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VALENCE TECH INC Message Board

  • Highlowsel Highlowsel Sep 10, 2000 4:37 PM Flag

    CIBC Report, Part 1 of 2

    CIBC Report synopsis:
    Investment
    Conclusion.

    They reiterate their strong buy rating on VLNC, and
    state the company is now shipping commercial volumes of
    products to two customers. Milestones appear to be in
    place to drive the rapid acceleration of the production
    ramp and positive results forecast

    F1Q results
    of a net operating loss of $0.25 per share ($9.3
    Million) on revenue of $2 Million was ahead of their
    estimates of loss of $0.27 on revenues of $2.1 Million.


    They are leaving their estimates essentially unchanged
    at the current time. They've trimmed their revenue
    estimate slightly in Q2 due to a possible delay as Alcatel
    has requested a slight change to its package. This is
    potentially offset as Qualcomm is aggressively increasing
    demand. VLNC is ramping production slightly ahead CIBC's
    prior expectations and they expect VLNC to end the
    fiscal year in a position to meet their $100 million
    revenue target in FY2001.

    IBD Funding
    Update

    The company expects to begin receiving funding from
    the Irish Development Board for its Mollusk, Ireland
    manufacturing facility during Q2. The initial requirement was
    for the company to ship a minimum of $4 Million of
    product as a milestone (which will be met in Q2). CIBC
    believes this funding could approximate $14 Million. VLNC
    will be providing the IDB a business plan in August.


    Strong Demand for 2nd generation Lith-poly
    batteries

    VLNC began shipping its second-generation lithium
    polymer batteries. These batteries have a higher energy
    density than the first gen and the company has exceeded
    its energy density forecasts with its
    customers.

    Demand for Globalstar batteries strong

    VLNC is
    currently using the majority of its available capacity for
    shipments of batteries to QCOM for the Globalstar handset.
    The company indicated that demand currently exceeds
    capacity and that it is ramping quickly. We note that QCOM
    reported record shipments (31,000 units in Q3FY00) of
    Globalstar handsets during its last investor conference
    call. The current assembly line manufacturing the
    batteries has a capacity to produce 20 bi-cells a minute.
    CIBC believes that the configuration of the Qualcomm
    battery is 9 bi-cells per battery. VLNC is currently
    operating two lines running 24/7 for Qualcomm's
    requirements. This battery does not include any electronics
    with it. CIBC believes that VLNC may see additional
    follow on releases which would increase current volumes
    through the remainder of this fiscal year and through
    next fiscal year.

    French cell phone order will
    begin in Q2

    The French cell phone has been
    delayed by one month due to the customer requesting that
    VLNC ship the battery with extra electronics. The
    customer is currently evaluating samples of this PCB and
    CIBC believes that VLNC will begin volume shipments of
    batteries within the quarter.

    These electronics
    consists of a PCB with two IC's. VLNC is outsourcing the
    production of this PCB assembly to a Scottish manufacturer
    who then assembles the PCB with the battery pack.
    CIBC believes the electronics will add $1.50 to the
    ASP of the battery but there will not be an increase
    in gross margins for the product. The electronics
    were designed in Korea and are currently being
    manufactured in Korea and shipped to VLNC.

    CIBC
    believes there is a significant trend towards shipping the
    battery with the additional electronics included. It also
    appears that the company may begin to become the prime
    contractor with the repackagers as subcontractors.


    (cont.)

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    • CIBC was predicting $100 million in revenue in FY 2001. Try $8 million (of which at least $1.6 million is an accounting adjustment) in FY 2002. Think they still have that $50 target price though. LOL!

      http://messages.yahoo.com/bbs?.mm=FN&action=m&board=4687587&tid=vlnc&sid=4687587
      &mid=32972

    • Thanks for facts.

      Recalling the confusion
      on plant capacity and several anlysts projections of
      $, with no reference of what the "Unit" refered
      to.

      The first reference to " shipped with
      electronics" may be the key.

      Remember when Vlnc was so
      happy they could use the existing Het electronics, even
      though the recharge voltage was not the optimum for
      VLC.

      It is noted that the Danish firm got the contract
      for delivery of "bateries and elctronis"


      Soney China plant will deliver " complete batterie
      units with electronics"

      Your report indicate we
      are heading for a VLNC
      market control of a ready
      to use OEM pagged battery unit with
      electronics.

      Agreed, from now on, now more bi-cell, stacked
      cells, cell batterie film, but plant PO for unit
      batteries to fit the OEM product.

      This may be
      related to the slow ramp up.

      I am cocerned about
      CIBC Rport, mixing oranges and
      apples:

      >>>>>"Globalstar handsets during its last investor conference
      call. The current assembly line manufacturing the
      batteries has a capacity to produce 20 bi-cells a minute.
      CIBC believes that the configuration of the Qualcomm
      battery is 9 bi-cells per battery. VLNC is currently
      operating two lines running 24/7 for Qualcomm's
      "<<<<<<<<<<<<

      CIBC> believes<<<<
      Qualcomm battery is 9
      bi-cells?
      Is Q* a 18 bi-cell battery? just
      wondering.

      Just estimating Ericcsons T28 battery equivalent
      energy need in VLNC technology, I ended up with 18
      bi-cells for their 9v platform.

      Just another dull
      day.

    • "Boy, you longs bring out mean spirit in
      me."

