A Quick Look At BCT Technology Latest Earnings

It's been a long time since I had updated on this smallish ACE Market stock, BCT Technology.

Here are my previous postings: BCT , BCT Part; II, BCT III and Update on BCT

And as mentioned in the last posting made last May 2008, BCT was not looking good at all.

Warned back then...

• And besides the lack of earnings issue, the company's balance sheet is deteriorating as well.
  
  And it's no wonder why the stock is getting punished.

I just made a brief update on the earlier table posted in the posting Update on BCT.

BCT latest earnings is highlighted in yellow.

The lack of sales revenue is rather alarming and needless to say the losses is a worry. And the company's balance sheet deterioration has worsen dramatically.

And needless to say this is reflected perfectly in the company's stock chart.

Update on BCT

Here's an update to the following postings, BCT , BCT Part; II and BCT III

BCT announced its earnings last Friday. And yes, it still isn't a pretty sight.

And besides the lack of earnings issue, the company's balance sheet is deteriorating as well.

And it's no wonder why the stock is getting punished.

Makes me wonder about all the bullish projections made by HwangDBS and KN mentioned in the posting, BCT III .

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.

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.

Yet another clear destruction of market capital in another Messdaq stock!

BCT III

My Dearest Doc,

Here is an update to posting: BCT Part II

BCT announced its earnings yesterday. I have updated the earnings table.



Extremely early days but I am more than likely to be sceptical cause the first 2 quarters of fy 07 earnings (3.546 + 2.720) is less than the last 2 quarters of its fy 06 (2.335 + 4.015). However, it's still very much early days for now.

I would compare what this earnings with what I had written in the previus posting ( BCT Part II ). (Added new comments in italics)

>>>>>

Total earnings for the 3 quarters is some 9.896 million. ( Total net earnings for these 4 quarters is now 12.616 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%. (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. (We now have 4 quarters of earnings and they only total 12.616 million. Based on these earnings indications, yes BCT would probably perform much better than its last fiscal year earnings of 10.5 million... )

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? (At this rate, the earnings growth is simply not going to be as terror as projected!)

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.

How? As mentioned earlier, we now have 4 quarters of earnings and they only total 12.616 million. Based on these earnings indications, yes BCT would probably perform much better than its last fiscal year earnings of 10.5 million... which is decent by all means BUT the performance shown by BCT simply pales in comparison to what HDBS and KN had projected.

Rgds

BCT Part II

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

BCT

My Dearest Doc,

History.

June 27 2006. Posted on Business Times.

• MSC-status BCT Tech develops, design and markets mixed signal chip components to manufacturers of products for computer and consumer markets. It develops standard and custom-made chips for areas of power management, power supply and solid state lighting.
  
  BCT Tech is expected to be listed on Mesdaq market of Bursa Malaysia Bhd in the third week of July. It will be the first fabless integrated circuit (IC) company to make a debut on Mesdaq.
  
  The company is making a public issue of 12.2 million new shares of 10 sen par value each at a price of RM1.23 per share. Of the total new shares, one million will be available for public application and 1.2 million for the directors, eligible persons and business associates of BCT Tech and its subsidiaries. The remaining 10 million shares will be placed out to selected investors.
  
  Following the public issue, BCT Tech will be making a one-for-one bonus issue of 60.98 million, with ex-bonus price of 61.5 sen per share.
  
  BCT Tech expects to raise RM15 million from the public exercise, of which RM4.5 million will be spent on research and development, while RM4 million will be allotted for business development and marketing to drive its expansion. Another RM4.7 million will be utilised for working capital.

July 1 2006. BCT to make analogue and mixed-signal chips.

• Chip designer
  
  It appears that intense focus on technology is the main driver of this company’s growth. Over the past three years, BCT has spent more than 27% of its revenue on research and development.
  
  The fruit of R&D has enabled the company to have more than 25 chips in its catalogue, 46 proven analogue and digital intellectual properties. And of course, these figures will continue to grow as the company expands.
  
  Despite the fact that BCT first shipped its products to its clients in 2004, the growth and acceptance of its chips have been pretty phenomenal.
  
  Last year, the company grew by 110% and 527% on revenue and net profit respectively. This was mainly derived from the sales of its products to tier 2 and tier 3 players.
  
  BCT is working with a few tier-1 customers on future chip products currently at various stages of development. With this development, BCT’s chief executive officer and founder Ken Lee expects to continue growing revenue aggressively.
  
  Lee says that accessing tier 1 customers for its application specific standard product (ASSP) products is part of its mid-term plan to leapfrog its growth.
  
  “The average size of the current ASSP customer is between 50,000 and 200,000 units per month. With a tier 1 customer, potentially, you are looking at 300,000 to over 2 million units per month,” he says.
  
  For its financial year (FY) ending December 2006, BCT is targeting to grow revenue 149% to RM50.61mil, while net profit is expected to grow 74% to RM10.42mil.
  
  While one may think that profit margins of 21% might be pretty unsustainable, Lee begs to differ.
  
  “We are not producing “Me too” products. If we were, then we would have to worry about price erosion in our margins. But our chips are high-tech chips with scarce alternatives,” he says.

July 11 2006. Business Times

• BCT Technology stock a fair value at RM1.20
  
  July 11 2006
  
  CHIP design house BCT Technology Bhd, which will soon be listed on Mesdaq, has locked in contracts that could contribute to a 74.6 per cent and 60.9 per cent jump in net profit for this year and 2007 respectively, a research house said.
  
