goldman Sachs’ price target has been placed at $73 based on a risk/reward analysis and the analytical firm sees a 14% upside, while others are looking for Nike to give upwards of 15% in 2008; most of it coming from boost in media attention around the Summer Olympics, Beijing 2008. However, there is a strong possibility that a slowdown in the company’s U.S. revenue growth, along with input cost increases, and an increase in selling, general & administrative expenses may hurt the bottom line in the upcoming quarter and for the full-year outlook.
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Thursday, May 22, 2008
BetterTrades looks at Ship Finance International Ltd. - May 22, 2008
Oil tanker owner and operator Ship Finance International Ltd. (SFL) made it known early Thursday morning that the company’s fiscal 1Q profits advanced 8%, however, sales declined below Wall Street's expectations. For the quarter ended March 31st, the Hamilton, Bermuda-based company reported income of $59.8M, or $0.82 per share, compared with $55.3M, or $0.76 per share, in the year-ago period. Revenues for the company surged 41% to $121.9M from $86.5M in the prior-year quarter. Results included a negative non-cash accounting adjustment of $2.2M, or $0.03 per share. Analysts, on average, estimated earnings of $0.85 per share on sales of $131.4M. In the 1Q, the company experienced a robust spot-tanker market, which has remained strong so far in the 2Q, Ship Finance proclaimed. The company was also able to maintain roughly flat operating expenses compared with the same quarter last year. In addition, Ship Finance International Ltd. announced Thursday that the company has increased its quarterly cash dividend by $0.01 to $0.56. The dividend will be paid on or about June 30th to shareholders of record as of June 17th. Ship Finance also stated that they plan to further increase its dividend in the 3Q to $0.58. By the end of today’s trading session, shares of Ship Finance were slightly lower on the day, down $1.64, or 5.1%, to finish at $30.63.
Ship Finance International Limited, incorporated in October of 2003, is a Bermuda-based shipping company that is engaged primarily in the ownership and operation of vessels and offshore related assets. The Company is also involved in the charter, purchase and sale of assets. Ship Finance operates through subsidiaries and partnerships located in Bermuda, Cyprus, Liberia, Norway, Delaware, Singapore and the Marshall Islands. The Company's assets consist of 33 oil tankers, eight oil bulk ores (OBOs) configured to carry dry-bulk cargo, one dry-bulk carrier, eight container vessels, two jack-up drilling rigs and six offshore supply vessels. Ship Finance's customers include Frontline Ltd (FRO), Horizon Lines Inc. (HRZ), Golden Ocean Group Limited, Seadrill Limited, SCAN Geophysical ASA, Taiwan Maritime Transportation Co. Ltd., Bryggen Shipping & Trading AS, Heung-A Shipping Co. Ltd., Deep Sea Supply Plc and Compania Sud Americana de Vapores. In March 2008, the Company entered into an agreement to acquire two building chemical tankers from Bryggen. In December 2007, Ship Finance agreed the sale of two non-double hull Suezmax tankers. The vessels were delivered in December 2007 and January 2008. In August 2007, the Company entered into an agreement to acquire five offshore supply vessels from Deep Sea. The vessels were delivered in September and October 2007. In November 2007, Ship Finance entered into an agreement to acquire a further two offshore supply vessels from Deep Sea. The vessels were delivered to the Company in January 2008. In January 2007, Ship Finance sold five single-hull Suezmax tankers to Frontline. The vessels were delivered in March 2007. In May 2007, the Company re-chartered the single-hull VLCC Front Vanadis to an unrelated third party. The new charter is in the form of a hire-purchase agreement, where the vessel is chartered to the buyer for a 3.5 year period, with a purchase obligation at the end of the charter.
SFL had a very nice 4th quarter. Net income was $0.71 per share and cash flow from ongoing operations was $1.49 per share. The profit sharing agreement with Frontline (FRO) chipped in another $0.22. A dividend was declared of $0.55, where it has been for several quarters. Because of the charter structure and bookkeeping rules of Ship Finance’s fleet the cash flow number is a better indicator of the company’s profitability. The growing cash flow bodes well for future dividend increases. SFL had a busy 2007. Several ships were sold to reduce single hull exposure, or just for nice profits. Others were acquired and placed in service on long term charters. Due to the company’s strong financial position they are able to obtain financing at very favorable rates and re-lease ships at excellent ongoing cash flow. The size and value of the fleet has tripled over the last 4 years, and should grow by another 33% over the next two years. Just this past week, SFL announced that they have entered into an agreement to acquire the new building ultra-deepwater drill-ship West Polaris, from a subsidiary of Seadrill Limited. With a total acquisition cost of approximately $850M, this is a record-breaking sale/leaseback transaction in the maritime industry. The vessel is expected to be delivered end of June 2008 from Samsung Heavy Industries in South Korea, and will be chartered back to the seller for 15 years on a bareboat basis, fully guaranteed by Seadrill.
The strong fundamentals of the offshore industry combined with long term charter coverage and high quality credit counterparts makes this a very attractive industry for anyone to invest in. Ship Finance sees a large potential in providing further flexible solutions to Seadrill as well as assisting other major offshore companies to optimize their capital structure and create flexibility for further growth. Over the last 12 months, Ship Finance has announced new investments of approximately $1.5B, and their fixed-rate charter backlog, excluding profit shares, is currently in excess of $6.6B. This company has the unique combination of very conservative financing to protect cash flow and aggressive growth to increase said cash flow. They do not increase the dividend until they are sure they can maintain it indefinitely. And this is a company whose average charter length is over 13 years, so indefinitely is a pretty long time. With the current yield at nearly 7%, it is hard to see much downside to SFL. Of course the market will hammer the stock when it gets a wild hair about shipping or tanker companies, but that will just be a buying opportunity. It would not be out of the ordinary to consider this stock as an excellent long term investment.
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Ship Finance International Limited, incorporated in October of 2003, is a Bermuda-based shipping company that is engaged primarily in the ownership and operation of vessels and offshore related assets. The Company is also involved in the charter, purchase and sale of assets. Ship Finance operates through subsidiaries and partnerships located in Bermuda, Cyprus, Liberia, Norway, Delaware, Singapore and the Marshall Islands. The Company's assets consist of 33 oil tankers, eight oil bulk ores (OBOs) configured to carry dry-bulk cargo, one dry-bulk carrier, eight container vessels, two jack-up drilling rigs and six offshore supply vessels. Ship Finance's customers include Frontline Ltd (FRO), Horizon Lines Inc. (HRZ), Golden Ocean Group Limited, Seadrill Limited, SCAN Geophysical ASA, Taiwan Maritime Transportation Co. Ltd., Bryggen Shipping & Trading AS, Heung-A Shipping Co. Ltd., Deep Sea Supply Plc and Compania Sud Americana de Vapores. In March 2008, the Company entered into an agreement to acquire two building chemical tankers from Bryggen. In December 2007, Ship Finance agreed the sale of two non-double hull Suezmax tankers. The vessels were delivered in December 2007 and January 2008. In August 2007, the Company entered into an agreement to acquire five offshore supply vessels from Deep Sea. The vessels were delivered in September and October 2007. In November 2007, Ship Finance entered into an agreement to acquire a further two offshore supply vessels from Deep Sea. The vessels were delivered to the Company in January 2008. In January 2007, Ship Finance sold five single-hull Suezmax tankers to Frontline. The vessels were delivered in March 2007. In May 2007, the Company re-chartered the single-hull VLCC Front Vanadis to an unrelated third party. The new charter is in the form of a hire-purchase agreement, where the vessel is chartered to the buyer for a 3.5 year period, with a purchase obligation at the end of the charter.
SFL had a very nice 4th quarter. Net income was $0.71 per share and cash flow from ongoing operations was $1.49 per share. The profit sharing agreement with Frontline (FRO) chipped in another $0.22. A dividend was declared of $0.55, where it has been for several quarters. Because of the charter structure and bookkeeping rules of Ship Finance’s fleet the cash flow number is a better indicator of the company’s profitability. The growing cash flow bodes well for future dividend increases. SFL had a busy 2007. Several ships were sold to reduce single hull exposure, or just for nice profits. Others were acquired and placed in service on long term charters. Due to the company’s strong financial position they are able to obtain financing at very favorable rates and re-lease ships at excellent ongoing cash flow. The size and value of the fleet has tripled over the last 4 years, and should grow by another 33% over the next two years. Just this past week, SFL announced that they have entered into an agreement to acquire the new building ultra-deepwater drill-ship West Polaris, from a subsidiary of Seadrill Limited. With a total acquisition cost of approximately $850M, this is a record-breaking sale/leaseback transaction in the maritime industry. The vessel is expected to be delivered end of June 2008 from Samsung Heavy Industries in South Korea, and will be chartered back to the seller for 15 years on a bareboat basis, fully guaranteed by Seadrill.
The strong fundamentals of the offshore industry combined with long term charter coverage and high quality credit counterparts makes this a very attractive industry for anyone to invest in. Ship Finance sees a large potential in providing further flexible solutions to Seadrill as well as assisting other major offshore companies to optimize their capital structure and create flexibility for further growth. Over the last 12 months, Ship Finance has announced new investments of approximately $1.5B, and their fixed-rate charter backlog, excluding profit shares, is currently in excess of $6.6B. This company has the unique combination of very conservative financing to protect cash flow and aggressive growth to increase said cash flow. They do not increase the dividend until they are sure they can maintain it indefinitely. And this is a company whose average charter length is over 13 years, so indefinitely is a pretty long time. With the current yield at nearly 7%, it is hard to see much downside to SFL. Of course the market will hammer the stock when it gets a wild hair about shipping or tanker companies, but that will just be a buying opportunity. It would not be out of the ordinary to consider this stock as an excellent long term investment.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, May 21, 2008
BetterTrades looks at Phillips-Van Heusen Corp. - May 21, 2008
Apparel maker Phillips-Van Heusen Corp. (PVH) announced after the close on Tuesday that the company’s fiscal 1Q profits declined 12%, which were hurt by start-up costs related to new business. However, these results beat Wall Street expectations. Profits for the quarter, ending May 4th dropped to $46.8M, or $0.90 per share, from $53M, or $0.92 per share, a year ago. The latest-quarter results included a $0.08 per share start-up cost related to the company's Timberland wholesale sportswear business and Calvin Klein specialty retail stores. Revenues for PVH increased 6% to $625.7M from $591.9M last year, while analysts were predicting a profit of $0.88 per share on revenues of $621M. The New York-based company proclaimed that their Calvin Klein licensing business was strong, partly offsetting weak results from its heritage outlet retail and moderate sportswear business. Total outlet same-store sales, or sales in stores open at least one year, a key retail metric, declined 2%. Those figures included a 10% jump at Calvin Klein outlets and a 6% decline at heritage outlet stores. For the upcoming 2Q, the company expects earnings of $0.63 to $0.66 per share on revenues between $575M and $585M, with analysts predicting a profit of $0.66 per share on revenues of $581.2M. In addition, the company also raised their fiscal-year guidance despite expectations of a difficult retail environment. Phillips-Van Heusen now expects fiscal-year earnings of $3.32 to $3.41 per share, which, the company stated, "reflects a cautious view of 2008 and a belief that the current difficult economic environment will continue throughout the year." In March, the company predicted earnings of $3.30 to $3.40 per share. Analysts are predicting a profit of $3.35 per share. The company reaffirmed revenue guidance of $2.6B, while analysts expect revenues of $2.58B. The company also expects total outlet same-store sales to be flat or down 1% for the full year. Shares of PVH dropped $2.38, or 5.2%, to close at $43.38.
Phillips-Van Heusen Corporation, incorporated in 1976, is an apparel company that designs, source and markets varied selection of branded label dress shirts, sportswear, neckwear and footwear under its portfolio of brands, as well as the licensing of its owned brands, other than the Calvin Klein brands, for an assortment of products. It operates in five segments: Wholesale Dress Furnishings, Wholesale Sportswear and Related Products, Retail Apparel and Related Products, Retail Footwear and Related Products and Calvin Klein Licensing. The Company's portfolio of brands includes its own brands, Calvin Klein Collection, ck Calvin Klein, Van Heusen, IZOD, Arrow, G.H. Bass & Co., Bass and Eagle and its licensed brands, Geoffrey Beene, BCBG Max Azria, BCBG Attitude, Chaps, Sean John, Donald J. Trump Signature Collection, Kenneth Cole New York, JOE Joseph Abboud, Kenneth Cole Reaction, MICHAEL Michael Kors, Michael Kors Collection, DKNY, Tommy Hilfiger, Nautica, Perry Ellis Portfolio, Ted Baker, Ike Behar, Jones New York and Hart Schaffner Marx. The Company also licenses Company-owned brands internationally over a range of products. In January of 2007, the Company completed the acquisition of substantially all of the assets of Superba, Inc., a manufacturer and distributor of neckwear in the United States and Canada. The acquired business, which includes neckwear licenses for designer and brand names, such as Arrow, DKNY, Tommy Hilfiger, Nautica, Perry Ellis, Ted Baker, Ike Behar, Michael Kors, JOE Joseph Abboud, Original Penguin, Jones New York and Hart Schaffner Marx, will be operated through PVH Neckwear Group. The Company's products are distributed at wholesale in national and regional department, mid-tier department, mass market, specialty and independent stores in the United States. The Company also markets its products directly to consumers through its Van Heusen, IZOD, Geoffrey Beene, Bass and Calvin Klein retail stores, primarily located in outlet malls throughout the United States.
Phillips-Van Heusen has the buttoned-down look all sewn up. Of all the brands PVH owns, it's Calvin Klein that currently shines. Introduced in 2005, CK men's sportswear collection has been a best-seller in department stores, ones like Macy's (M). That coupled with the Calvin Klein brand should continue to add significantly to the top line for the near future as the designers seem to have the right flair for making the clothes attractive to young and middle-aged men. The stock's price has been on a strong upward move over the last 4 years, starting in 2004 with a low of $16.50. Not coincidentally, earnings have been on the same trajectory, going from $0.99 a share in 2004 to $1.37 in 2005, $2.03 in 2006, $2.60 for 2007, and above is the forecast for 2008 and 2009. In fact, the company’s earnings estimate for ’09 has been raised from $3.85 per share to $3.91 a share. Additionally, analysts at Wedbush Morgan have posted and maintained a “buy” rating on Phillips-Van Heusen and have raised their target price for the full year from $46 to $51 a share. Although the company’s target price has been raised, it is still below the stock’s 52-week high, set last May at $62.19. However, the raising of the target price up to $51 a share would show a 17% increase from today’s trading price of $43.50. This would represent a positive showing for the company despite being in a highly volatile industry.
This is a mid-cap stock with a market cap of $2.25B. Earnings for the company should continue to grow by about 14% a year, on average, over the next 5 years, according to analysts, and there is a small dividend attached of $0.15 a year. Debt is 31% of capital and their current assets are nearly 2 times that of their current liabilities, and the company’s Return on Equity (ROE) is a very healthy 19.3% for the trailing 12 months. Phillips-Van Heusen has several strong brands performing right now with good prospects of more of the same ahead. But fashion retail can be fickle. That's one of the reasons Timberland became available for sale in the early part of 2007. That brand has seen profits fall recently, a reversal of fortune being that Timberland had been hot for several years and it is now seeing a decline in sales of its once trendy boots. Behind the recent downturn looms a wall of worry that is expected to possibly take its toll on revenues and earnings for months to come. Higher gas prices, falling home values and tighter credit conditions are all holding back consumers' willingness to spend. This should all be taken into consideration when looking for possibly plays in the retail sector.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Phillips-Van Heusen Corporation, incorporated in 1976, is an apparel company that designs, source and markets varied selection of branded label dress shirts, sportswear, neckwear and footwear under its portfolio of brands, as well as the licensing of its owned brands, other than the Calvin Klein brands, for an assortment of products. It operates in five segments: Wholesale Dress Furnishings, Wholesale Sportswear and Related Products, Retail Apparel and Related Products, Retail Footwear and Related Products and Calvin Klein Licensing. The Company's portfolio of brands includes its own brands, Calvin Klein Collection, ck Calvin Klein, Van Heusen, IZOD, Arrow, G.H. Bass & Co., Bass and Eagle and its licensed brands, Geoffrey Beene, BCBG Max Azria, BCBG Attitude, Chaps, Sean John, Donald J. Trump Signature Collection, Kenneth Cole New York, JOE Joseph Abboud, Kenneth Cole Reaction, MICHAEL Michael Kors, Michael Kors Collection, DKNY, Tommy Hilfiger, Nautica, Perry Ellis Portfolio, Ted Baker, Ike Behar, Jones New York and Hart Schaffner Marx. The Company also licenses Company-owned brands internationally over a range of products. In January of 2007, the Company completed the acquisition of substantially all of the assets of Superba, Inc., a manufacturer and distributor of neckwear in the United States and Canada. The acquired business, which includes neckwear licenses for designer and brand names, such as Arrow, DKNY, Tommy Hilfiger, Nautica, Perry Ellis, Ted Baker, Ike Behar, Michael Kors, JOE Joseph Abboud, Original Penguin, Jones New York and Hart Schaffner Marx, will be operated through PVH Neckwear Group. The Company's products are distributed at wholesale in national and regional department, mid-tier department, mass market, specialty and independent stores in the United States. The Company also markets its products directly to consumers through its Van Heusen, IZOD, Geoffrey Beene, Bass and Calvin Klein retail stores, primarily located in outlet malls throughout the United States.
