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  • bobforaps bobforaps Dec 8, 2012 3:02 PM Flag

    A mystery

    Volume Fri was under 250k shares. So--yes the share price has nearly tripled in 6 months. Everyone should be well satisfied except the few short positions. Yet something is missing. There does not seem to be any conviction from the institutions, even in the face of managements confirmation that the growth pattern was accelerating thru Dec. Stock prices reflect future value expectations. This company has demonstrated dynamic growth in both revenues and net income and confirmed that growth, at least in revenues is intact. Apparently there is something holding investors back. Forward earnings look like an easy $2 to $3 plus so we are trading at a very subdued price. I wonder why?

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    • I remember thinking something similar when it was at $5 with $5 of cash and a book value of $7 (before they did the capex), and again when it was at $6.50 and after we knew about the new contracts, and again when it was at $11 and there'd been a good quarter and we knew how high revenue would be the next quarter, so it's not surprising that the same feeling is still there at $15 after a great quarter and a higher dividend. Patience. It will be up again by the time they report the next quarter in a couple months, though still probably not as high as it should be. Also, there's still not a single analyst covering the stock. After they get a few analysts you can count on a better price.

      Another stock that's a sure thing is IMOS. A Taiwanese chip testing/packaging company at $10.58 with forward earnings around $2.50 and free cash flow (both forward and backward) close to $4. Just paid their first small dividend, and next year they'll start paying more than half of their profit in dividends. As great as NTE is, I have even more IMOS.

      Sentiment: Strong Buy

    • I think the Chinese factor is probably one reason. When investors see a small cap, relatively unknown Chinese stock with no analyst coverage report 100% plus revenue growth year over year, they often assume the company might be cooking the books.

      Then again most EMS stocks don't trade at very high forward P/E ratios to begin with either. JBL, FLEX, and SAMN all trade at a forward P/E of around 6. CLS is slight higher at 10.

      Assuming NTE can earn between $2-$3 a share the next 4 quarters, it is currently trading at a forward p/e of around 5-7. While it is within range of other EMS companies, NTE has better margins then the companies I mentioned the last 2 quarter and should have a much higher growth rate too.

      Gross margins for JBL, FLEX, SAMN and CLS are usually around 6-7%. The last 2 quarters NTE managed 9%. Going forward it will be important to see if NTE can manage to keep their margins at that level as revenue continue to ramp up.

      Currently the stock seems to be stuck around $15. Every rally attempt has been meet with a selloff back to $15 during the last week. It may very well stay around the $14-$16 range until earnings at the end of Jan. Similar to how the stock was stuck between the $10-$11 range between Sept to the first few days of Nov until NTE reported earnings on Nov 6.

    • If NTE can continue to execute, the price will go up. It is only a matter of time.

      If NTE can make $3/share, it won't trade for $15. I would guess in the mid 20's.

      If NTE raises the dividend, it will move higher yet.

      Right now China is a drag. In the future, it could be "hto" again. These things move in cycles.

      We'll see.

      Sentiment: Strong Buy

      • 1 Reply to dtejd1997
      • Agree with you. General mistrust of Chinese stocks, Chinese companies, Chinese accounting . If NTE has finally gotten it right and really can execute it is cheap and will definitely go much higher. Many of us here have probably known Namtai for many years. I personally think Namtai is going to have a great six months first half of 2013!

        Sentiment: Strong Buy

    • When I mention this stock to others, as soon as I say the company is in China they wish to hear no more.

      Sentiment: Strong Buy

      • 1 Reply to dangiteli
      • I think that is part of the reason this stock continues under the radar. Still, with the recent dynamic quarterly reports you would think serious investors would at least do some DD where they would discover this companys history, management and directors and the fact that they have been a listed company, first on Nasdaq then the NYSE for many years. They seem to have a very solid management team and a very good reputation over a long period. Discounting all that because they are Chinese, well I guess each investor has to make that call. I am not all in here but I have added over time and the future still looks good to me.