  Kenanga Retail Research said it pegs the fair value of the stock at RM1.20, which implies 95.1 per cent upside over the initial public offering (IPO) price.
  
  BCT Tech’s IPO price is 61.5 sen after a one-for-one bonus issue upon the listing.
  
  “At our RM1.20-target price, BCT Tech shares would be trading at a financial year 2006 and 2007 price earnings of 14 times and 8.7 times, respectively,” Kenanga said in a research note.

July 22 2006, Business Times

• BCT Technology is the first fabless company, producing analogue and mixed-signal chips, to be listed on the Mesdaq market.
  
  Being fabless, it only designs and develops semiconductor chips but does not manufacture them.
  
  BT Technology shares opened with a premium of 15.5 sen, or 25.2 per cent, at 77 sen against its ex-bonus issue reference price of 61.5 sen.
  
  It closed 11.5 sen or 18.7 per cent higher at 73 sen with 18.72 million shares traded.

Jan 13, 2007. BCT Tech is set to meet its ambitious growth target

• Up to the nine months of September 2006, BCT has only achieved cumulative net profit of RM6.52mil on the back of RM28.42mil in revenue. Should BCT achieve the full year forecast, it would mean that its final quarter itself is delivering approximately 40% of its entire financial year.
  
  “We are quietly confident of achieving the RM10mil,” says BCT's founder and chief executive officer Ken Lee.
  
  Adds BCT's fellow founder and executive director YP Chong. “We are preparing the accounts for audit now, and based on preliminary numbers, we are on target for our profit forecast.”
  
  Assuming that the profit forecast is in the bag, then based on BCT's current share price of 79 sen, the stock would be trading at 9 times (x) historical price earnings ratio (PER), which appears rather attractive.
  
  For 2007, K&N Kenanga head of retail research Teoh Cheng Guan appears very positive on this company. He says that essentially locked in contracts will result in a 60.9% jump in FY07 net profit to RM16.9mil.

26/2/2007. BCT announced its Q4 earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2006

BCT did 10.531 million. This is what the company said in its notes.

• The Group's recorded revenue and profit before tax of approximately RM17.921 million and RM4.015 million respectively for the current financial quarter, which were approximately RM3.530 million or 24.53% and RM1.680 million or 71.95% higher than the immediate preceding quarter. The increases in revenue and profit before tax were mainly due to the increased sales of ASSP products in the current financial quarter as compared to the immediate preceding quarter . The higher profit margin recorded in the current financial quarter as compared with the immediate preceding quarter was mainly contributed by the introduction of new ASIC products that have higher selling price in the current financial quarter. The increased trade receivables of approximately RM 19.775 million as compared to the immediate preceding quarter was in tandem with the increased revenue generated during the period. Inventory levels also recorded an increase of RM 21.751 million to RM22.971 million as compared to the immediate preceding quarter. This includes buffer inventory and raw materials (WIP wafer) committed by the Company to meet the projected sales demand for first half of year 2007.

14/5/07. Quarterly rpt on consolidated results for the financial period ended 31/3/2007

This is what BCT has achieved since listing.

Margin improved but sales revenue was down a lot.

This is what the company said in its notes.

• The Group's recorded revenue and profit before tax of approximately RM9.313 million and RM3.546 million respectively for the current financial quarter, are approximately RM8.608 million or 48.03% and RM0.469 million or 11.68% lower than the immediate preceding quarter. The decreases in revenue and profit before tax were mainly due to the slower sales of ASSP products in the current financial quarter as compared to the immediate preceding quarter due to the longer factory down time during the festive season coupled with the shorter number of business days during the first quarter of the year. The higher net profit margin recorded in the current financial quarter as compared with the immediate preceding quarter was mainly contributed by the sales mixed in the current financial quarter which consists of more products with higher selling price and gross margin. The trade receivables decreased by approximately RM16.865 million as compared to the immediate preceding quarter due to management’s decision to tighten credit control. Inventory levels also recorded a decrease of RM3.734 million to RM19.236 million as compared to the immediate preceding quarter. The Company will aggressively reduce its buffer inventory with the aggressive marketing strategy and timely rolling out of its planned new products for the coming quarter in 2007.

Issue to watch. Dilutions of earnings and note KN.

• BCT TECHNOLOGY BERHAD ("BCT" OR "COMPANY) PROPOSED PRIVATE PLACEMENT OF UP TO 12,196,000 NEW ORDINARY SHARES OF RM0.10 EACH IN BCT REPRESENTING 10% OF THE EXISTING ISSUED AND PAID-UP SHARE CAPITAL OF BCT ("PROPOSED PRIVATE PLACEMENT")
  
  On behalf of the Board of Directors of BCT ("Board"), Kenanga Investment Bank Berhad (formerly known as K & N Kenanga Bhd) ("Kenanga") is pleased to announce that the Company proposes to undertake a private placement of up to 12,196,000 new ordinary shares of RM0.10 each in BCT ("Placement Shares") representing 10% of the existing issued and paid-up share capital of BCT to investors to be identified.

2nd April 2007, HDBS iniates coverage.

• We accord BCTT a conservative price target of RM1.70, which is based on 8x FY08 EPS, and is a 38% discount to comparable stocks in this region. With a 40% 3-year CAGR, the target price implies a conservative PEG of only 0.20x.

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.

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.

Too little info for me to comment more.

rgds