Phillips-Van Heusen has the buttoned-down look all sewn up. Of all the brands PVH owns, it's Calvin Klein that currently shines. Introduced in 2005, CK men's sportswear collection has been a best-seller in department stores, ones like Macy's (M). That coupled with the Calvin Klein brand should continue to add significantly to the top line for the near future as the designers seem to have the right flair for making the clothes attractive to young and middle-aged men. The stock's price has been on a strong upward move over the last 4 years, starting in 2004 with a low of $16.50. Not coincidentally, earnings have been on the same trajectory, going from $0.99 a share in 2004 to $1.37 in 2005, $2.03 in 2006, $2.60 for 2007, and above is the forecast for 2008 and 2009. In fact, the company’s earnings estimate for ’09 has been raised from $3.85 per share to $3.91 a share. Additionally, analysts at Wedbush Morgan have posted and maintained a “buy” rating on Phillips-Van Heusen and have raised their target price for the full year from $46 to $51 a share. Although the company’s target price has been raised, it is still below the stock’s 52-week high, set last May at $62.19. However, the raising of the target price up to $51 a share would show a 17% increase from today’s trading price of $43.50. This would represent a positive showing for the company despite being in a highly volatile industry.
This is a mid-cap stock with a market cap of $2.25B. Earnings for the company should continue to grow by about 14% a year, on average, over the next 5 years, according to analysts, and there is a small dividend attached of $0.15 a year. Debt is 31% of capital and their current assets are nearly 2 times that of their current liabilities, and the company’s Return on Equity (ROE) is a very healthy 19.3% for the trailing 12 months. Phillips-Van Heusen has several strong brands performing right now with good prospects of more of the same ahead. But fashion retail can be fickle. That's one of the reasons Timberland became available for sale in the early part of 2007. That brand has seen profits fall recently, a reversal of fortune being that Timberland had been hot for several years and it is now seeing a decline in sales of its once trendy boots. Behind the recent downturn looms a wall of worry that is expected to possibly take its toll on revenues and earnings for months to come. Higher gas prices, falling home values and tighter credit conditions are all holding back consumers' willingness to spend. This should all be taken into consideration when looking for possibly plays in the retail sector.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, May 20, 2008
BetterTrades looks at The9 Ltd. - May 20, 2008
The9 Ltd. (NCTY), a China-based online game operator, made it known Monday that the company’s 1Q profits grew 36% due to higher subscriptions for multiplayer games such as World of Warcraft. The9 confirmed that their profits for the quarter, ending March 31st, climbed to $12.8M, or $0.46 per share, from $9.4M in the same quarter last year. Revenues, meanwhile, surged 64% to $65.9M from $40.1M in the year-ago quarter. Income excluding interest, taxes, amortization and appreciation charges was $14.6M. Analysts were expecting a profit of $0.32 per share on $58.1M in revenues. The9 stated that they were helped by robust growth in its online games. Its peak of concurrent users increased to 1.2 million during the quarter, the company confirmed. Separately, The9 announced that they have spent $39.3M toward its $50M stock repurchase program announced in November. “The excellent financial results were achieved on the back of resilient growth of Blizzard Entertainment's World of Warcraft, despite the seasonality impact we experienced as usual in the 1Q of the year," Chief Executive Jun Zhu said in a statement earlier today. Shares of The9 dropped slightly, falling $0.05, or 0.2%, to $25.74 in trading Tuesday. The stock has traded in a 52-week range of $15.05 to $52.44.
The9 Limited, incorporated in December 1999, is an online game operator in China. The Company's business is primarily focused on operating massively multiplayer online role-playing games (MMORPGs), including World of Warcraft (WoW) and other games in China. WoW is a full-view, three-dimensional MMORPG developed by Blizzard Entertainment, the game development studio of VUG, which has developed PC games, including the Warcraft, Diablo and StarCraft series. The Company offers engaging online games, including MMORPGs and its self-developed online community game, The9 City. Its other products and services include game operating support, Website solutions and advertisement services, short message service (SMS) and sales of its Pass9 system. The9 has licenses to operate or own seven MMORPGs in China, which include WoW, MU, Granado Espada, Soul of the Ultimate Nation (SUN), Guild Wars, Joyful Journey West and Hellgate: London. The Company's users can access its MMORPGs from any location with an Internet connection. Substantially all of its users in China access the game servers either from PCs at home or Internet cafe outlets equipped with multiple personal computers that have Internet access. A significant portion of its users access the game through Internet cafes throughout China, which sell game playing time to their customers. The9's other products and services mainly consist of its online virtual community named The9 City, its game operating support, Website solutions and advertisement services, SMS service and sales of its Pass9 system. As of December, The9 City, its online virtual community game, had close to 65 million registered users. The Company's game operating support, Website solutions and advertisement services primarily relate to providing game operating support to 9Webzen in connection with operating MU in China. Its game operating support services to 9Webzen include payment collection and processing, user membership management, production of prepaid cards and other online game related technical support in connection with the operation of MU in China. It offers several different SMS products and subscription packages that enable users to, among other things, transmit and receive SMS messages, receive password protection and other value-added services. Pass9 is the Company's integrated membership management and payment system.
The year 2007 was a banner year for China’s online games industry and 2008 is expected to be just as robust. China’s online games market pulled in an impressive $1.66 billion in 2007, up 60%.Successful online games can be highly profitable. Revenues in 2007 were driven by compelling and diverse game content, free-to-play games, and rising demand for leisure and technology products. The9 with revenues up 30% to $175M since the beginning of the year was mainly due to its operation of U.S. publisher Blizzard’s World of Warcraft. In addition to WoW, The9 also launched two new MMO games recently, employing a free-to-play item-sales business model: Soul of The Ultimate Nation (SUN), and Granado Espada (GE). SUN had 180,000 Active Paying Accounts by the end of the 1Q of 2008, which on average generated $8.27 per person-per month. Heading through 2008, $21.4M of total monthly revenues are anticipated for these three MMO games operated by The9 in China, with the WoW at $16.2M per month using a subscription-based business model, the SUN at $1.5M per month using a free-to-play item-sales business model, and GE at $3.7M per month using a free-to-play item-sales business model.
This market will continue to grow, as forecasters foresee the online games market in China to exceed $3B in 2010. This business, not just in China, is booming, growing far faster than anyone predicted, as it makes the transition to being popular entertainment for the masses. While the industry is still at its very beginning, it will grow to be bigger than movies and TV combined as it leverages its key advantages of interactivity, connectivity and non linearity. Casual gaming is huge and probably growing faster than any other area of gaming. The ability to just drop in and spend a little time having fun then log out and get on with the rest of your life is very convenient. There are 200+ million people who play online casual games every month, both downloadable and browser games. Games are cheap to develop using Flash but the average quality is still very low, something that will change as the market matures. Revenue can come from advertising, premier membership and micro-payments. This business can only grow and grow and is well worth investing in, just make sure that you put a marketing effort behind your games on these services, you can’t expect good sales otherwise. Tin fact, these games are smaller and easier to make then their full price boxed equivalent and the revenue stream is steady over a long period rather than spectacular gains over a shorter life.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
The9 Limited, incorporated in December 1999, is an online game operator in China. The Company's business is primarily focused on operating massively multiplayer online role-playing games (MMORPGs), including World of Warcraft (WoW) and other games in China. WoW is a full-view, three-dimensional MMORPG developed by Blizzard Entertainment, the game development studio of VUG, which has developed PC games, including the Warcraft, Diablo and StarCraft series. The Company offers engaging online games, including MMORPGs and its self-developed online community game, The9 City. Its other products and services include game operating support, Website solutions and advertisement services, short message service (SMS) and sales of its Pass9 system. The9 has licenses to operate or own seven MMORPGs in China, which include WoW, MU, Granado Espada, Soul of the Ultimate Nation (SUN), Guild Wars, Joyful Journey West and Hellgate: London. The Company's users can access its MMORPGs from any location with an Internet connection. Substantially all of its users in China access the game servers either from PCs at home or Internet cafe outlets equipped with multiple personal computers that have Internet access. A significant portion of its users access the game through Internet cafes throughout China, which sell game playing time to their customers. The9's other products and services mainly consist of its online virtual community named The9 City, its game operating support, Website solutions and advertisement services, SMS service and sales of its Pass9 system. As of December, The9 City, its online virtual community game, had close to 65 million registered users. The Company's game operating support, Website solutions and advertisement services primarily relate to providing game operating support to 9Webzen in connection with operating MU in China. Its game operating support services to 9Webzen include payment collection and processing, user membership management, production of prepaid cards and other online game related technical support in connection with the operation of MU in China. It offers several different SMS products and subscription packages that enable users to, among other things, transmit and receive SMS messages, receive password protection and other value-added services. Pass9 is the Company's integrated membership management and payment system.
The year 2007 was a banner year for China’s online games industry and 2008 is expected to be just as robust. China’s online games market pulled in an impressive $1.66 billion in 2007, up 60%.Successful online games can be highly profitable. Revenues in 2007 were driven by compelling and diverse game content, free-to-play games, and rising demand for leisure and technology products. The9 with revenues up 30% to $175M since the beginning of the year was mainly due to its operation of U.S. publisher Blizzard’s World of Warcraft. In addition to WoW, The9 also launched two new MMO games recently, employing a free-to-play item-sales business model: Soul of The Ultimate Nation (SUN), and Granado Espada (GE). SUN had 180,000 Active Paying Accounts by the end of the 1Q of 2008, which on average generated $8.27 per person-per month. Heading through 2008, $21.4M of total monthly revenues are anticipated for these three MMO games operated by The9 in China, with the WoW at $16.2M per month using a subscription-based business model, the SUN at $1.5M per month using a free-to-play item-sales business model, and GE at $3.7M per month using a free-to-play item-sales business model.
This market will continue to grow, as forecasters foresee the online games market in China to exceed $3B in 2010. This business, not just in China, is booming, growing far faster than anyone predicted, as it makes the transition to being popular entertainment for the masses. While the industry is still at its very beginning, it will grow to be bigger than movies and TV combined as it leverages its key advantages of interactivity, connectivity and non linearity. Casual gaming is huge and probably growing faster than any other area of gaming. The ability to just drop in and spend a little time having fun then log out and get on with the rest of your life is very convenient. There are 200+ million people who play online casual games every month, both downloadable and browser games. Games are cheap to develop using Flash but the average quality is still very low, something that will change as the market matures. Revenue can come from advertising, premier membership and micro-payments. This business can only grow and grow and is well worth investing in, just make sure that you put a marketing effort behind your games on these services, you can’t expect good sales otherwise. Tin fact, these games are smaller and easier to make then their full price boxed equivalent and the revenue stream is steady over a long period rather than spectacular gains over a shorter life.
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Monday, May 19, 2008
BetterTrades looks at Excel Maritime Carriers Ltd. - May 19, 2008
Greek dry bulk carrier Excel Maritime Carriers Ltd. (EXM) announced early this morning that the company more than tripled their net income, beating market expectations, helped by higher freight rates and increased spot market exposure. The company increased its spot market deployment for the current quarter to 581 days from 414 days, thereby benefiting from a strong spot freight environment. For the 1Q, the shipping company earned $38.5M, or $1.93 a share, compared with $12.3M, or $0.61 a share, a year ago. Voyage revenues almost doubled to $69.5M, while revenues from operations, which include revenues from managing related party vessel, surged to $69.8M. Analysts, on average, were expecting earnings of $1.78, excluding items, on revenues of $61.5M. Excel Maritime, which completed the acquisition of Quintana Maritime Ltd, said that the 1Q results do not include that of Quintana. Shares of the company plummeted nearly 7%, or $4.01, to $53.71 in trading.
Excel Maritime Carriers Ltd., incorporated in November, 1988, is a shipping company and a provider of worldwide sea-born transportation services for dry bulk cargo, including among others, iron ore, coal and grain, collectively referred to as major bulks, and steel products, fertilizers, cement, bauxite, sugar and scrap metal, collectively referred to as minor bulks. The Company's fleet consists of 17 dry bulk carriers, ten Panamax and seven Handymax vessels, representing a carrying capacity of approximately 1,005,000 dead weight tons. The average age of Excel's vessels was 13.8 years. The Company's fleet is managed by its wholly owned subsidiary, Maryville Maritime Inc, and in April 2008, Excel completed the acquisition of Quintana Maritime Limited. As a result of the merger, Quintana will operate as a wholly owned subsidiary of Excel under the name, Bird Acquisition Corp. The Company owns each of its vessels through separate wholly owned subsidiaries incorporated in Liberia and Cyprus. In addition, Excel owns a 75% interest in Oceanaut Inc., a development-stage company. Oceaunaut was formed to acquire, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, vessels or one or more operating businesses in the shipping industry. During the past year, Excel derived approximately 45% of its gross revenues from five charterers, which were Daeyang Shipping Co., Ltd (15%), Fratelli D'Amato SpA (9%), Perseveranza Di Navigazione Spa (8%), Oldendorff Carriers GMBH and Co KG (7%) and Rizzo Bottiglieri De Carlini Armatori Spa (6%). The Company has also established companies to acquire vessels, which include Magalie Investments Corp., Melba Management Ltd., Minta Holdings S.A., Odell International Ltd. and Naia Development Corp.
While investors are, for the most part, preoccupied with all the glamour and glitz of high flying internet and gadget stocks, the shippers have been quietly steaming ahead. As they expand their fleets to accommodate growing demand, coupled with higher rates, revenues in general and earnings in particular should continue to outpace the energy sector. Today, the shipping sector is less volatile than the mining sector that could face a severe price correction for commodities that are not truly in short supply. Even at lower prices, commodities still need to be shipped and the dry bulk segment should make out just fine. The tanker stocks that enjoyed a tremendous increase in 2006, 2007 and the first half of 2008 have sold off somewhat with the rest of the market, but their profits keep climbing higher and higher. Most of the stocks in this group, including Excel, are selling at single digit trailing and next year P/E Ratio, while their earnings are growing at a double and triple digit rate. As for Excel Maritime, their trailing P/E is currently at 14, while their forward looking P/E is, as stated above, only 9.5, along with the company’s quarterly earnings growth is 265% year-over-year.
In October of 2007, Excel announced that it was offering "qualified institutional investors" $100M in convertible senior notes with a $25M over allotment cover. The notes pay a delightful 1.875% interest per annum. The catch is that these notes are convertible to common stock at a valuation of $91.30 per share. Also, the longer it takes for EXM to convert the notes, the more shares are issued per face value. There is certainly more to this than just concluding that EXM shares are being valued at $91.30. Also, investors can not cash-out without EXM's blessing so the common shareholders are protected. EXM is using the proceeds to pay down debt and acquire two new Supramax ships expected to be in service during the beginning of 2008. This alone, will increase EXM's tonnage capacity by 11%. Revenues, based on the new acquisitions, are anticipated to increase in 2008 along with lower interest payments on lower debt should boost yearly earnings 35% to 40% year-over-year. The industry has a lot of potential as demand for metals and grains have skyrocketed and the supply of ships to haul them is limited. The result is pricing leverage for the companies operating within the oceanic shipping industry. The rates paid to these companies are often locked in with forward contracts. With global trade expanding in accordance with universal expansion theory, China alone can provide enough momentum to keep this industry healthy for years to come.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Excel Maritime Carriers Ltd., incorporated in November, 1988, is a shipping company and a provider of worldwide sea-born transportation services for dry bulk cargo, including among others, iron ore, coal and grain, collectively referred to as major bulks, and steel products, fertilizers, cement, bauxite, sugar and scrap metal, collectively referred to as minor bulks. The Company's fleet consists of 17 dry bulk carriers, ten Panamax and seven Handymax vessels, representing a carrying capacity of approximately 1,005,000 dead weight tons. The average age of Excel's vessels was 13.8 years. The Company's fleet is managed by its wholly owned subsidiary, Maryville Maritime Inc, and in April 2008, Excel completed the acquisition of Quintana Maritime Limited. As a result of the merger, Quintana will operate as a wholly owned subsidiary of Excel under the name, Bird Acquisition Corp. The Company owns each of its vessels through separate wholly owned subsidiaries incorporated in Liberia and Cyprus. In addition, Excel owns a 75% interest in Oceanaut Inc., a development-stage company. Oceaunaut was formed to acquire, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, vessels or one or more operating businesses in the shipping industry. During the past year, Excel derived approximately 45% of its gross revenues from five charterers, which were Daeyang Shipping Co., Ltd (15%), Fratelli D'Amato SpA (9%), Perseveranza Di Navigazione Spa (8%), Oldendorff Carriers GMBH and Co KG (7%) and Rizzo Bottiglieri De Carlini Armatori Spa (6%). The Company has also established companies to acquire vessels, which include Magalie Investments Corp., Melba Management Ltd., Minta Holdings S.A., Odell International Ltd. and Naia Development Corp.
While investors are, for the most part, preoccupied with all the glamour and glitz of high flying internet and gadget stocks, the shippers have been quietly steaming ahead. As they expand their fleets to accommodate growing demand, coupled with higher rates, revenues in general and earnings in particular should continue to outpace the energy sector. Today, the shipping sector is less volatile than the mining sector that could face a severe price correction for commodities that are not truly in short supply. Even at lower prices, commodities still need to be shipped and the dry bulk segment should make out just fine. The tanker stocks that enjoyed a tremendous increase in 2006, 2007 and the first half of 2008 have sold off somewhat with the rest of the market, but their profits keep climbing higher and higher. Most of the stocks in this group, including Excel, are selling at single digit trailing and next year P/E Ratio, while their earnings are growing at a double and triple digit rate. As for Excel Maritime, their trailing P/E is currently at 14, while their forward looking P/E is, as stated above, only 9.5, along with the company’s quarterly earnings growth is 265% year-over-year.
