My Dearest Doc,
Finished the posting BCT late. I do feel that there were stuff I did not mention as I had I did a fairly rush job on it.
Firstly, here is BCT's quarterly earnings so far.
Total earnings for the 3 quarters is some 9.896 million.
Regarding the last two paragpraphs. The comments from HDBS and KN.
Jun 8th, 2007, from HDBS
- Cheap stock. With 3-year CAGR of 40%, BCTT shares are trading at only 5.0x FY08F EPS. We believe it should be worth 8x FY08 EPS or RM1.70/share, which implies a very conservative 0.2x PEG.
Key note for me is 3-year CAGR of 40%.
This means that HDBS is really assuming and expecting an amazing growth for BCT. Have a look at HDBS earnings table posted below.
So, BCT which earned 10.5 million for its last fiscal year ( its current earnings for 3 quarters is 9.896 million) is expected to earn 25.8 million by FY 2008.
And because it is expected to do so good, and based on this expected achievement, BCT is then reasoned cheap by HDBS.
For it's rather optimistic.
Let's compare with KN.
Jun 11th, 2007, from KN
- Maintain BUY with a revised 12-month target price of RM1.56 (+30.0%) based on a FY08 P/E of 10.0x (2-year (FY06-FY08) PEG ratio of just 0.52x). BCTT’s FY07 and FY08 net profit growth of 45.9% and 38.6% y-y remain respectable despite our slight exchange rate driven earnings downgrades. At RM1.03, BCTT shares are trading at highly attractive FY07 and FY08 P/E of 8.8x and 6.6x, respectively.
My opinion? Strange. Cos how could "BCTT’s FY07 and FY08 net profit growth of 45.9% and 38.6% y-y remain respectable" when this is but just a projection. Doesn't BCT has to achieve these targets before being getting its respects?
Anyway, here is KN's earnings table projection for BCT.
KN's net earnings projection for BCT's FY 2008 is 20.9 million. Which is much lower than HDBS projection of 28.9 million!
So for me, it appears to me, that the high target prices are assigned to BCT because both HDBS and KN expects fantastic growth for BCT.
Is this achievable?
For me, this is one of the issue I would address. However, as it is, there isn't much data available but 3 quarterly earnings data from BCT.
rgds
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5 comments:
Electronic chips and devices have a very peculair habit - erosion of prices.
They are rapid replaced with new advances in technology at the rate stipulated by Moore's every 18 months. Very frightening. Unless the are the leaders in the field their products become obsolete before the manufacturing equipment are fully depreciated. Thus their window of opportunity is very small. To project profit become very tricky and unreliable. Is BCT any different from the run of the mill? A hit and run is a probably the right strategy here.
If they are not producing the common "me too" product, that means their product acnnot be a direct replacement of others Mix Signal products by others, which also means they have to do their design-win with their potential customers (where? US, Europe, China?). Who will do it for them? their Distributors? or they have to have offices and Application engineers around the world.... sounds like they have lots of thing to do.
Worst when it comes to ASSPs, these are Application Specific products, even high risk. I dun believe they have the ablility & expertize.
1:28 PM
Guys thanks for the info. I am sure that Doc will find your comments extremely helpful.
Cheers
Thanks Madviruz and SS for your indept knowledge on BCT" products and Moola highlighting the salient point of the research report....make me wondering how on earth they are going to increase the revenue to such an extend in the coming two years to justify the target price.
I am not comfortable with hit and run strategic as at times hardly anytime to lokk at the market.
learned something and will study in detail again
tanhin
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