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Hutchinson Technology Inc. Message Board

  • longtimefollower longtimefollower May 1, 2013 12:08 AM Flag

    The story is delightfully, and deliciously intact here.

    Yeah, the new program "ramp" has been somewhat delayed...but who cares, when management gives critical guidance in the conference call, for an even BETTER future than originally expected. To wit:

    "While overall demand has been below the expectations that we had six months ago, our position and momentum on new customer programs is even stronger now than a quarter ago. The ramp to higher volumes on new programs should begin to increase our volume in the fourth quarter of this year.

    I also like the way they characterize the "new product" that sent the stock over $3.00 on heavy volume (initially), a few weeks ago:

    "We will keep you updated on our new business development progress in future calls as these opportunities become material to our overall results."

    (This sounds to me like they EXPECT the new business development to become "material" to the company. Personally, I also think a diversification away from the core suspension assembly business, that is successful, could allow HTCH to be valued at a much higher multiple of earnings, as it is potentially seen as a "technology" company that is its namesake.)

    Upshot:

    The losses are essentially over. I would expect another $4 or so million loss in fiscal Q3. But, personally, with the guidance for a likely ramp of the "new programs" in fiscal Q4, I would expect the company to return to profitability in fiscal Q4 (September 2013), and then BE PROFITABLE FOR EACH QUARTER GOING FORWARD.

    The question is: When will the Street decide to start discounting that wonderful future that we are on the cusp of? Will they wait until the "disappointing" June 2013 quarter is reported? Or, with management's increased confidence about the new programs a comin', will the Street start discounting that NOW? I'm not going to hazard a guess on the timing, but I WILL hazard a guess that the stock is more likely to be trading in the $4-7 range, imho, by the end of this calendar year, versus the $2.80 we are trading at now.

    Sentiment: Strong Buy

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    • Well said and right on.

      HTCH is still running way below the radar screen for most. Apparently many are not capable of multiplying 13 weeks by 8mil assys to get 104million.....and then realize that 104 is between 95 and 105. I am more confident than ever that every quarter of FY14 which starts Oct 1st is going to be profitable, very profitable.

      I am pleased that I was able to add another 10k shares today in the low 2.70s. After listening to the cc last night I was saying that anything below $3 was a big gift for today.

    • I should also say that the amount of the adjusted loss, at $4 million, was materially better than I expected. And the earning of a bottom line profit, on VERY SAVVY financial management of buying back bonds at a huge discount, is very gratifying indeed, as it effectively preserves the book value of the company from further erosion, from this point onward (other than the rather nominal loss expected in the current quarter we are in).

      Run rate of D&A, going forward is $40 M annually, versus $20 million in expected capex this year.

      R&D is going to slow down to $2.5 M a quarter, vs. the $3.5 M we've been seeing.

      Net debt, with the recent buybacks, appears to be down to little more than 50% of equity...quite manageable, considering the nature of the maturity schedule (nothing until 2015)....and the fact that I fully expect HTCH to be continuously profitable, for at least several quarters, starting, most likely, in the September quarter.

      Finally, I think management's overall tone in the conference call bespeaks of a high level of confidence. The new programs are, indeed, coming. The question that is most interest is, are we going to be getting to quarterly earnings of 10 cents, 25 cents, or 50 cents, eventually. That all depends, obviously, on how much market share and volumes can grow for HTCH. But even just returning to 10-15 cents a quarter in EPS, for a few quarters, could, and probably should, get the stock back to the $4-7 target range. And if the EPS numbers ESCALATE, sequentially, quarter after quarter, and the "momentum" people come in here....well then, "watch out" on the upside. Could be quite astronomical, in terms of the gains.

      Sentiment: Strong Buy

 
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