In October of 2007, Excel announced that it was offering "qualified institutional investors" $100M in convertible senior notes with a $25M over allotment cover. The notes pay a delightful 1.875% interest per annum. The catch is that these notes are convertible to common stock at a valuation of $91.30 per share. Also, the longer it takes for EXM to convert the notes, the more shares are issued per face value. There is certainly more to this than just concluding that EXM shares are being valued at $91.30. Also, investors can not cash-out without EXM's blessing so the common shareholders are protected. EXM is using the proceeds to pay down debt and acquire two new Supramax ships expected to be in service during the beginning of 2008. This alone, will increase EXM's tonnage capacity by 11%. Revenues, based on the new acquisitions, are anticipated to increase in 2008 along with lower interest payments on lower debt should boost yearly earnings 35% to 40% year-over-year. The industry has a lot of potential as demand for metals and grains have skyrocketed and the supply of ships to haul them is limited. The result is pricing leverage for the companies operating within the oceanic shipping industry. The rates paid to these companies are often locked in with forward contracts. With global trade expanding in accordance with universal expansion theory, China alone can provide enough momentum to keep this industry healthy for years to come.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, May 16, 2008
BetterTrades looks at Ambercrombie & Fitch Co. - May 16, 2008
Teen retailer Abercrombie & Fitch Co. (ANF) made it known Friday that the company’s 1Q earnings edged up 3% from a year ago on stronger sales. Abercrombie confirmed that they earned $62.1M, or $0.69 per share, in the past three months compared with profits of $60.1M, or $0.65 a share, a year ago. Sales for the company climbed 8% to $800.1M from $742.4M last year, but sales at stores open at least a year dropped 3%. Analysts following the company expected profits of $0.66 a share on sales of $810M. The company's modest earnings growth is in contrast to the earnings declines posted Thursday by several department store chains. J.C. Penney Co.'s (JCP) 1Q profits slipped by nearly half compared to a year ago, while Kohl's Inc.'s (KSS) results were down nearly 27% along with Nordstrom Inc. (JWN) reporting a 24% decline. On Wednesday, Macy's Inc. (M) posted a $59M loss for their recent quarter. Abercrombie also announced last week that they will add a second flagship store in Europe, opening a store in Copenhagen, Denmark, by 2009. Abercrombie already has a store in London and says it is securing locations for stores in Italy, France, Germany, Spain and Sweden. The company plans to open a store in Tokyo, also by late 2009. The company on Friday reaffirmed that it expects earnings for the first half of its 2008 fiscal year to come in within a range of $1.61 to $1.65 per share, representing a 5% to 8% increase from a year ago, while analysts are looking for a first-half profit of $1.61 per share. In Friday’s trading, Abercrombie shares gained $0.11, or 0.1%, to $76.19 after rising as high as $77.24 earlier in the session.
Abercrombie & Fitch Co., incorporated in 1996, through its subsidiaries, is a specialty retailer that operates stores and Websites selling casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products and accessories for men, women and kids under the Abercrombie & Fitch, Abercrombie, Hollister and RUEHL brands. In addition, the Company operates stores under the Gilly Hicks brand offering bras, underwear, personal care products, and sleepwear and at-home products for women. As of February 2008, the Company operated 1,035 stores in the United States, Canada and the United Kingdom. The Company's operating segments are Abercrombie & Fitch, Abercrombie, Hollister, RUEHL and Gilly Hicks. Targeted at 18 to 22 year-old males and females, the Abercrombie & Fitch brand is rooted in East Coast traditions and Ivy League heritage. The Adirondacks supply a clean and rugged inspiration to this youthful All-American lifestyle. Targeted at seven to 14 year-old boys and girls, the Abercrombie brand has the essence of privilege and prestigious East Coast prep schools. Abercrombie directly follows in the footsteps of Abercrombie & Fitch. Targeted at 14 to 18 year-old guys (dudes) and girls (bettys), Hollister is the fantasy of Southern California. Targeted at 22 to 35 year-old men and women, RUEHL is the post-grad that has arrived in Greenwich Village, New York City to live the dream. Targeted at 14 to 35 year-old women, Gilly Hicks is the cheeky cousin of Abercrombie & Fitch, inspired by the free spirit of Sydney, Australia. The Company operates Web-based stores for the Abercrombie & Fitch, Abercrombie, Hollister and RUEHL brands located at their Websites, www.Abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.RUEHL.com, respectively. Products offered at individual stores can be purchased through the respective Websites. Each of the four Websites reinforces the particular brand's lifestyle and is designed to complement the in-store experience.
Abercrombie & Fitch seems to have a strong enough brand to achieve significant success in international markets. ANF's first European venture charges twice as much as U.S. stores, and has sales of about $4500 per square foot, matching its main shop on New York's Fifth Avenue. A higher initial markup helped to drive 80 basis-points of gross margin expansion year over year. These developments speak volumes as to the company’s investments help to improve processes and internal operating functions. Based on early international success, Abercrombie has been laying the foundation for an accelerated international expansion and some analysts are predicting that international could account for 25% of the company's sales within five years. Now that international expansion opportunities are becoming a component of the Abercrombie story, investments in the business are yielding noticeable improvements in their fundamental business processes, for example inventory was down 25% in their 4Q of 2007. Analysts have mentioned that they are pretty confident in the stock hitting $91 by the conclusion of 2008.
Abercrombie also has a variety of other positive things going for it. For example, ANF has $650M in cash on its balance sheet, out of $2.5B in total assets, and it generates a free cash flow yield of around 5%. Also, ANF has a dividend yield of 1%, and it will likely use its excess cash to increase the yield along with repurchasing some of their outstanding shares. Currently, ANF trades at 14.6 times 2009 estimates, which is a small discount to its historical average of approximately 15. ANF also has operating margins around 20%, which is considerably better than the industry average of only 5%. Abercrombie & Fitch has consistently managed to keep the pulse of youthful fashion, making Abercrombie's clothes 'must-have' for generation Y, even at a premium price. With cool store layouts and sexy, successful marketing, Abercrombie has achieved 67% margins. Despite aggressive pricing, customers just can't get enough. Fiscal 2007 earnings surged an impressive 13% to $5.20/share, despite the difficult retail environment. Even though Abercrombie predicts slower sales, 5% to 8%, in first half of '08, analysts are forecasting $6.90/share in earnings. Upside possibilities include phenomenal international sales, but which still only account for 3% of ANF's $3.75B sales annually. With all that being said, the company appears to be undervalued, and it will be interesting to watch them over the coming year and beyond.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Abercrombie & Fitch Co., incorporated in 1996, through its subsidiaries, is a specialty retailer that operates stores and Websites selling casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products and accessories for men, women and kids under the Abercrombie & Fitch, Abercrombie, Hollister and RUEHL brands. In addition, the Company operates stores under the Gilly Hicks brand offering bras, underwear, personal care products, and sleepwear and at-home products for women. As of February 2008, the Company operated 1,035 stores in the United States, Canada and the United Kingdom. The Company's operating segments are Abercrombie & Fitch, Abercrombie, Hollister, RUEHL and Gilly Hicks. Targeted at 18 to 22 year-old males and females, the Abercrombie & Fitch brand is rooted in East Coast traditions and Ivy League heritage. The Adirondacks supply a clean and rugged inspiration to this youthful All-American lifestyle. Targeted at seven to 14 year-old boys and girls, the Abercrombie brand has the essence of privilege and prestigious East Coast prep schools. Abercrombie directly follows in the footsteps of Abercrombie & Fitch. Targeted at 14 to 18 year-old guys (dudes) and girls (bettys), Hollister is the fantasy of Southern California. Targeted at 22 to 35 year-old men and women, RUEHL is the post-grad that has arrived in Greenwich Village, New York City to live the dream. Targeted at 14 to 35 year-old women, Gilly Hicks is the cheeky cousin of Abercrombie & Fitch, inspired by the free spirit of Sydney, Australia. The Company operates Web-based stores for the Abercrombie & Fitch, Abercrombie, Hollister and RUEHL brands located at their Websites, www.Abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.RUEHL.com, respectively. Products offered at individual stores can be purchased through the respective Websites. Each of the four Websites reinforces the particular brand's lifestyle and is designed to complement the in-store experience.
Abercrombie & Fitch seems to have a strong enough brand to achieve significant success in international markets. ANF's first European venture charges twice as much as U.S. stores, and has sales of about $4500 per square foot, matching its main shop on New York's Fifth Avenue. A higher initial markup helped to drive 80 basis-points of gross margin expansion year over year. These developments speak volumes as to the company’s investments help to improve processes and internal operating functions. Based on early international success, Abercrombie has been laying the foundation for an accelerated international expansion and some analysts are predicting that international could account for 25% of the company's sales within five years. Now that international expansion opportunities are becoming a component of the Abercrombie story, investments in the business are yielding noticeable improvements in their fundamental business processes, for example inventory was down 25% in their 4Q of 2007. Analysts have mentioned that they are pretty confident in the stock hitting $91 by the conclusion of 2008.
Abercrombie also has a variety of other positive things going for it. For example, ANF has $650M in cash on its balance sheet, out of $2.5B in total assets, and it generates a free cash flow yield of around 5%. Also, ANF has a dividend yield of 1%, and it will likely use its excess cash to increase the yield along with repurchasing some of their outstanding shares. Currently, ANF trades at 14.6 times 2009 estimates, which is a small discount to its historical average of approximately 15. ANF also has operating margins around 20%, which is considerably better than the industry average of only 5%. Abercrombie & Fitch has consistently managed to keep the pulse of youthful fashion, making Abercrombie's clothes 'must-have' for generation Y, even at a premium price. With cool store layouts and sexy, successful marketing, Abercrombie has achieved 67% margins. Despite aggressive pricing, customers just can't get enough. Fiscal 2007 earnings surged an impressive 13% to $5.20/share, despite the difficult retail environment. Even though Abercrombie predicts slower sales, 5% to 8%, in first half of '08, analysts are forecasting $6.90/share in earnings. Upside possibilities include phenomenal international sales, but which still only account for 3% of ANF's $3.75B sales annually. With all that being said, the company appears to be undervalued, and it will be interesting to watch them over the coming year and beyond.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, May 15, 2008
BetterTrades looks at Melco PBL Entertainment Ltd. - May 15, 2008
Melco PBL Entertainment Ltd. (MPEL), a developer and owner of casinos and resorts in Macau, made it known Thursday that the company posted a 1Q profit, helped by strong results from its Crown Macau property. The Hong Kong Company reported earnings of $43.2M, or $0.03 per share, compared with a loss of $27.2M, or $0.02 per share, a year earlier. For the period ended March 31st, the company’s sales, after promotional allowances, soared to $482.9M from $20.3M, due in large part to the Crown Macau opening in May of 2007. The firm’s total revenues were more than double the $179.8M posted in the 4Q of last year, which Melco credited to the Crown Macau's improved operating performance. In the quarter, Melco benefited from better-than-expected table game hold percentage, which equates to the amount of betting chips that casinos win. Hold percentage was 3.1%, higher than the 2.4% in the previous quarter and above Melco's expected long-term average of 2.7%. Shares of Melco PBL Entertainment lost ground today, falling $0.64, or 4.5%, to $13.62 in trading. The stock closed at $14.26 on Wednesday.
Melco PBL Entertainment Limited, through its subsidiaries, engages in the development, ownership, and operation of casino gaming and entertainment resort facilities in Macau. It owns and operates Crown Macau resort that features a casino area of approximately 183,000 square feet with a total of 240 gaming tables and 240 gaming machines, as well as hotel rooms, fine dining and casual restaurants, recreation and leisure facilities, and meeting facilities; Mocha Clubs, which provide single player machines with various games, including progressive jackpots; and multi-player games where players on linked machines play against each other in electronic roulette, baccarat, and sicbo. As of December, 2007, the company operated seven Mocha Clubs in Macau with a total of approximately 1,100 gaming machines. In addition, Melco PBL is developing City of Dreams project, an integrated urban entertainment resort, combining casino with hotel offerings, entertainment venues, a performance theatre, retail, and food and beverage outlets. The company, formerly known as Melco PBL Holdings Limited, is based in Central, Hong Kong and currently employs nearly 5,000 people. Additionally, MPBL Entertainment has entered into an agreement with New Cotai Entertainment and New Cotai Entertainment, LLC, under which MPBL Gaming will operate the casino portions of the Macau Studio City project, a large scale integrated gaming, retail and entertainment resort development. The project is being developed by a joint venture between eSun Holdings Limited and New Cotai Holdings, LLC, which is primarily owned by investment funds and David Friedman, a former senior executive of Las Vegas Sands.
So far in 2008, gaming stocks have been negative across the board. The stock prices of many top quality U.S. hotel & casino operators have dropped significantly. However, Melco is a pure play on Macau which has done very well after a poor 2007. Melco went public in 2006 and also sold another round of shares in 2007 to raise additional funds for building new casinos. The company is one of six companies to hold a gaming concession or sub-concession in Macau and they currently hold a sub-concession from Wynn (WYNN) Macau. In the 2007 annual report, the company had $835M in cash and $616M in debt. The company increased revenues from $36M in 2006 to $358M in 2007, but Melco has posted a loss per share last year on double the number of shares it had outstanding in 2006. To date, Melco has been one of the best-performing casino stocks this year, as the company's single casino, the Crown Macau, has come to dominate the VIP market in the Asian gambling region of Macau. In past years, casino revenues were much more concentrated than they are now. Most of a casino operator’s revenue came from gaming operations, not hotel, restaurant & bar, retail, and other non-gaming functions. Today, an ever-increasing amount of casino revenue comes from non-gaming activities. Increasing room rates, expensive restaurants and nightclubs, and high-end retail have added to bottom lines. All these things have also helped to transform casinos into luxury escapist vacation destinations in many cases.
The company's newest casino, City of Dreams, is scheduled to open phase one in the first half of 2009. The casino will have 420,000 square feet of gaming space and the property will also have three hotels with 300, 330, and 800 rooms respectively. The company also has development plans for a casino on the Macau Peninsula. Eventually the company would then own three casinos in Macau, which would increase its market share, setup the possibility for a partnership, or a possible buyout. Recently the Macau gaming commission has announced that they will not hand out any more gaming licenses in Macau until research is done which makes Melco's sub concession very valuable. If the property can continue to operate at the impressive levels of the 1Q, then Melco is set to surpass earnings estimates this year. However, the noise of the hold percentage means results could be volatile going forward.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Melco PBL Entertainment Limited, through its subsidiaries, engages in the development, ownership, and operation of casino gaming and entertainment resort facilities in Macau. It owns and operates Crown Macau resort that features a casino area of approximately 183,000 square feet with a total of 240 gaming tables and 240 gaming machines, as well as hotel rooms, fine dining and casual restaurants, recreation and leisure facilities, and meeting facilities; Mocha Clubs, which provide single player machines with various games, including progressive jackpots; and multi-player games where players on linked machines play against each other in electronic roulette, baccarat, and sicbo. As of December, 2007, the company operated seven Mocha Clubs in Macau with a total of approximately 1,100 gaming machines. In addition, Melco PBL is developing City of Dreams project, an integrated urban entertainment resort, combining casino with hotel offerings, entertainment venues, a performance theatre, retail, and food and beverage outlets. The company, formerly known as Melco PBL Holdings Limited, is based in Central, Hong Kong and currently employs nearly 5,000 people. Additionally, MPBL Entertainment has entered into an agreement with New Cotai Entertainment and New Cotai Entertainment, LLC, under which MPBL Gaming will operate the casino portions of the Macau Studio City project, a large scale integrated gaming, retail and entertainment resort development. The project is being developed by a joint venture between eSun Holdings Limited and New Cotai Holdings, LLC, which is primarily owned by investment funds and David Friedman, a former senior executive of Las Vegas Sands.
So far in 2008, gaming stocks have been negative across the board. The stock prices of many top quality U.S. hotel & casino operators have dropped significantly. However, Melco is a pure play on Macau which has done very well after a poor 2007. Melco went public in 2006 and also sold another round of shares in 2007 to raise additional funds for building new casinos. The company is one of six companies to hold a gaming concession or sub-concession in Macau and they currently hold a sub-concession from Wynn (WYNN) Macau. In the 2007 annual report, the company had $835M in cash and $616M in debt. The company increased revenues from $36M in 2006 to $358M in 2007, but Melco has posted a loss per share last year on double the number of shares it had outstanding in 2006. To date, Melco has been one of the best-performing casino stocks this year, as the company's single casino, the Crown Macau, has come to dominate the VIP market in the Asian gambling region of Macau. In past years, casino revenues were much more concentrated than they are now. Most of a casino operator’s revenue came from gaming operations, not hotel, restaurant & bar, retail, and other non-gaming functions. Today, an ever-increasing amount of casino revenue comes from non-gaming activities. Increasing room rates, expensive restaurants and nightclubs, and high-end retail have added to bottom lines. All these things have also helped to transform casinos into luxury escapist vacation destinations in many cases.
The company's newest casino, City of Dreams, is scheduled to open phase one in the first half of 2009. The casino will have 420,000 square feet of gaming space and the property will also have three hotels with 300, 330, and 800 rooms respectively. The company also has development plans for a casino on the Macau Peninsula. Eventually the company would then own three casinos in Macau, which would increase its market share, setup the possibility for a partnership, or a possible buyout. Recently the Macau gaming commission has announced that they will not hand out any more gaming licenses in Macau until research is done which makes Melco's sub concession very valuable. If the property can continue to operate at the impressive levels of the 1Q, then Melco is set to surpass earnings estimates this year. However, the noise of the hold percentage means results could be volatile going forward.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, May 14, 2008
BetterTrades looks at ReneSola Ltd. - May 14, 2008
Shares of Chinese solar wafer maker ReneSola Ltd. (SOL) advanced Wednesday after the company made it known that their 1Q profits nearly tripled, boosted by the firm’s increased production. The company earned $17.7M or $0.28 per American Depositary Shares (ADS) for the three months ending March 31st, compared with $6.8M, or $0.14 per ADS, in the year-ago quarter. ReneSola, during the most recent quarter, had about 124.5 million shares outstanding in 2008, versus 100.8 million in the same period in 2007. Revenues for the company leaped to $123M, from $35.9M a year earlier, while analysts, on average, were expecting revenues of $105.9M. The company stated that their quarterly production soared to 66.5 megawatts, compared with 15.3 megawatts in the 1Q of 2007. ReneSola, based on the recent jump, now expects wafer production capacity to increase to 1,000 megawatts by the end of 2009. In addition to a marvelous earnings report, the company also announced today that they have signed a six-year 525 megawatt wafer supply agreement with Gintech Energy Corporation. Under the terms of the agreement, ReneSola will supply Gintech with 525 MW of solar wafers over a six-year period commencing in mid-2008. Gintech is a leading manufacturer of solar cells and is a publicly traded company on the Taiwan Stock Exchange. The recent wafer supply agreement with Gintech demonstrates the company’s commitment to expanding ReneSola's reach within key markets and strengthening their base of long-term customers. Gintech's fast growth and well-known manufacturing capabilities will contribute to a diversified customer base as ReneSola increases their wafer production output. Shares (ADS) of ReneSola rallied today, trading up $0.63, or 2.9%, to $22.30 in Wednesday’s trading, after hitting a 52-week high of $24.50 shortly after the opening bell.
ReneSola Ltd., incorporated in March 2006, is a manufacturer of solar wafers, which are thin sheets of crystalline silicon material primarily used in the production of solar cells. The Company and its subsidiaries are engaged in the manufacture and sale of solar wafers and related products, which are integrated into photovoltaic cells, the principal component of crystalline solar panels. ReneSola offers monocrystalline wafers in sizes of 125 millimeter by 125 millimeter with a thickness of 200 microns and 156 millimeter by 156 millimeter with the same thickness at customers' requests, which are two of the standard specifications used by most solar cell manufacturers. The Company began the production of 156 millimeter by 156 millimeter multicrystalline wafers with a thickness of 220 microns in 2007. The Company's customers include global manufacturers of solar cells and modules, such as JA Solar Co. (JASO), Motech Industries Inc., Solarfun Power Holding Ltd. (SOLF), Suntech Power Co. Ltd. (STP) and Topco Technologies Corp. As of December, 2007, ReneSola had annual manufacturing capacity of approximately 378 megawatt, consisting of monocrystalline manufacturing capacity of approximately 218 megawatt and multicrystalline manufacturing capacity of approximately 160 megawatt, and solar wafer manufacturing capacity of approximately 305 megawatt. The manufacture of solar wafers can be divided into three main steps: treatment of reclaimable silicon raw materials, panel production, and wafer slicing. ReneSola produces solar wafers using reclaimable silicon raw materials, in the form of partially processed and broken wafers, broken solar cells, pot scrap, silicon powder, ingot tops and tails and other off-cuts. The Company primarily uses semiconductor-grade reclaimable silicon. Its wholly owned subsidiaries include Zhejiang Yuhui Solar Energy Co Ltd., ReneSola America Inc. and ReneSola Singapore Pte Ltd.
Back in late-January of this year, ReneSola became a publicly traded company. The ReneSola sale was a secondary offering for the company, which already trades on London's Alternative Investment Market, or AIM, a sub-market of the London Stock Exchange. It opened at $13 on the New York Stock Exchange but closed the day effectively flat at $12.99. However, the offering raised more than $130M which was used to expand its wafer manufacturing and to invest in a polysilicon manufacturing lines. Shortly after the company’s IPO, the stock traded on the downside, falling lower than $8 a share. But the stock didn’t stay there for long. In the following three weeks, after hitting their low $7.36, shares of SOL shot up 74%. ReneSola is an attractive company because they are one of the few low-cost manufacturers in the industry, and they have also secured long-term supply contracts and have an impressive list of customers. Additionally, they are under-promoted and are not nearly as well known as their counterparts in the solar industry and amongst U.S. investors in particular.
The future is bright indeed, with some analysts setting a price target of $25 or more by the end of 2008. Although ReneSola stock is starting to look overbought with a RSI over 80, and if the stock market can hold and break through its current levels of resistance, right around the 13,000 mark, then there is a strong possibility that solar stocks, including ReneSola, will continue upward and outperform all other sectors. Despite all the promising signs for the company, they do face certain challenges within their industry. The most significant risk they face is that most of the silicon it uses to create its wafers is recycled from waste acquired from semiconductor industry sources. Demand for this recycled raw material is growing, and ReneSola gets its supply from a very limited number of sources. Competing for this supply are several other large wafer makers. Without much doubt, the Chinese economy holds much promise. It is a secular growth story, as both production capacity and consumer demand will continue to increase. Chinese stocks, taken as a whole, are quite promising as a very long-term investment theme.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
ReneSola Ltd., incorporated in March 2006, is a manufacturer of solar wafers, which are thin sheets of crystalline silicon material primarily used in the production of solar cells. The Company and its subsidiaries are engaged in the manufacture and sale of solar wafers and related products, which are integrated into photovoltaic cells, the principal component of crystalline solar panels. ReneSola offers monocrystalline wafers in sizes of 125 millimeter by 125 millimeter with a thickness of 200 microns and 156 millimeter by 156 millimeter with the same thickness at customers' requests, which are two of the standard specifications used by most solar cell manufacturers. The Company began the production of 156 millimeter by 156 millimeter multicrystalline wafers with a thickness of 220 microns in 2007. The Company's customers include global manufacturers of solar cells and modules, such as JA Solar Co. (JASO), Motech Industries Inc., Solarfun Power Holding Ltd. (SOLF), Suntech Power Co. Ltd. (STP) and Topco Technologies Corp. As of December, 2007, ReneSola had annual manufacturing capacity of approximately 378 megawatt, consisting of monocrystalline manufacturing capacity of approximately 218 megawatt and multicrystalline manufacturing capacity of approximately 160 megawatt, and solar wafer manufacturing capacity of approximately 305 megawatt. The manufacture of solar wafers can be divided into three main steps: treatment of reclaimable silicon raw materials, panel production, and wafer slicing. ReneSola produces solar wafers using reclaimable silicon raw materials, in the form of partially processed and broken wafers, broken solar cells, pot scrap, silicon powder, ingot tops and tails and other off-cuts. The Company primarily uses semiconductor-grade reclaimable silicon. Its wholly owned subsidiaries include Zhejiang Yuhui Solar Energy Co Ltd., ReneSola America Inc. and ReneSola Singapore Pte Ltd.
Back in late-January of this year, ReneSola became a publicly traded company. The ReneSola sale was a secondary offering for the company, which already trades on London's Alternative Investment Market, or AIM, a sub-market of the London Stock Exchange. It opened at $13 on the New York Stock Exchange but closed the day effectively flat at $12.99. However, the offering raised more than $130M which was used to expand its wafer manufacturing and to invest in a polysilicon manufacturing lines. Shortly after the company’s IPO, the stock traded on the downside, falling lower than $8 a share. But the stock didn’t stay there for long. In the following three weeks, after hitting their low $7.36, shares of SOL shot up 74%. ReneSola is an attractive company because they are one of the few low-cost manufacturers in the industry, and they have also secured long-term supply contracts and have an impressive list of customers. Additionally, they are under-promoted and are not nearly as well known as their counterparts in the solar industry and amongst U.S. investors in particular.
The future is bright indeed, with some analysts setting a price target of $25 or more by the end of 2008. Although ReneSola stock is starting to look overbought with a RSI over 80, and if the stock market can hold and break through its current levels of resistance, right around the 13,000 mark, then there is a strong possibility that solar stocks, including ReneSola, will continue upward and outperform all other sectors. Despite all the promising signs for the company, they do face certain challenges within their industry. The most significant risk they face is that most of the silicon it uses to create its wafers is recycled from waste acquired from semiconductor industry sources. Demand for this recycled raw material is growing, and ReneSola gets its supply from a very limited number of sources. Competing for this supply are several other large wafer makers. Without much doubt, the Chinese economy holds much promise. It is a secular growth story, as both production capacity and consumer demand will continue to increase. Chinese stocks, taken as a whole, are quite promising as a very long-term investment theme.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, May 13, 2008
BetterTrades looks at GigaMedia Ltd. - May 13, 2008
Online gaming company GigaMedia Ltd. (GIGM), made it known Tuesday that the company’s 1Q profits climbed on an increase in gaming software sales. Net profits for the firm increased 42% to $12.1M, or $0.20 per share, from $8.5M, or $0.14 per share, in the 1Q of 2007. Excluding one-time costs and gains, the Taiwan-based company made $0.21 per share compared with $0.15 per share last year. During the recent quarter, sales soared 51% to $54.6M from $36.1M, including an increased in gaming software and service revenues to $38.3M from $26.3M. The company stated that they had its strongest growth in its poker and casino software, while their online game and service sales jumped to $12.9M from $5.5M, as the company's FunTown casual games operation saw growth in Taiwan and Hong Kong. Internet access and service revenues, however, did decline to $3.4M from $4.5M. Looking ahead, GigaMedia Ltd. also stated Tuesday that the company anticipates 2Q sales to approximately match its $54.6M in sales in the 1Q, largely because of a seasonal slowdown. The company also reiterated that its outlook reflects industry-wide sales patterns during the summer months. However, it said the slowdown may be offset in part by product launches such as new poker formats and traditional Asian games. By the close of the markets today, shares of GIGM were up big, higher by 10.2%, or $1.79, at $19.26.
GigaMedia Limited, incorporated in September 1999, is a holding company that develops and licenses entertainment software and provides application services, owns and operates an online games portal and provides broadband Internet access services through its several subsidiaries. The Company's entertainment software business is operated through its subsidiary, Cambridge Entertainment Software Limited (CESL). Its Taiwan online casual games business is operated through Hoshin GigaMedia Center, Inc., while its’ Hong Kong and People's Republic of China online casual games business is operated through FunTown World Limited. Its Taiwan broadband Internet service provider (ISP) businesses are operated through its subsidiary, Hoshin GigaMedia, which focuses on consumer users, and Hoshin GigaMedia's subsidiary, Koos Broadband Telecom Co., Ltd., which focuses on corporate users. In June 2007, the Company acquired control over a majority of the voting rights of T2CN, an online game operator and distributor in the People’s Republic of China. In May of 2006, the Company entered into an asset purchase and sale agreement and a transition service agreement with Webs-TV Digital International Corporation to sell its asymmetrical digital subscriber line (ADSL) business and provide certain transition services. CESL develops and licenses software solutions and application services in the Internet-based entertainment markets. CESL can help clients expand geographically through language localization for products and services and their products and services are available in 16 languages, which include mostly European languages and some Asian languages. CESL can also help clients who license its software and services to expand their business through a customizable multi-tiered licensing program to a number of sub-licensees. FunTown offers a range of online casual games and services, which GigaMedia develops in-house or licenses from third parties. The online games offered by FunTown include MahJong and numerous varieties of card, chess and table games, most of which cater specifically to Asian audiences. As of May, 2007, FunTown had approximately 9.6 million registered members, and approximately 41,350 peak concurrent users and 20,500 average concurrent users. FunTown offers more than 40 online multi-player casual games in categories. These games are real-time and multi-player capable. FunTown's principal sources of revenue for online games are access fees and fees for sale of in-game items.
The company’s core business, Everest Poker, remained strong and the company has several initiatives in the works to boost revenues. GigaMedia has also signed a multi-year marketing agreement with the World Series of Poker and is planning to add more gambling options to the Everest Poker experience. On an annual basis, the company has grown revenues and profits at a 60% rate for the full-year of 2007. GIGM will offer sports betting with in the year. They are looking for a partner to bring sports wagering to their customers. This is a huge market and should bring significant revenues to the company. Additionally, Asia remain one of the growth markets for GigaMedia. The recent investment in the South Korea based XL Games Inc. and Neostorm will strengthen GIGM's pan-Asian gaming platform. Its exclusive three year license with Electronic Arts (ERTS), announced last November, to operate NBA Street Online in Hong Kong, Macau and Taiwan would help the company to tap the Olympics fervor in these markets. And finally, and this is a long shot, the company is preparing for the return of legal online poker in the U.S. Online gambling was outlawed in 2006, but the huge popularity of Poker in the U.S. plus broad TV coverage of poker tournaments could lead to its legalization again. If and/or when this happens, GIGM plans to be an early applicant. As the only U.S. listed, public company, they think they have an inside track on obtaining an online gambling license.
Currently sporting a P/E Ratio of 28.6 and a forward P/E of 16.7 this stock is cheap despite the recent run-up in share price. Considering its 54.8% year over year quarterly revenue growth, analyst predictions of 35% to 65% revenue growth over the next one to three years, and healthy 23.3% profit margins, the share price for GigaMedia is beginning to reflect current growth. But not ignoring the prospects which will emerge as the cell phone market continues to evolve and cell phone usage penetrates new markets, may turn into a revenue generator for GIGM. With debt manageable at $33M while sitting on nearly $80M in cash, GigaMedia will continue to thrive in the cell phone software market and is projected to generate $245M in revenues in 2008. This company has been growing revenue at close to triple digit rates, so a positive run in their stock price is a distinct possibility. However, the stock has done well over the last year but with some significant volatility along the way. GIGM may have huge growth ahead of it over the next few years. With GIGM in a growth mode, especially in the Asian online games platform, the company should continue to make further investments in game development studios and will also continue to license big title games. The recent initiatives indicate that GIGM is all set to move northwards from current levels.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
GigaMedia Limited, incorporated in September 1999, is a holding company that develops and licenses entertainment software and provides application services, owns and operates an online games portal and provides broadband Internet access services through its several subsidiaries. The Company's entertainment software business is operated through its subsidiary, Cambridge Entertainment Software Limited (CESL). Its Taiwan online casual games business is operated through Hoshin GigaMedia Center, Inc., while its’ Hong Kong and People's Republic of China online casual games business is operated through FunTown World Limited. Its Taiwan broadband Internet service provider (ISP) businesses are operated through its subsidiary, Hoshin GigaMedia, which focuses on consumer users, and Hoshin GigaMedia's subsidiary, Koos Broadband Telecom Co., Ltd., which focuses on corporate users. In June 2007, the Company acquired control over a majority of the voting rights of T2CN, an online game operator and distributor in the People’s Republic of China. In May of 2006, the Company entered into an asset purchase and sale agreement and a transition service agreement with Webs-TV Digital International Corporation to sell its asymmetrical digital subscriber line (ADSL) business and provide certain transition services. CESL develops and licenses software solutions and application services in the Internet-based entertainment markets. CESL can help clients expand geographically through language localization for products and services and their products and services are available in 16 languages, which include mostly European languages and some Asian languages. CESL can also help clients who license its software and services to expand their business through a customizable multi-tiered licensing program to a number of sub-licensees. FunTown offers a range of online casual games and services, which GigaMedia develops in-house or licenses from third parties. The online games offered by FunTown include MahJong and numerous varieties of card, chess and table games, most of which cater specifically to Asian audiences. As of May, 2007, FunTown had approximately 9.6 million registered members, and approximately 41,350 peak concurrent users and 20,500 average concurrent users. FunTown offers more than 40 online multi-player casual games in categories. These games are real-time and multi-player capable. FunTown's principal sources of revenue for online games are access fees and fees for sale of in-game items.
The company’s core business, Everest Poker, remained strong and the company has several initiatives in the works to boost revenues. GigaMedia has also signed a multi-year marketing agreement with the World Series of Poker and is planning to add more gambling options to the Everest Poker experience. On an annual basis, the company has grown revenues and profits at a 60% rate for the full-year of 2007. GIGM will offer sports betting with in the year. They are looking for a partner to bring sports wagering to their customers. This is a huge market and should bring significant revenues to the company. Additionally, Asia remain one of the growth markets for GigaMedia. The recent investment in the South Korea based XL Games Inc. and Neostorm will strengthen GIGM's pan-Asian gaming platform. Its exclusive three year license with Electronic Arts (ERTS), announced last November, to operate NBA Street Online in Hong Kong, Macau and Taiwan would help the company to tap the Olympics fervor in these markets. And finally, and this is a long shot, the company is preparing for the return of legal online poker in the U.S. Online gambling was outlawed in 2006, but the huge popularity of Poker in the U.S. plus broad TV coverage of poker tournaments could lead to its legalization again. If and/or when this happens, GIGM plans to be an early applicant. As the only U.S. listed, public company, they think they have an inside track on obtaining an online gambling license.
Currently sporting a P/E Ratio of 28.6 and a forward P/E of 16.7 this stock is cheap despite the recent run-up in share price. Considering its 54.8% year over year quarterly revenue growth, analyst predictions of 35% to 65% revenue growth over the next one to three years, and healthy 23.3% profit margins, the share price for GigaMedia is beginning to reflect current growth. But not ignoring the prospects which will emerge as the cell phone market continues to evolve and cell phone usage penetrates new markets, may turn into a revenue generator for GIGM. With debt manageable at $33M while sitting on nearly $80M in cash, GigaMedia will continue to thrive in the cell phone software market and is projected to generate $245M in revenues in 2008. This company has been growing revenue at close to triple digit rates, so a positive run in their stock price is a distinct possibility. However, the stock has done well over the last year but with some significant volatility along the way. GIGM may have huge growth ahead of it over the next few years. With GIGM in a growth mode, especially in the Asian online games platform, the company should continue to make further investments in game development studios and will also continue to license big title games. The recent initiatives indicate that GIGM is all set to move northwards from current levels.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, May 12, 2008
BetterTrades looks at Gerdau Ameristeel Corp. - May 12, 2008
Gerdau Ameristeel Corp. (GNA) made it known Monday that the company’s 1Q profits jumped 22% on greater production, largely from a recent acquisition, as well as higher selling prices. Net income for the three months ending March 31st climbed to $163M, or $0.38 per share, compared with $133.5M, or $0.44 per share, in the year-earlier quarter. The per-share figure declined because, according to a Nov. 7th, 2007 statement by Gerdau, it completed a 126.5 million-share common stock offering to help fund its $4.2B acquisition of Chaparral Steel Co., increasing the number of shares outstanding. Also during its most recent quarter, net sales increased 54% to $2B from $1.3B. For the three months ending that last day in March, finished steel shipments increased to 2.4 million tons, an increase of 488,200 tons from the three months ending in March of 2007, primarily as a result of the Chaparral Steel acquisition. Additionally, the average mill-finished steel selling prices increased 24.4%, helping their bottom line. Along with posting a solid earnings report, Gerdau Ameristeel Corp. also stated Monday that their board of directors declared a quarterly dividend of $0.02, in which the dividend is payable June 13th to all shareholders of record on May 29th.Shares of Gerdau Ameristeel declined slightly on the day, down $0.27, or 1.6%, to close at $16.10 a share.
Gerdau Ameristeel Corporation, incorporated in September, 1970, is a minimill steel producer in North America with an annual manufacturing capacity of 12 million tons of mill finished steel products. Through its vertically integrated network of 19 mills, including one 50%-owned minimill, 19 scrap recycling facilities and 65 downstream operations, the Company primarily serves customers throughout the United States and Canada. Its products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufacturers (OEMs) for use in a variety of industries, including construction, mining, cellular and electrical transmission, automotive, metal building, manufacturing and equipment manufacturing. The Company's operations are segmented into two operating divisions: minimills and downstream operations. Gerdau Ameristeel conducts its operations directly and indirectly through subsidiaries and joint ventures in Canada and the United States. In April 2008, the Company announced that Pacific Coast Steel (PCS), a majority-owned Gerdau Ameristeel joint venture, acquired all the assets of Century Steel, Inc., a reinforcing and structural steel contractor specializing in the fabrication and installation of structural steel and reinforcing steel products. In October 2007, Gerdau Ameristeel acquired Enco Materials, Inc. In September 2007, the Company completed the acquisition of Chaparral Steel Company. Gerdau Ameristeel owns and operates 15 mills in the United States and three in Canada, and also has a 50% interest in the Gallatin minimill located in Kentucky, a joint venture with Dofasco Inc. The Company manufactures and markets a range of steel products, including reinforcing steel bar (rebar), merchant bars, structural shapes, beams, special sections, coiled wire rod (rod) and flat rolled sheet. During the year ending December, 2007, shipments were approximately 6.9 million tons of mill finished steel products. Over 90% of the raw material feed for the minimill operations is recycled steel scrap, making Gerdau Ameristeel the major steel recycler in North America. The Company operates minimills, which are steel mills that use electric arc furnaces to melt scrap metal by charging it with electricity. The Company has secondary value-added steel businesses referred to as downstream operations. These steel fabricating and product manufacturing operations process steel principally produced in its minimills.
As the U.S. economy continues to slow, the domestic steel industry continues to accelerate. Pricing power is very important for industries during all business cycles. As raw input costs rise, a firm must be able to pass these costs on to the end users. Without this power, margins get squeezed, and cash flows and profits start to decline. However, for the steel industry, pricing power remains strong, especially for the end demand steel users, those being the infrastructure, oil and gas, aerospace, and recycling industries. The weak U.S. Dollar is keeping foreign steel imports low, hence making the end pricing strong. For 2008, new international iron ore contracts have just been set, 65% higher than last year, which is giving the U.S. recyclers’ huge pricing power. Another very positive sign for the domestic steel sector is that firms have continued to invest heavily in new high tech equipment, which reduces cost and increases productivity. With high energy cost as well, imports are drying up, leaving the domestic steel firms to fill demand with much lower supply and competition. Analysts have upped expectations for this quarter four times in the last thirty days. The current chart is bullish, as it has seen an upward movement since last January at $11.00 and now sits at just over $16. The current trend has a price target of $20.
The company’s outlook for the near term remains positive despite the unprecedented level of volatility in raw material costs. Certain grades of scrap raw material costs have increased over $200 per ton since the end of the 1Q, however with their captive scrap operations which supply approximately one-third of the company’s scrap needs and announced selling price increases, Gerdau Ameristeel has remain focused on keeping metal spreads robust. Import levels remain lower than historical highs, global steel demand and prices are creating export opportunities, and inventory levels in North America appear to be at low levels throughout the system. In addition, the firm’s flat rolled joint venture, Gallatin Steel, saw improving margins throughout the past three months and this trend is expected to continue into the next quarter. Furthermore, Gerdau’s balance sheet continues to be strong and the firm holds fast to seek opportunities to expand their business and provide attractive returns to their shareholders. The Chaparral integration continues to exceed expectations and they are now raising the annualized synergy expectations to $100 million by the end of 2008. Gerdau is also focused on the integration of the recent Century Steel fabrication business acquisition which continues to expand their market presence in the western United States.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Gerdau Ameristeel Corporation, incorporated in September, 1970, is a minimill steel producer in North America with an annual manufacturing capacity of 12 million tons of mill finished steel products. Through its vertically integrated network of 19 mills, including one 50%-owned minimill, 19 scrap recycling facilities and 65 downstream operations, the Company primarily serves customers throughout the United States and Canada. Its products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufacturers (OEMs) for use in a variety of industries, including construction, mining, cellular and electrical transmission, automotive, metal building, manufacturing and equipment manufacturing. The Company's operations are segmented into two operating divisions: minimills and downstream operations. Gerdau Ameristeel conducts its operations directly and indirectly through subsidiaries and joint ventures in Canada and the United States. In April 2008, the Company announced that Pacific Coast Steel (PCS), a majority-owned Gerdau Ameristeel joint venture, acquired all the assets of Century Steel, Inc., a reinforcing and structural steel contractor specializing in the fabrication and installation of structural steel and reinforcing steel products. In October 2007, Gerdau Ameristeel acquired Enco Materials, Inc. In September 2007, the Company completed the acquisition of Chaparral Steel Company. Gerdau Ameristeel owns and operates 15 mills in the United States and three in Canada, and also has a 50% interest in the Gallatin minimill located in Kentucky, a joint venture with Dofasco Inc. The Company manufactures and markets a range of steel products, including reinforcing steel bar (rebar), merchant bars, structural shapes, beams, special sections, coiled wire rod (rod) and flat rolled sheet. During the year ending December, 2007, shipments were approximately 6.9 million tons of mill finished steel products. Over 90% of the raw material feed for the minimill operations is recycled steel scrap, making Gerdau Ameristeel the major steel recycler in North America. The Company operates minimills, which are steel mills that use electric arc furnaces to melt scrap metal by charging it with electricity. The Company has secondary value-added steel businesses referred to as downstream operations. These steel fabricating and product manufacturing operations process steel principally produced in its minimills.
As the U.S. economy continues to slow, the domestic steel industry continues to accelerate. Pricing power is very important for industries during all business cycles. As raw input costs rise, a firm must be able to pass these costs on to the end users. Without this power, margins get squeezed, and cash flows and profits start to decline. However, for the steel industry, pricing power remains strong, especially for the end demand steel users, those being the infrastructure, oil and gas, aerospace, and recycling industries. The weak U.S. Dollar is keeping foreign steel imports low, hence making the end pricing strong. For 2008, new international iron ore contracts have just been set, 65% higher than last year, which is giving the U.S. recyclers’ huge pricing power. Another very positive sign for the domestic steel sector is that firms have continued to invest heavily in new high tech equipment, which reduces cost and increases productivity. With high energy cost as well, imports are drying up, leaving the domestic steel firms to fill demand with much lower supply and competition. Analysts have upped expectations for this quarter four times in the last thirty days. The current chart is bullish, as it has seen an upward movement since last January at $11.00 and now sits at just over $16. The current trend has a price target of $20.
The company’s outlook for the near term remains positive despite the unprecedented level of volatility in raw material costs. Certain grades of scrap raw material costs have increased over $200 per ton since the end of the 1Q, however with their captive scrap operations which supply approximately one-third of the company’s scrap needs and announced selling price increases, Gerdau Ameristeel has remain focused on keeping metal spreads robust. Import levels remain lower than historical highs, global steel demand and prices are creating export opportunities, and inventory levels in North America appear to be at low levels throughout the system. In addition, the firm’s flat rolled joint venture, Gallatin Steel, saw improving margins throughout the past three months and this trend is expected to continue into the next quarter. Furthermore, Gerdau’s balance sheet continues to be strong and the firm holds fast to seek opportunities to expand their business and provide attractive returns to their shareholders. The Chaparral integration continues to exceed expectations and they are now raising the annualized synergy expectations to $100 million by the end of 2008. Gerdau is also focused on the integration of the recent Century Steel fabrication business acquisition which continues to expand their market presence in the western United States.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, May 09, 2008
BetterTrades looks at True Religion Apparel Inc. - May 9, 2008
Jeans maker True Religion Apparel Inc. (TRLG) announced Thursday after the market close, that the company’s 1Q profits surged 35% on surging sales in both North America and abroad. For the quarter ending March 31st, True Religion earned $6.9M, or $0.29 per share, compared with $5.2M, or $0.22 per share, for the same quarter in 2007. Total sales soared 47% to $53.4M from $36.2M in the year-ago period. Analysts had expected a profit of $0.26 per share on $46.1M in sales. True Religion management credited the strong sales increase to positive consumer reaction to the company's spring collection. Net sales in the company's U.S. wholesale segment increased 30% to $32.5M, while international wholesale sales jumped 29% to $8.9M. Sales at the consumer direct segment, which includes True Religion's branded retail stores and e-commerce site, nearly doubled to $11.8M. In addition to posting a positive earnings report, True Religion raised their 2008 guidance based on recent numbers posted yesterday. True Religion said it now expects to post a 2008 profit of $1.52 to $1.56 per share, up from its previous guidance of $1.48 to $1.52 per share. Analysts are expecting a profit of $1.51 per share for the year. The company also boosted its 2008 sales prediction to a range of $220M to $225M, from its previous estimate of $210M to $215M while analysts are expecting sales of $214.2M for the year. At the close of today’s session, shares of TRLG jumped more than 14%, or $2.76, to finish at $22.21.
True Religion Apparel, Inc., through its wholly owned subsidiary, Guru Denim, Inc., designs, develops, manufactures, markets, distributes and sells denim jeans and other apparel, including corduroy jeans and jackets, velvet jeans and jackets, skirts, shorts for men and women, t-shirts, sweaters and sportswear. The Company manufactures, markets, distributes and sells apparel under the brand name True Religion Brand Jeans, including jeans, skirts, denim jackets and tops in the United States, Canada, the United Kingdom, Europe, Mexico, Japan, Korea, Australia and the Middle East. During the year 2007, the Company's three largest customers were Jameric, Inc., its Japanese distributor, Nordstrom and Bloomingdales', which accounted for 25% of total revenues. During the same time frame, True Religion operated four stores, three full-price retail stores and one factory outlet store. These stores range in size from 800 to 3,000 square feet. The Company's principal products are jeans. These jeans are sold in the United States and abroad to retailers and boutiques. True Religion sells men’s, women’s and children's style apparel. Its jeans are available in multiple vintage washes, premium washes and a destroyed finish. It also offers a bleach version in most styles. True Religion markets and distributes its products by entering into sales agency or distribution agreements with independent agents. It has distribution agreements with distributors in Japan, Korea, Italy, Germany, Switzerland, Belgium, Holland, France, Scandinavia, Spain, South Africa, Mexico, Canada, Australia, Lebanon and the United Kingdom. The retail segment includes the Company's retail operations, as well as Internet sales through its Website. The wholesale segment includes the wholesale operations in North America and internationally, through its international distributors. In the United States, True Religion's products are sold to Nordstroms, Neiman Marcus, Saks Fifth Avenue, Barney's New York, Henri Bendel, Bergdorf Goodman, Bloomingdales, Marshall Field's and approximately 650 high-end boutiques and specialty stores throughout the United States. The Company also sells through a commission-based showroom, L'Atelier, with showrooms in Los Angeles and New York.
True Religion currently posses a low P/E Ratio, 19, while also generating a high Return on Equity, 35%, combined with solid earnings-per-share (EPS), outstanding balance sheet and good recent price momentum has revived the stock over the past month or so. Additionally, the company has entered into several licensing agreements over the past eight months for swimwear, high-end handbags and small leather accessories, outerwear and its first agreement, which was for footwear, head-ware, scarves and gloves, due out later this Fall. On top of these interesting brand expansions, the company continues to open up stores nationwide with 2 new openings in L.A., one in Miami, one in NYC, and 2 in Metro NY, along with one each in Chicago and Houston. The company isn’t exactly just a supplier of once-trendy jeans. When a company manages to sell a pair of jeans for an average $200 apiece and already has a gross margin above 50%, it might seem hard to significantly improve margins. But direct retail does it, as True Religion was realizing a 75% gross margin in the four stores it had open by the end of 2007. Plans call for having 30 stores by the end of 2008 and more than 50 by the end of 2009.
The valuation seems reasonable, especially if the 20% estimated growth for 2008 is close to right. They aren’t exactly giving the stock away, but it seems awfully reasonable at 12.5-times forward estimates. The company grew sales only 47% in the recent quarter, and they are expected to show a 33% year-over-year for the upcoming quarter. The balance sheet is stellar, with $34in cash in the most recent quarter, just $9M in inventories, which just happen to be down sharply from a year ago. There are no intangibles on the balance sheet, and the company has no debt, with total liabilities at just $14M. While the stock probably needs to make a new 52-week high, its current high was set last August at $23.74 to command a lot of attention. There is good support at $17 to $18 range or so based upon chart patterns. The stock is up strong year-to-date, but only a market performer over the past year. If the stock works hard and breaks through resistance, the P/E multiple could expand very rapidly.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
True Religion Apparel, Inc., through its wholly owned subsidiary, Guru Denim, Inc., designs, develops, manufactures, markets, distributes and sells denim jeans and other apparel, including corduroy jeans and jackets, velvet jeans and jackets, skirts, shorts for men and women, t-shirts, sweaters and sportswear. The Company manufactures, markets, distributes and sells apparel under the brand name True Religion Brand Jeans, including jeans, skirts, denim jackets and tops in the United States, Canada, the United Kingdom, Europe, Mexico, Japan, Korea, Australia and the Middle East. During the year 2007, the Company's three largest customers were Jameric, Inc., its Japanese distributor, Nordstrom and Bloomingdales', which accounted for 25% of total revenues. During the same time frame, True Religion operated four stores, three full-price retail stores and one factory outlet store. These stores range in size from 800 to 3,000 square feet. The Company's principal products are jeans. These jeans are sold in the United States and abroad to retailers and boutiques. True Religion sells men’s, women’s and children's style apparel. Its jeans are available in multiple vintage washes, premium washes and a destroyed finish. It also offers a bleach version in most styles. True Religion markets and distributes its products by entering into sales agency or distribution agreements with independent agents. It has distribution agreements with distributors in Japan, Korea, Italy, Germany, Switzerland, Belgium, Holland, France, Scandinavia, Spain, South Africa, Mexico, Canada, Australia, Lebanon and the United Kingdom. The retail segment includes the Company's retail operations, as well as Internet sales through its Website. The wholesale segment includes the wholesale operations in North America and internationally, through its international distributors. In the United States, True Religion's products are sold to Nordstroms, Neiman Marcus, Saks Fifth Avenue, Barney's New York, Henri Bendel, Bergdorf Goodman, Bloomingdales, Marshall Field's and approximately 650 high-end boutiques and specialty stores throughout the United States. The Company also sells through a commission-based showroom, L'Atelier, with showrooms in Los Angeles and New York.
True Religion currently posses a low P/E Ratio, 19, while also generating a high Return on Equity, 35%, combined with solid earnings-per-share (EPS), outstanding balance sheet and good recent price momentum has revived the stock over the past month or so. Additionally, the company has entered into several licensing agreements over the past eight months for swimwear, high-end handbags and small leather accessories, outerwear and its first agreement, which was for footwear, head-ware, scarves and gloves, due out later this Fall. On top of these interesting brand expansions, the company continues to open up stores nationwide with 2 new openings in L.A., one in Miami, one in NYC, and 2 in Metro NY, along with one each in Chicago and Houston. The company isn’t exactly just a supplier of once-trendy jeans. When a company manages to sell a pair of jeans for an average $200 apiece and already has a gross margin above 50%, it might seem hard to significantly improve margins. But direct retail does it, as True Religion was realizing a 75% gross margin in the four stores it had open by the end of 2007. Plans call for having 30 stores by the end of 2008 and more than 50 by the end of 2009.
The valuation seems reasonable, especially if the 20% estimated growth for 2008 is close to right. They aren’t exactly giving the stock away, but it seems awfully reasonable at 12.5-times forward estimates. The company grew sales only 47% in the recent quarter, and they are expected to show a 33% year-over-year for the upcoming quarter. The balance sheet is stellar, with $34in cash in the most recent quarter, just $9M in inventories, which just happen to be down sharply from a year ago. There are no intangibles on the balance sheet, and the company has no debt, with total liabilities at just $14M. While the stock probably needs to make a new 52-week high, its current high was set last August at $23.74 to command a lot of attention. There is good support at $17 to $18 range or so based upon chart patterns. The stock is up strong year-to-date, but only a market performer over the past year. If the stock works hard and breaks through resistance, the P/E multiple could expand very rapidly.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, May 08, 2008
BetterTrades looks at Allegheny Technologies Inc. - May 8, 2008
Specialty metals maker Allegheny Technologies Inc. (ATI) announced a week ago its 1Q results in which profits declined 28%, hurt by high raw materials costs. For the quarter ending March 31st, the company earned $142M, or $1.40 per share, down from $197.8M, or $1.92 per share, in the same period a year earlier. Revenues for the firm dropped 2% to $1.34B from $1.37B, while analysts, on average, expected profits of $1.48 per share on sales of $1.3B. The company said that, as expected, certain raw material costs were higher than the raw material indices and surcharges included in its selling prices. The company derived 28% of their sales dollars in the 1Q from direct international sales. They believe that more than 50% of their sales are driven by demand from non-U.S. markets. ATI is benefiting from global infrastructure growth, along with a diverse product mix, the value of the dollar, and the strategy of several key customers to purchase more products with U.S. dollars. The 1Q of 2008’s earnings were similar to those achieved in the 4Q of 2007. As previously stated, the company had expected the 1Q to be negatively impacted by certain raw material costs being higher than the raw material indices/surcharges included in their selling prices for certain products. While this mismatch was largely offset by a last-in-last-out (LIFO) reserve benefit of approximately $74M in the 4Q, there was no such offset in the 1Q of 2008. Shares of Allegheny Technologies were higher on the day, up $3.05, or 4.1%, to close at $76.58.
Allegheny Technologies Incorporated manufactures and sells specialty metals worldwide. The company operates in three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products. The High Performance Metals segment produces, converts, and distributes a range of high performance alloys, including nickel- and cobalt-based alloys and super alloys; titanium and titanium-based alloys; exotic metals, such as zirconium, hafnium, niobium, nickel-titanium, and their related alloys; and other specialty alloys in various forms comprising ingot, billet, bar, rod, wire, and seamless tube. It sells products directly to end-use customers in the aerospace and defense, chemical process, oil and gas, medical, and electrical energy sectors. The Flat-Rolled Products segment offers stainless steel, nickel-based alloys, and titanium and titanium-based alloys in various product forms, such as plate, sheet, engineered strip, and precision rolled strip products, as well as grain-oriented electrical steel to independent service centers and end-use customers. It serves chemical process, oil and gas, electrical energy, automotive, food equipment and appliances, machine and cutting tools, construction and mining, aerospace and defense, electronics, communication equipment, and computers industries. The Engineered Products segment includes the production of tungsten powder, tungsten heavy alloys, tungsten carbide materials, and tungsten carbide cutting tools. It also manufactures carbon alloy steel impression die forgings, and grey and ductile iron castings, as well as provides precision metals processing services, such as grinding, polishing, blasting, cutting, flattening, and ultrasonic testing. This segment serves various industrial markets, including automotive, chemical process, oil and gas, machine and cutting tools, aerospace, construction and mining, and other markets. Allegheny Technologies Incorporated was founded in 1960, currently employs more than 9,700 workers and is based in Pittsburgh, Pennsylvania
ATI’s business continues to be driven by long-term growth in the global aerospace, defense, and infrastructure markets. Overall demand from these markets remains at a high level. For example, 1Q orders from Asian markets have significantly exceeded last year’s rate, which was a record year. The firm’s airframe and jet engine customers report record backlogs and good order rates so far in 2008, resulting in improving build rates for existing models. Boeing’s recently revised schedule for its 787 Dreamliner release date brings near-term uncertainty to the supply chain. Boeing has stated to Allegheny that they (Boeing) intend to honor the supply agreement, and as production increases so will the supply to this breakthrough aircraft. In the meantime, ATI intends to continue to navigate through this period and focus their milled products capabilities on the diversified global markets that the company serves so well. During the recent quarter, cash flow from operations was $66M and included an investment of $149M in managed working capital to support the higher business volumes, primarily in the company’s Flat Rolled Products segment. Cash on hand at the end of the quarter was $468M after the managed working capital investment, $112M in capital investments and $62M of share repurchases.
ATI is positioned to continue to benefit from the current and long-term global growth opportunities of their major end markets. They continue to rely on investments to give them an unsurpassed manufacturing capability which enables them for substantial profitable growth. ATI is not only focused on product diversification but also on global market diversification and are committed to maintaining a strong balance sheet. Although the condition of the U.S. economy, the impact of Boeing’s 787 schedule delay, and continuing raw material cost volatility create near-term impacts, management believes the 1Q’s earnings represents the bottom. Generally, base selling prices are staying flat and may become higher, volumes in sales continue to improve; and raw material indices/surcharges are in better balance. As a result, Allegheny expects 2Q earnings to be somewhat higher than 1Q results. In fact, demand for the company’s titanium alloys should be at a higher level from the aerospace and defense market, and demand for nickel-based alloys should be in good from for the upcoming quarter. Demand for exotic alloys should be even strong from the chemical process industry as it is growing exponentially from the nuclear energy markets.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Allegheny Technologies Incorporated manufactures and sells specialty metals worldwide. The company operates in three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products. The High Performance Metals segment produces, converts, and distributes a range of high performance alloys, including nickel- and cobalt-based alloys and super alloys; titanium and titanium-based alloys; exotic metals, such as zirconium, hafnium, niobium, nickel-titanium, and their related alloys; and other specialty alloys in various forms comprising ingot, billet, bar, rod, wire, and seamless tube. It sells products directly to end-use customers in the aerospace and defense, chemical process, oil and gas, medical, and electrical energy sectors. The Flat-Rolled Products segment offers stainless steel, nickel-based alloys, and titanium and titanium-based alloys in various product forms, such as plate, sheet, engineered strip, and precision rolled strip products, as well as grain-oriented electrical steel to independent service centers and end-use customers. It serves chemical process, oil and gas, electrical energy, automotive, food equipment and appliances, machine and cutting tools, construction and mining, aerospace and defense, electronics, communication equipment, and computers industries. The Engineered Products segment includes the production of tungsten powder, tungsten heavy alloys, tungsten carbide materials, and tungsten carbide cutting tools. It also manufactures carbon alloy steel impression die forgings, and grey and ductile iron castings, as well as provides precision metals processing services, such as grinding, polishing, blasting, cutting, flattening, and ultrasonic testing. This segment serves various industrial markets, including automotive, chemical process, oil and gas, machine and cutting tools, aerospace, construction and mining, and other markets. Allegheny Technologies Incorporated was founded in 1960, currently employs more than 9,700 workers and is based in Pittsburgh, Pennsylvania
ATI’s business continues to be driven by long-term growth in the global aerospace, defense, and infrastructure markets. Overall demand from these markets remains at a high level. For example, 1Q orders from Asian markets have significantly exceeded last year’s rate, which was a record year. The firm’s airframe and jet engine customers report record backlogs and good order rates so far in 2008, resulting in improving build rates for existing models. Boeing’s recently revised schedule for its 787 Dreamliner release date brings near-term uncertainty to the supply chain. Boeing has stated to Allegheny that they (Boeing) intend to honor the supply agreement, and as production increases so will the supply to this breakthrough aircraft. In the meantime, ATI intends to continue to navigate through this period and focus their milled products capabilities on the diversified global markets that the company serves so well. During the recent quarter, cash flow from operations was $66M and included an investment of $149M in managed working capital to support the higher business volumes, primarily in the company’s Flat Rolled Products segment. Cash on hand at the end of the quarter was $468M after the managed working capital investment, $112M in capital investments and $62M of share repurchases.
ATI is positioned to continue to benefit from the current and long-term global growth opportunities of their major end markets. They continue to rely on investments to give them an unsurpassed manufacturing capability which enables them for substantial profitable growth. ATI is not only focused on product diversification but also on global market diversification and are committed to maintaining a strong balance sheet. Although the condition of the U.S. economy, the impact of Boeing’s 787 schedule delay, and continuing raw material cost volatility create near-term impacts, management believes the 1Q’s earnings represents the bottom. Generally, base selling prices are staying flat and may become higher, volumes in sales continue to improve; and raw material indices/surcharges are in better balance. As a result, Allegheny expects 2Q earnings to be somewhat higher than 1Q results. In fact, demand for the company’s titanium alloys should be at a higher level from the aerospace and defense market, and demand for nickel-based alloys should be in good from for the upcoming quarter. Demand for exotic alloys should be even strong from the chemical process industry as it is growing exponentially from the nuclear energy markets.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, May 07, 2008
BetterTrades looks at Cognizant Technology Solutions Corp. - May 7, 2008
Information technology and outsourcing company Cognizant Technology Solutions Corp. (CTSH) announced Wednesday that their 1Q profits shot up 35% on higher revenues across its business segments. But the company offered conservative guidance for the June quarter. Net income for the recent quarter jumped to $101.9M, or $0.34 per share, from $75.5M or $0.25 per share, in the 1Q of 2007. Excluding $0.04 in stock-based compensation expenses and one-time costs and gains, the company earned $0.38 per share. One-time items included an Indian tax on stock-based fringe benefits of $900,000. Revenues, meanwhile, climbed 40% to $643.1M, from $460.3M last year, with analysts expecting a profit of $0.33 per share on revenues of $642.9M. The company also stated that its healthcare, retail/manufacturing/logistics and other segments all grew 10% or more from the 4Q of 2007. European operations increased 12% from the December quarter. The company also made it known Wednesday that they expect profits slightly below analysts’ expectations. The company anticipates profit for the June quarter between $0.34 and $0.35 per share. Excluding the stock-based compensation expenses of $0.04 per share and other items, the company expects profits between $0.38 and $0.39 per share. For fiscal 2008, the company expects earnings per share of approximately $1.50 per share, or $1.67 per share adjusted for stock option costs and one-time items. The company also forecasts 2008 revenues of approximately $2.95B, an increase of 38% from 2007. Analysts are expecting profits of $0.36 cents per share for the upcoming quarter along with expectations of profits of $1.51 per share, on revenues of $2.95B for the full-year. In today’s trading, Cognizant Technology shares slid $3.54, or 10.5%, to $30.21, down from their regular session close Tuesday of $33.75 a share.
Cognizant Technology Solutions Corporation is a provider of custom information technology (IT) consulting and technology services, as well as outsourcing services for Global 2000 companies located in North America, Europe and Asia. The Company's core services include technology strategy consulting; complex systems development; enterprise software package implementation and maintenance; data warehousing and business intelligence; application testing; application maintenance; infrastructure management, and vertically-oriented business process outsourcing (V-BPO). Cognizant tailor its services to specific industries, and utilizes an integrated on-site/offshore business model. The Company operates in four business segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics and Other. During the past year, the Company's Financial Services business segment represented approximately 47% of its total revenues. This business segment provides services to its customers operating in the industries, such as capital markets, banking and insurance. Cognizant's Healthcare business segment represented approximately 24% of its total revenues. This business segment provides services to its customers operating in following industries, including healthcare and life sciences, while focusing on the industry solutions, such as broker compensation, sales and underwriting systems, provider management, plan sponsor administration, electronic enrollment, membership, billing, claims processing, medical management and pharmacy benefit management. The Company's Manufacturing, Logistics and Retail business segment represented approximately 15% of its total revenues. This business segment services customers in industry groups, such as manufacturing and logistics, and retail. Some of its manufacturing and logistics solutions include supply chain management, warehouse and yard management, waste management, transportation management, optimization, portals and ERP solutions. The Other reportable business segment is an aggregation of operating segments, which individually, are less than 10% of consolidated revenues and segment operating profit. The Other business segment includes communications, media and information services, and high technology operating segments, and its Other business segment represented approximately 14% of the Company's total revenues. The Company's communications industry practice serves communications service providers, equipment vendors and software vendors. Some of its solutions include supply chain management solutions, from pre-press to material procurement, circulation, logistics and vendor management; business solutions covering advertising management, online media and e-business; workflow automation covering the product development process for broadcasters; spot ad buying systems covering agency of record, traffic management, post-buy analysis and financial management; digital asset management (DAM) and digital rights management (DRM), and operational systems, including ad sales, studio management, outsourcing billing and payments, along with content management and delivery. The company was founded in 1994, currently employs more than 55,000 workers and is headquartered in Teaneck, New Jersey.
Areas of strength in 1Q of 2008 included the Financial Services which posted 42% year-over-year (yoy) growth and 9% quarter-over-quarter (qoq) growth. The European region was up 89% (yoy) and 15% (qoq) and accounted for 18% of total revenues. Revenues included a $5M contribution from MarketRx, which was acquired by Cognizant in mid-November of 2007. Cognizant also credited the past quarter’s performance to an effective sales force and distinctive offerings. These results have continued to benefit the company in above-average reinvestments in infrastructure, vertical/horizontal expertise and client partnerships. A survey of the company's top-50 clients indicates approximately 80% of Cognizant’s 2008 IT budgets have been finalized, which is consistent with recent years. Although the company's full-year revenue growth outlook is far above the expectations of most investors, the 2Q guidance could pressure the stock and lead investors to question the full-year outlook.
Cognizant is undoubtedly most confident about its 2008 prospects of a 30% increase in earnings-per-share (EPS). The company has also acknowledged the potential for modest short- term accelerations due to finalizations of client budgets and new projects. Cognizant posted strong cash flow from operations of $150M or $0.50 per share in the quarter. Proceeds from financing activities, that being the exercising of options and share repurchases, amounted to $80M. To date, Cognizant has repurchased 3.39 million shares of common stock for $105.4M, or an average price of $31.10 per share. Other major outflows comprised of capital expenditures of $72M, while these expenses are budgeted to climb from $182M in 2007 to $250M in 2008. Cognizant exited the past quarter with net cash of $670M, albeit down from $800.1M in the 4Q of 2007. The company is also able to appear attractive with a PE Ratio of 27, along with a historical profit of over 50%. Despite the dollar’s devaluation and market slow down in some client sectors, a 30% to 35% compounded annual growth rate should be achievable over the next 2 years.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Cognizant Technology Solutions Corporation is a provider of custom information technology (IT) consulting and technology services, as well as outsourcing services for Global 2000 companies located in North America, Europe and Asia. The Company's core services include technology strategy consulting; complex systems development; enterprise software package implementation and maintenance; data warehousing and business intelligence; application testing; application maintenance; infrastructure management, and vertically-oriented business process outsourcing (V-BPO). Cognizant tailor its services to specific industries, and utilizes an integrated on-site/offshore business model. The Company operates in four business segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics and Other. During the past year, the Company's Financial Services business segment represented approximately 47% of its total revenues. This business segment provides services to its customers operating in the industries, such as capital markets, banking and insurance. Cognizant's Healthcare business segment represented approximately 24% of its total revenues. This business segment provides services to its customers operating in following industries, including healthcare and life sciences, while focusing on the industry solutions, such as broker compensation, sales and underwriting systems, provider management, plan sponsor administration, electronic enrollment, membership, billing, claims processing, medical management and pharmacy benefit management. The Company's Manufacturing, Logistics and Retail business segment represented approximately 15% of its total revenues. This business segment services customers in industry groups, such as manufacturing and logistics, and retail. Some of its manufacturing and logistics solutions include supply chain management, warehouse and yard management, waste management, transportation management, optimization, portals and ERP solutions. The Other reportable business segment is an aggregation of operating segments, which individually, are less than 10% of consolidated revenues and segment operating profit. The Other business segment includes communications, media and information services, and high technology operating segments, and its Other business segment represented approximately 14% of the Company's total revenues. The Company's communications industry practice serves communications service providers, equipment vendors and software vendors. Some of its solutions include supply chain management solutions, from pre-press to material procurement, circulation, logistics and vendor management; business solutions covering advertising management, online media and e-business; workflow automation covering the product development process for broadcasters; spot ad buying systems covering agency of record, traffic management, post-buy analysis and financial management; digital asset management (DAM) and digital rights management (DRM), and operational systems, including ad sales, studio management, outsourcing billing and payments, along with content management and delivery. The company was founded in 1994, currently employs more than 55,000 workers and is headquartered in Teaneck, New Jersey.
Areas of strength in 1Q of 2008 included the Financial Services which posted 42% year-over-year (yoy) growth and 9% quarter-over-quarter (qoq) growth. The European region was up 89% (yoy) and 15% (qoq) and accounted for 18% of total revenues. Revenues included a $5M contribution from MarketRx, which was acquired by Cognizant in mid-November of 2007. Cognizant also credited the past quarter’s performance to an effective sales force and distinctive offerings. These results have continued to benefit the company in above-average reinvestments in infrastructure, vertical/horizontal expertise and client partnerships. A survey of the company's top-50 clients indicates approximately 80% of Cognizant’s 2008 IT budgets have been finalized, which is consistent with recent years. Although the company's full-year revenue growth outlook is far above the expectations of most investors, the 2Q guidance could pressure the stock and lead investors to question the full-year outlook.
Cognizant is undoubtedly most confident about its 2008 prospects of a 30% increase in earnings-per-share (EPS). The company has also acknowledged the potential for modest short- term accelerations due to finalizations of client budgets and new projects. Cognizant posted strong cash flow from operations of $150M or $0.50 per share in the quarter. Proceeds from financing activities, that being the exercising of options and share repurchases, amounted to $80M. To date, Cognizant has repurchased 3.39 million shares of common stock for $105.4M, or an average price of $31.10 per share. Other major outflows comprised of capital expenditures of $72M, while these expenses are budgeted to climb from $182M in 2007 to $250M in 2008. Cognizant exited the past quarter with net cash of $670M, albeit down from $800.1M in the 4Q of 2007. The company is also able to appear attractive with a PE Ratio of 27, along with a historical profit of over 50%. Despite the dollar’s devaluation and market slow down in some client sectors, a 30% to 35% compounded annual growth rate should be achievable over the next 2 years.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, May 06, 2008
BetterTrades looks at LeapFrog Enterprises Inc. - May 6, 2008
LeapFrog Enterprises, Inc. (LF) a leading developer of technology-based learning products, yesterday announced financial results for the 1Q in 2008. For the quarter, the company reported net sales of $58.3M, compared to net sales of $60.9M for the 1Q of 2007, a decrease of 4.3%, and a net loss of $0.43 per share, compared to a net loss of $0.48 per share for the same period last year, while cash and investments totaled $116.5M for the quarter. Excluding the impact of foreign currencies, sales would have declined 5.6%. The decrease in net sales was driven primarily by the ongoing decline in sales of the products being phased out or replaced in 2008, partially offset by higher sales of continuing educational gaming products. Net sales from the U.S. Consumer segment totaled $40.6M, compared with $43.4M in 2007. Net sales from the International segment totaled $12.7M for the 1Q of 2008, compared with $12.5M in 2007, while net sales from the School segment were essentially unchanged from the prior year at $5.0M. Gross margin for the quarter was 36.3%, down 4.2 percentage-points from gross margin of 40.5% for 2007. The decrease was primarily due to strong growth in Leapster hardware shipments, reflecting the continued strength of the Educational Gaming business and the need for retailers to rebuild their inventories after a strong holiday season. Software sales exceeded expectations but were outpaced by strong educational gaming hardware sales, which negatively impacted gross margins.
LeapFrog Enterprises, Inc. provides technology-based educational platforms worldwide. It offers reading solutions, including the LeapPad learning system that introduces basic vocabulary and reading concepts or reinforces second-language learning to preschool and kindergarten children; and Tag learning system, a pen-based reading system that focuses on fundamental reading skills and offers a library of interactive books. The company also provides educational gaming and grade school products, such as the Leapster multimedia learning systems that include screen-based, learning devices to encourage learning skills while allowing kids to play action-packed educational games; ClickStart My First Computer that introduces computer and preschool skills by turning TV into a computer; and the FLY Fusion Pentop Computer, a learning tool for helping grade school children with their homework. In addition, it offers learning toys, such as Learn & Groove line, an interactive collection of instruments introducing numbers, letters, colors, and shapes through music and song in either English or Spanish; and Alphabet Pal caterpillar, a musical pull-toy that teaches letter names and sounds, learning songs, and colors. The learning toy products also comprise the Fridge magnetic set of products for infants and toddlers, including Fridge Phonics, a magnetic letter set for preschoolers and kindergarteners for teaching letter names and sounds, and learning songs; and the Word Whammer that challenges young learners to build three-letter words using their knowledge of letters and letter sounds. LeapFrog Enterprises sells its products directly to national and regional mass-market and specialty retailers, as well as to other retail stores through a combination of sales representatives, and through its online store and other Internet-based channels. The company was founded in 1995, currently employs more than 840 workers and is headquartered in Emeryville, California. LeapFrog Enterprises, Inc. is a subsidiary of Mollusk Holdings, LLC.
LeapFrog’s business is highly seasonal, with retail customers making up a large percentage of all purchases during the back-to-school and traditional holiday seasons and although they are expanding their retail presence by selling products online as well as to electronics and office supply stores, the vast majority of U.S. sales are to a few large retailers. Net sales to Wal-Mart (WMT) (including Sam’s Club), Toys “R” Us and Target (TGT) accounted for approximately 70% of U.S. segment sales in 2007 compared to 80% in 2006 and 86% in 2005. Sales in all segments declined during these times were primarily as a result of significant reduction in the sales of LeapPad family of products whose design was overhauled. In addition, retailers’ inventories fell an estimated 40% at years’ end compared to the same period last year, which also negatively impacted 2006 sales. To invigorate sales and margins, the company plans to introduce many new products in 2008. Currently Leapfrog is sitting on over $100 million in the most recent quarter, or $1.64 a share in cash. This is cash from operations since debt stands at zero.
Looking forward, the company reiterated its current expectations for full year 2008 results which include all new products introduced in 2007 and 2008 are expected to comprise approximately half of 2008 net sales. Net sales are expected to grow at an annual percentage rate in the mid-to-high teens, while Gross margin is expected to continue to improve. The company also states that their Selling, general and administrative expenses and research and development expenses are expected to decrease approximately 10%-15% year-over-year, helping with their bottom line. The company expects a nominal loss for the year as the first half results are expected to be weaker than the first half of 2007, and the second half results are expected to show substantial improvement over the second half of 2007, reflecting the impact of new product introductions and cost reductions. And finally, cash and investments are expected to be approximately $100M at year-end. You have to give credit to the company as they are engineering a turnaround in a very difficult retail environment and the new products are getting rave reviews. The main thing to point to is their management of inventory not only with themselves but at retailers like Target and Wal-Mart. A 10% margin increase year over year is also a sign of outstanding management. At $8.25 a share, a small speculative position may be worth a look in case this turnaround is completed.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
LeapFrog Enterprises, Inc. provides technology-based educational platforms worldwide. It offers reading solutions, including the LeapPad learning system that introduces basic vocabulary and reading concepts or reinforces second-language learning to preschool and kindergarten children; and Tag learning system, a pen-based reading system that focuses on fundamental reading skills and offers a library of interactive books. The company also provides educational gaming and grade school products, such as the Leapster multimedia learning systems that include screen-based, learning devices to encourage learning skills while allowing kids to play action-packed educational games; ClickStart My First Computer that introduces computer and preschool skills by turning TV into a computer; and the FLY Fusion Pentop Computer, a learning tool for helping grade school children with their homework. In addition, it offers learning toys, such as Learn & Groove line, an interactive collection of instruments introducing numbers, letters, colors, and shapes through music and song in either English or Spanish; and Alphabet Pal caterpillar, a musical pull-toy that teaches letter names and sounds, learning songs, and colors. The learning toy products also comprise the Fridge magnetic set of products for infants and toddlers, including Fridge Phonics, a magnetic letter set for preschoolers and kindergarteners for teaching letter names and sounds, and learning songs; and the Word Whammer that challenges young learners to build three-letter words using their knowledge of letters and letter sounds. LeapFrog Enterprises sells its products directly to national and regional mass-market and specialty retailers, as well as to other retail stores through a combination of sales representatives, and through its online store and other Internet-based channels. The company was founded in 1995, currently employs more than 840 workers and is headquartered in Emeryville, California. LeapFrog Enterprises, Inc. is a subsidiary of Mollusk Holdings, LLC.
LeapFrog’s business is highly seasonal, with retail customers making up a large percentage of all purchases during the back-to-school and traditional holiday seasons and although they are expanding their retail presence by selling products online as well as to electronics and office supply stores, the vast majority of U.S. sales are to a few large retailers. Net sales to Wal-Mart (WMT) (including Sam’s Club), Toys “R” Us and Target (TGT) accounted for approximately 70% of U.S. segment sales in 2007 compared to 80% in 2006 and 86% in 2005. Sales in all segments declined during these times were primarily as a result of significant reduction in the sales of LeapPad family of products whose design was overhauled. In addition, retailers’ inventories fell an estimated 40% at years’ end compared to the same period last year, which also negatively impacted 2006 sales. To invigorate sales and margins, the company plans to introduce many new products in 2008. Currently Leapfrog is sitting on over $100 million in the most recent quarter, or $1.64 a share in cash. This is cash from operations since debt stands at zero.
Looking forward, the company reiterated its current expectations for full year 2008 results which include all new products introduced in 2007 and 2008 are expected to comprise approximately half of 2008 net sales. Net sales are expected to grow at an annual percentage rate in the mid-to-high teens, while Gross margin is expected to continue to improve. The company also states that their Selling, general and administrative expenses and research and development expenses are expected to decrease approximately 10%-15% year-over-year, helping with their bottom line. The company expects a nominal loss for the year as the first half results are expected to be weaker than the first half of 2007, and the second half results are expected to show substantial improvement over the second half of 2007, reflecting the impact of new product introductions and cost reductions. And finally, cash and investments are expected to be approximately $100M at year-end. You have to give credit to the company as they are engineering a turnaround in a very difficult retail environment and the new products are getting rave reviews. The main thing to point to is their management of inventory not only with themselves but at retailers like Target and Wal-Mart. A 10% margin increase year over year is also a sign of outstanding management. At $8.25 a share, a small speculative position may be worth a look in case this turnaround is completed.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, May 05, 2008
BetterTrades looks at Continental Resources Inc. - May 5, 2008
Continental Resources Inc.'s (CLR) profits surged 64% in the 1Q as oil spiraled to record prices, the energy company announced Monday. Continental Resources earned $88M, or $0.52 per share, compared with profits of $53.8M, or $0.34 per share, in the 1Q of last year, while analysts were forecasting profits of $0.49 per share. Revenues for the quarter leaped 88% to $227.7M from $121.lM, with analysts expecting revenues of $218M. Sales of oil and gas spiked because of swelling energy prices. The average price the company commanded for a barrel of oil rose during the 1Q to $81.35 from $46.47 in the year-ago quarter. Profits would have been even higher had Continental not hedged some of its oil. In July last year, Continental signed a number of contracts effectively locking in the company's price for a barrel of oil at $72.90. With the price of oil climbing well past that price since then, the company recorded a $4.6M loss in the 1Q to reflect the adjusted value of contracts promising oil at a price lower than market value. These contracts expired last month, meaning the oil the company is producing is no longer locked in at a lower price. Continental said it plans to use some of the cash it is generating from higher energy prices to invest in more drilling. The company expects its production by the end of the year to increase 42% from its current production levels. In Monday’s trading, shares of Continental Resources surged $7.14, or 16.3%, to $50.97. The stock closed Friday at $43.83, and it has traded in a 52-week range of $14 to $52.15, its high set earlier in today’s trading session.
Continental Resources, Inc. is an independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. The Company focuses its exploration activities in new or developing plays that provide it with the opportunity to acquire undeveloped acreage positions for future drilling operations. During the year ended December, 2007, approximately 82% of the Company's estimated proved reserves were located in the Rocky Mountain region. Also, as of December, 2007, its estimated proved reserves were 134.6 million barrels of oil equivalent (MMBoe), with estimated proved developed reserves of 101.2 MMBoe, or 75% of its total estimated proved reserves. Crude oil comprised 77% of its total estimated proved reserves. The Company's properties in the Rocky Mountain region represented 87% of its proven reserves. Its principal producing properties in this region are in the Red River units, the Bakken field and the Big Horn Basin. The Red River units represented 56% of the Company's reserves in the Rocky Mountain region. The eight units comprising the Red River units are located along the Cedar Hills Anticline in North Dakota, South Dakota and Montana, and produce oil and natural gas from the Red River B formation, a thin, continuous, dolomite formation at depths of 8,000 to 9,500 feet. Continental Resources' properties in the Mid-Continent region represented 13% of its reserves. Its principal producing properties in this region are located in the Anadarko and Arkoma Basins of Oklahoma, the Michigan Basin and the Illinois Basin. The Company's properties within the Anadarko Basin represented 40% in the Mid-Continent Region. Its wells within the Anadarko Basin produce from a variety of sands and carbonates in both stratigraphic and structural traps. The Company's principal producing properties in this region are located in South Texas and Louisiana. The average daily production from its Gulf Coast properties was 330 net Bbls of oil and 2,004 net Mcf of natural gas. The company was founded in 1967, currently employs just over 330 workers and is based in Enid, Oklahoma.
The company issued its IPO mid-year last year at $15 but has impressed investors enough to nearly triple the stock since then. One of the primary drivers of growth has been a project in North Dakota. Production in this area is ramping up and should be a strong addition to 2008. While most have very little control over the end selling price of oil, efficiency is extremely important to building a sustainable franchise. Continental has been able to successfully acquire properties and set up rigs to drill the wells while maintaining a very attractive cost per barrel. Financial leverage can be a dangerous thing in any business and the oil industry is no stranger to the game. Analysts consider Continental’s balance sheet to be conservative with a 20% debt to cap rate. Since the industry is very capital intensive, it often takes significant financing to be able to fund a drilling project as wide as CLR’s.
Oil and natural gas sales for the year ending December, 2007 were $582.2M, a 20% increase over sales of $483.6M for the comparable period of 2006. Production expenses increased $28.2M or 43% during the year ending December 2007 to $93.6M from $65.4M during the year ending in 2006. Production taxes, which turned out to be a positive, only increased $1.6M during the year in 2007 to $12.9M from $11.3M during 2006. And finally, Exploration expenses increased $14.5M in 2007 to $19.7M due primarily to an increase in dry hole expense of $11.9M and an increase in seismic expenses of $2.0M. The stock is breaking to new highs after the positive earnings announcement this week. With earnings expected to grow quickly in 2008 and 2009, the P/E multiple still looks attractive at 19.1 and the supply/demand dynamics are interesting as the fairly-new public company is attracting the attention of large institutional buyers for the first time. The company does not pay a dividend at this time, choosing instead to plow cash flow back into its business, but the growing value for shareholders appears very promising.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Continental Resources, Inc. is an independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. The Company focuses its exploration activities in new or developing plays that provide it with the opportunity to acquire undeveloped acreage positions for future drilling operations. During the year ended December, 2007, approximately 82% of the Company's estimated proved reserves were located in the Rocky Mountain region. Also, as of December, 2007, its estimated proved reserves were 134.6 million barrels of oil equivalent (MMBoe), with estimated proved developed reserves of 101.2 MMBoe, or 75% of its total estimated proved reserves. Crude oil comprised 77% of its total estimated proved reserves. The Company's properties in the Rocky Mountain region represented 87% of its proven reserves. Its principal producing properties in this region are in the Red River units, the Bakken field and the Big Horn Basin. The Red River units represented 56% of the Company's reserves in the Rocky Mountain region. The eight units comprising the Red River units are located along the Cedar Hills Anticline in North Dakota, South Dakota and Montana, and produce oil and natural gas from the Red River B formation, a thin, continuous, dolomite formation at depths of 8,000 to 9,500 feet. Continental Resources' properties in the Mid-Continent region represented 13% of its reserves. Its principal producing properties in this region are located in the Anadarko and Arkoma Basins of Oklahoma, the Michigan Basin and the Illinois Basin. The Company's properties within the Anadarko Basin represented 40% in the Mid-Continent Region. Its wells within the Anadarko Basin produce from a variety of sands and carbonates in both stratigraphic and structural traps. The Company's principal producing properties in this region are located in South Texas and Louisiana. The average daily production from its Gulf Coast properties was 330 net Bbls of oil and 2,004 net Mcf of natural gas. The company was founded in 1967, currently employs just over 330 workers and is based in Enid, Oklahoma.
The company issued its IPO mid-year last year at $15 but has impressed investors enough to nearly triple the stock since then. One of the primary drivers of growth has been a project in North Dakota. Production in this area is ramping up and should be a strong addition to 2008. While most have very little control over the end selling price of oil, efficiency is extremely important to building a sustainable franchise. Continental has been able to successfully acquire properties and set up rigs to drill the wells while maintaining a very attractive cost per barrel. Financial leverage can be a dangerous thing in any business and the oil industry is no stranger to the game. Analysts consider Continental’s balance sheet to be conservative with a 20% debt to cap rate. Since the industry is very capital intensive, it often takes significant financing to be able to fund a drilling project as wide as CLR’s.
Oil and natural gas sales for the year ending December, 2007 were $582.2M, a 20% increase over sales of $483.6M for the comparable period of 2006. Production expenses increased $28.2M or 43% during the year ending December 2007 to $93.6M from $65.4M during the year ending in 2006. Production taxes, which turned out to be a positive, only increased $1.6M during the year in 2007 to $12.9M from $11.3M during 2006. And finally, Exploration expenses increased $14.5M in 2007 to $19.7M due primarily to an increase in dry hole expense of $11.9M and an increase in seismic expenses of $2.0M. The stock is breaking to new highs after the positive earnings announcement this week. With earnings expected to grow quickly in 2008 and 2009, the P/E multiple still looks attractive at 19.1 and the supply/demand dynamics are interesting as the fairly-new public company is attracting the attention of large institutional buyers for the first time. The company does not pay a dividend at this time, choosing instead to plow cash flow back into its business, but the growing value for shareholders appears very promising.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, May 02, 2008
BetterTrades looks at North American Palladium Ltd. - May 2, 2008
Within the platinum family, palladium could promote itself as the Cinderella Metal. With platinum prices now above $1,500 per ounce, cousin palladium is getting a lot more attention from jewelry consumers. Palladium trades for a quarter of platinum's cost, a fact that Chinese consumers have deeply appreciated. China is the world's leading consumer of platinum for jewelry use, but buyer resistance to ever-increasing prices has allowed palladium jewelry to make substantial inroads. More than a fifth of the world's net palladium supply now goes to jewelry, with most of the demand arising in China. Like platinum, palladium can be fashioned into jewelry as a stand-alone or alloyed with other metals. Palladium, for example, can be substituted for nickel in the manufacture of white gold. Palladium, in fact, actually cost more than platinum back in 2001. The technology to efficiently cast palladium as jewelry didn't exist then. With that problem now resolved, jewelry use has spiked as the price trajectories of platinum and palladium reversed. The metal has industrial applications as well: in dentistry, in automotive components and in electronics. Russia's the top producer of palladium, with at least half the world share, followed by South Africa, the United States and Canada.
North American Palladium Ltd. (PAL) is a producer of platinum group metals (PGMs). North American Palladium's principal properties and projects are the Lac des Iles property (including the Lac des Iles mine and the Offset High Grade Zone (OHGZ), the Shebandowan West Project and the Arctic Platinum Project (APP). During the year ending December 31, 2007, the concentrator processed 5,006,383 tons of ore or 13,716 tons per calendar day at an average palladium head grade of 2.39 grams per ton and an average palladium recovery of 74.8%. In December of 2007, the Company earned a 50% interest in the former producing Shebandowan mine and the surrounding Haines and Conacher properties pursuant to an option and joint venture agreement with Vale Inco. The Company owns and operates the Lac des Iles mine located 85 kilometers from Thunder Bay, Ontario, Canada. The Lac des Iles mine consists of an open pit mine, an underground mine and two processing plants. The primary deposit on the property is the Roby Zone, a PGM deposit. The OHGZ is located on the Lac des Iles property. The OHGZ is the fault-displaced continuation of the Roby Zone mineralization and is located below and approximately 250 meters to the west of the Roby Zone. The Shebandowan West Project contains a series of nickel-copper-PGM mineralized bodies and is located approximately 100 kilometers southwest of the Company's Lac des Iles mine. In October of 2007, the Company announced the completion of a NI 43-101 compliant mineral resource estimate for the Shebandowan West Project by an independent Qualified Person. The APP is comprised of a series of advanced-stage nickel-copper-PGM exploration projects located approximately 60 kilometers south of the city of Rovaniemi, Finland. The Company is party to an agreement with subsidiaries of Gold Fields Limited of South Africa (Gold Fields) entitling it to earn up to a 60% interest in the APP. As of December 31, 2007, three areas of the APP have been explored by North American Palladium: the Suhanko deposits, the Narkaus deposits, and the Penikat deposits.
Palladium's many emerging usages relate to the fact that it defies a physics law. It is a solid metal, but it absorbs hydrogen gas, and lots of it. Palladium can absorb up to 900 times its own volume of hydrogen. It also absorbs deuterium, a heavier form of hydrogen with an extra neutron in its nucleus. Palladium's absorption of deuterium is extremely important that I will talk about later. Since palladium absorbs hydrogen, that makes it very useful. Like platinum, it can be used as a catalyst in many important industry chemical reactions, like oil refinery and fertilizer production, synthetic fiber etc. It is most widely used in auto-catalysts to reduce air pollution. Palladium is also used in hydrogen purification. Both platinum and palladium can be used as a catalyst in fuel cell batteries, a red hot industry sector being developed. There are already hydrogen fuel cell vehicles being driven on American roads, and hydrogen refueling stations in New York and Shanghai. Commercial hydrogen fuel cell vehicles will come to the mass market next year. There are also miniature fuel cell batteries, called Direct Methanol Fuel Cell [DMFC], being developed for mobile electronics, like cell phones, laptop computers and digital cameras, providing extremely long lasting battery power. Such consumer fuel cell devices will also go to the mass market beginning next year. The point is all fuel cells must consume PGM metals as catalyst. So that will be a booming demand to drive PGM metal prices to crazily high levels, which will definitely help the stock prices of North American Palladium in the long term.
Released just a few days ago, PAL announced a rare world record breaking event that does not happen often. They broke the old record of the highest grade PGM mine bodies. PAL can now proudly claim they now own the richest PGM mine in the whole world, in terms of grams of PGM metals per ton ores. And it's right in their backyard. The drill hole revealed PGM grade as high as 29.69 grams per ton, or almost one troy ounce per ton, 29.69 grams per ton. South Africa is the world's largest PGM metal producer, supplying 85% of the world's platinum and 35% of palladium. But typical ore grades for the South African PGM ores are no more than 4 to 5 grams of PGM per ton ores. They are making handsome profit only thanks to a much higher percentage of platinum versus palladium. The Russian Norilsk (NILSY) nickel mine, the largest palladium producer in the world, boasts a PGM grade more than twice that of South Africa's, but Norilsk mines’ PGM grade is only 10 grams per ton. That is how impressive this recent find for PAL is. PAL will be mining up to 30 grams per ton of ore, instead of 2 grams/ton, in the near future. No wonder PAL insiders have been quietly buying up shares from open market,
The stock price of PAL has seen some nerve wrecking movement in recent months. From the high of $12-plus in May of 2007, to the heart breaking plummet into the low $3 range in mid December, the struggle on the bottom till mid January of this year, and then a dramatic and powerful rally all the way to $9, and then fall back in the metals correction to the current price in the low $5. Hopefully, with the company’s earnings report to be released on May 12th, the 1Q of 2008 will prove to be a very profitable one and help propel the stock up to where it has traded in the not too distant past. Shares of PAL finished today’s trading session up more than 6%, or $0.33, at $5.22.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
North American Palladium Ltd. (PAL) is a producer of platinum group metals (PGMs). North American Palladium's principal properties and projects are the Lac des Iles property (including the Lac des Iles mine and the Offset High Grade Zone (OHGZ), the Shebandowan West Project and the Arctic Platinum Project (APP). During the year ending December 31, 2007, the concentrator processed 5,006,383 tons of ore or 13,716 tons per calendar day at an average palladium head grade of 2.39 grams per ton and an average palladium recovery of 74.8%. In December of 2007, the Company earned a 50% interest in the former producing Shebandowan mine and the surrounding Haines and Conacher properties pursuant to an option and joint venture agreement with Vale Inco. The Company owns and operates the Lac des Iles mine located 85 kilometers from Thunder Bay, Ontario, Canada. The Lac des Iles mine consists of an open pit mine, an underground mine and two processing plants. The primary deposit on the property is the Roby Zone, a PGM deposit. The OHGZ is located on the Lac des Iles property. The OHGZ is the fault-displaced continuation of the Roby Zone mineralization and is located below and approximately 250 meters to the west of the Roby Zone. The Shebandowan West Project contains a series of nickel-copper-PGM mineralized bodies and is located approximately 100 kilometers southwest of the Company's Lac des Iles mine. In October of 2007, the Company announced the completion of a NI 43-101 compliant mineral resource estimate for the Shebandowan West Project by an independent Qualified Person. The APP is comprised of a series of advanced-stage nickel-copper-PGM exploration projects located approximately 60 kilometers south of the city of Rovaniemi, Finland. The Company is party to an agreement with subsidiaries of Gold Fields Limited of South Africa (Gold Fields) entitling it to earn up to a 60% interest in the APP. As of December 31, 2007, three areas of the APP have been explored by North American Palladium: the Suhanko deposits, the Narkaus deposits, and the Penikat deposits.
Palladium's many emerging usages relate to the fact that it defies a physics law. It is a solid metal, but it absorbs hydrogen gas, and lots of it. Palladium can absorb up to 900 times its own volume of hydrogen. It also absorbs deuterium, a heavier form of hydrogen with an extra neutron in its nucleus. Palladium's absorption of deuterium is extremely important that I will talk about later. Since palladium absorbs hydrogen, that makes it very useful. Like platinum, it can be used as a catalyst in many important industry chemical reactions, like oil refinery and fertilizer production, synthetic fiber etc. It is most widely used in auto-catalysts to reduce air pollution. Palladium is also used in hydrogen purification. Both platinum and palladium can be used as a catalyst in fuel cell batteries, a red hot industry sector being developed. There are already hydrogen fuel cell vehicles being driven on American roads, and hydrogen refueling stations in New York and Shanghai. Commercial hydrogen fuel cell vehicles will come to the mass market next year. There are also miniature fuel cell batteries, called Direct Methanol Fuel Cell [DMFC], being developed for mobile electronics, like cell phones, laptop computers and digital cameras, providing extremely long lasting battery power. Such consumer fuel cell devices will also go to the mass market beginning next year. The point is all fuel cells must consume PGM metals as catalyst. So that will be a booming demand to drive PGM metal prices to crazily high levels, which will definitely help the stock prices of North American Palladium in the long term.
Released just a few days ago, PAL announced a rare world record breaking event that does not happen often. They broke the old record of the highest grade PGM mine bodies. PAL can now proudly claim they now own the richest PGM mine in the whole world, in terms of grams of PGM metals per ton ores. And it's right in their backyard. The drill hole revealed PGM grade as high as 29.69 grams per ton, or almost one troy ounce per ton, 29.69 grams per ton. South Africa is the world's largest PGM metal producer, supplying 85% of the world's platinum and 35% of palladium. But typical ore grades for the South African PGM ores are no more than 4 to 5 grams of PGM per ton ores. They are making handsome profit only thanks to a much higher percentage of platinum versus palladium. The Russian Norilsk (NILSY) nickel mine, the largest palladium producer in the world, boasts a PGM grade more than twice that of South Africa's, but Norilsk mines’ PGM grade is only 10 grams per ton. That is how impressive this recent find for PAL is. PAL will be mining up to 30 grams per ton of ore, instead of 2 grams/ton, in the near future. No wonder PAL insiders have been quietly buying up shares from open market,
The stock price of PAL has seen some nerve wrecking movement in recent months. From the high of $12-plus in May of 2007, to the heart breaking plummet into the low $3 range in mid December, the struggle on the bottom till mid January of this year, and then a dramatic and powerful rally all the way to $9, and then fall back in the metals correction to the current price in the low $5. Hopefully, with the company’s earnings report to be released on May 12th, the 1Q of 2008 will prove to be a very profitable one and help propel the stock up to where it has traded in the not too distant past. Shares of PAL finished today’s trading session up more than 6%, or $0.33, at $5.22.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, May 01, 2008
BetterTrades looks at Magna International Inc. - May 1, 2008
Magna International Inc. (MGA), North America's largest auto-parts maker, announced that the company’s 1Q earnings declined 5% as production declined in North America and on some vehicles it assembles for carmakers. However, the profits did beat analysts' estimates and the company's shares increased in today’s trading session. Net income for the firm declined to $207M, or $1.78 a share, from $218M, or $1.96, a year earlier, the company made it known today in a statement. As for the upside, sales increased 3.1% to $6.62B as Magna has sought to overcome slumping North American auto sales at General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC, its three biggest customers, by winning new contracts in Eastern Europe, India and Asia. North America, did however, account for 54% of the company's revenues last year. The per-share net income that Magna was able to post was more than the $1.55 average of analyst estimates, while the average for adjusted earnings was $1.52. For the full year 2008, the company now expects sales to be between $25.5B and $26.8B. Earlier, the company expected to report sales to be between $24.9B and $26.2B, while analysts have revenue estimates of $25.63B for fiscal 2008. The company also expects full year 2008 complete vehicle assembly sales to be between $3.9B and $4.2B. In addition, the company expects that full year 2008 spending for fixed assets will be in the range of $900M to $950M. Magna gained $4.39, or 5.9%, to $79.02 in trading, which would be the biggest daily percentage gain in almost a year.
Magna International Inc., founded in 1905 and incorporated in November, 1961, is a supplier of automotive systems, assemblies, modules and components. The Company designs, develops and manufactures automotive systems, assemblies, modules and components, and engineers and assembles vehicles for sale to original equipment manufacturers (OEMs) of cars and light trucks in North America, Europe, Asia and South America. As of December 31st, 2007, Magna had 241 manufacturing facilities and 62 product development and engineering centers in 23 countries. Magna's product capabilities span a number of automotive areas, including interior systems, seating systems, closure systems, metal body systems, metal body and chassis systems, vision systems, electronic systems, exterior systems, powertrain systems, roof systems, as well as complete vehicle engineering and assembly. The company currently employs nearly 84,000 workers and is headquartered in Aurora, Canada. Magma International Inc. operated as a subsidiary of MI Developments Inc. (MIM).
Despite the trouble hitting the auto industry, Magna shares represent an attractive valuation, trading at 3.7 times 2008 estimated earnings. By comparison, its industry rivals are trading at about 5.7 times earnings. Magna’s net cash stash of $2.95B or $25.45 per share, and available credit of another $1.59B puts the company in an excellent position as competitors struggle through the difficult industry restructuring process. Magna also has the power to buy back stock and make acquisitions. The one significant risk to the company is Chrysler which represents an estimated 12% of Magna’s overall sales. In the first two weeks of April, Chrysler sales fell 27.5% overall and sales of its minivans, for which Magna supplies a high content of parts, fell 50%. Another risk that may affect the financial position of Magna is General Motors Corp. (GM), a major Magna customer, has been forced to idle or slow production at almost 30 factories and lay off thousands of workers temporarily as the work stoppage drags onward. Positively, Magna's alliance with Oleg Deripaska's Russian Machines Inc. has given it the upper hand in the Russian auto marketplace, ahead of rivals Toyota (TM), which is planning to build its second production facility, and General Motors, which had to import approximately 30% of the cars it sold in Russia during the 4Q of 2007.
Looking ahead in 2008, Magna has to hesitate when making full-year estimates as the potential for relatively flat revenue and lower production expectations were offset by the potential that the investments being made to accelerate revenue growth in fast-growing emerging markets such as Russia and China will bring. With that being said, estimates for light vehicle production are approximately 14.4 million units in North America and 15.6 million units in Europe, compared to 15.1 million and 15.8 million in 2007 for North America and Europe, respectively. Also, the average dollar content per vehicle in North America is estimated to be between $855 and $885 and between $440 and $465 in Europe, compared to between $845 and $875 for North America and between $410 and $435 for Europe. As such, it may also be foreseeable that the Euro will depreciate against the dollar and settle back into the $1.20 to $1.30 range, which in turn will help with European exports. The “Buy” rating on Magna shares reflects Magna’s attractive equity valuation, solid growth prospects, net debt-free balance sheet, and robust free cash flow outlook. Its 12-month price target of $110 is down slightly from its previous target of $115, but Magna’s manufacturing and engineering capability, financial strength, and skilled management team should allow the company to grow and prosper despite industry turmoil.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Magna International Inc., founded in 1905 and incorporated in November, 1961, is a supplier of automotive systems, assemblies, modules and components. The Company designs, develops and manufactures automotive systems, assemblies, modules and components, and engineers and assembles vehicles for sale to original equipment manufacturers (OEMs) of cars and light trucks in North America, Europe, Asia and South America. As of December 31st, 2007, Magna had 241 manufacturing facilities and 62 product development and engineering centers in 23 countries. Magna's product capabilities span a number of automotive areas, including interior systems, seating systems, closure systems, metal body systems, metal body and chassis systems, vision systems, electronic systems, exterior systems, powertrain systems, roof systems, as well as complete vehicle engineering and assembly. The company currently employs nearly 84,000 workers and is headquartered in Aurora, Canada. Magma International Inc. operated as a subsidiary of MI Developments Inc. (MIM).
Despite the trouble hitting the auto industry, Magna shares represent an attractive valuation, trading at 3.7 times 2008 estimated earnings. By comparison, its industry rivals are trading at about 5.7 times earnings. Magna’s net cash stash of $2.95B or $25.45 per share, and available credit of another $1.59B puts the company in an excellent position as competitors struggle through the difficult industry restructuring process. Magna also has the power to buy back stock and make acquisitions. The one significant risk to the company is Chrysler which represents an estimated 12% of Magna’s overall sales. In the first two weeks of April, Chrysler sales fell 27.5% overall and sales of its minivans, for which Magna supplies a high content of parts, fell 50%. Another risk that may affect the financial position of Magna is General Motors Corp. (GM), a major Magna customer, has been forced to idle or slow production at almost 30 factories and lay off thousands of workers temporarily as the work stoppage drags onward. Positively, Magna's alliance with Oleg Deripaska's Russian Machines Inc. has given it the upper hand in the Russian auto marketplace, ahead of rivals Toyota (TM), which is planning to build its second production facility, and General Motors, which had to import approximately 30% of the cars it sold in Russia during the 4Q of 2007.
Looking ahead in 2008, Magna has to hesitate when making full-year estimates as the potential for relatively flat revenue and lower production expectations were offset by the potential that the investments being made to accelerate revenue growth in fast-growing emerging markets such as Russia and China will bring. With that being said, estimates for light vehicle production are approximately 14.4 million units in North America and 15.6 million units in Europe, compared to 15.1 million and 15.8 million in 2007 for North America and Europe, respectively. Also, the average dollar content per vehicle in North America is estimated to be between $855 and $885 and between $440 and $465 in Europe, compared to between $845 and $875 for North America and between $410 and $435 for Europe. As such, it may also be foreseeable that the Euro will depreciate against the dollar and settle back into the $1.20 to $1.30 range, which in turn will help with European exports. The “Buy” rating on Magna shares reflects Magna’s attractive equity valuation, solid growth prospects, net debt-free balance sheet, and robust free cash flow outlook. Its 12-month price target of $110 is down slightly from its previous target of $115, but Magna’s manufacturing and engineering capability, financial strength, and skilled management team should allow the company to grow and prosper despite industry turmoil.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
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