      Maybe you wouldn't be so mean spirited if you had
      bought in at 2 5/8, 6, and 15 1/2 like I have. I wish
      you the very best of luck and skill in your
      investments. MN

    • Interesting board this weekend. Thanks to
      Highlowsel for the CIBC Report. Ducktax (or whatever) has
      shown a rare side of his "personality," namely, posts
      with emotional content! Lots of laughter and
      hyperbole. Hey, this is ok, but it sort of reminds one of
      MGV7 when he doesn't take his medication. A pronounced
      personality change. Montecito6 is back on the quiz circuit,
      following up on his negative beta quiz with a quiz on
      options. So far, the response has been underwhelming. Is
      this your final answer? Monte is definitely feeling
      ignored. Where are his old buddies, Mooter and Lipolymer?
      Have they lost interest? The soap opera continues.

    • 1. VLNC is currently using the majority of its
      available capacity for shipments of batteries to QCOM for
      the Globalstar handset...

      2. QCOM reported
      record shipments (31,000 units in Q3FY00) of Globalstar
      handsets during its last investor conference call.


      3. The current assembly line manufacturing the
      batteries has a capacity to produce 20 bi-cells a minute.
      CIBC believes that the configuration of the Qualcomm
      battery is 9 bi-cells per battery.
      [ERGO: Each line
      produces about 1.5m bi-cells per Q, or the makings of 200k
      batteries per Q]

      4. VLNC is currently operating two
      lines running 24/7 for ...

      [ERGO valence has the
      capacity right now to produce 400k batteries (3m cells)
      per Q, at an indicated cost of $90 ($10 per cell),
      resulting in potential sales of $30m this quarter
      alone.]

      [REDUCTIO: HOW CAN THEY PRODUCE $30m in batteries, on only
      $17m in contract sales!
      Yet Qualcomm is "demanding
      more production", meaning that we are, as usual,
      production constrained -- because we know that they did not
      need more than 30,000 batteries at the most]

      So
      according to these figures, valence can produce 7 times
      more than its only customer can use, yet the customer
      is demanding more production.

      MORE
      BUTTERMILK FOR THE ELVES AND BROWNIES, PLEASE!!

    • Capacity situation: 6X increase by end of
      2000

      VLNC is expected to receive the German assembly line
      ($11 million in costs) which includes: Assembly
      machine. Two high speed packagers (one for small cells
      capable of 72 batteries/minute). Degas machines. These
      are expected by March quarter of CY2001. The machine
      is capable of 160 bi-cells per minute (8X better
      than the current assembly lines in production) for
      batteries up to 4" x 8" in size. This machine is capable of
      producing 4.2 million batteries per year. Payments will be
      made in phases for this assembly line.

      CIBC
      believes that with all of the new assembly machines coming
      online that total capacity by the end of the calendar
      year will be approximately 6X that of Q1 or
      approximately 9.6 million batteries. They believe that total
      capacity may increase to 16.7 million units per year by
      September of 2001.

      High speed Arco assembly
      machines coming on line

      The first high speed line
      was brought online during the quarter in parallel to
      the existing line for the Qualcomm batteries and is
      currently producing batteries at approximately 33% of total
      capacity (35 bi-cells per minute). This machine will
      continue to ramp up during the quarter. The capacity of
      this new machine is 125 bi-cells per minute, a factor
      of 6X over the current assembly machine used to
      manufacture the batteries. A second high speed line is
      anticipated to come online and begin ramping up during the
      quarter and is dedicated at this time for the French cell
      phone battery order. One of these lines is configured
      so that it can make the larger sized batteries.


      Fable machine now online and ramping

      This
      machine has been brought on line during the quarter and
      is making batteries for Alliant Techsystems for a US
      Navy contract. The capacity for this machine is 8
      meters/battery per minute. This machine can be configured to
      produce batteries of any size up to 12" x
      12".

      VLNC has indicated that it has accepted smaller
      production orders for batteries during the quarter but did
      not make any press announcements. It will only be
      announcing significant size orders.

      Will install
      isopropyl alcohol distillation equipment to recycle
      chemical

      CIBC believes VLNC will be installing a $2.5 million
      isopropyl alcohol distillation recovery system during the
      quarter. It is felt this will save VLNC $0.50 per battery
      in costs associated with the purchase of the
      chemical as well as the disposal of it.

      Gen III
      battery on track to be in production by end of
      2000

      VLNC intends to be shipping third-generation lithium
      polymer batteries within six months. These batteries are
      expected to improve power densities by 20% over the second
      generation benchmark of approximately 150 watt hours/kg.
      There is no increase in manufacturing costs over Gen II
      batteries. CIBC believes Gen III technology may offer energy
      densities of approximately 40% better than the current
      competitive technology. Film is currently being manufactured
      in the Henderson, NV facility which is then shipped
      to Northern Ireland for processing to make
      batteries. VLNC is in the process of pre-sampling these
      batteries to customers. CIBC believes this new process
      could be in production before the end of CY2000. VLNC
      will be submitting its Gen III battery for UL
      approval.

      (cont.)

      • 1 Reply to Highlowsel
      • PDA opportunities

        CIBC believes lith-poly
        technology has the capability to meet next generation PDA
        power requirements (color displays, increased
        functionality, etc.) and that VLNC is in a first mover position
        to capture these design wins with its Gen II and III
        technology.

        Hanil-Valence on track for September
        launch

        This joint venture is currently not shipping any
        batteries but is ontrack to begin shipping in September,
        with initial production consisting primarily of cell
        phone batteries. The initial test battery results look
        promising and the company will undergo further quality
        auditing before final approval for production is given.


        May pursue patent infringements

        VLNC has
        indicated that it is currently exploring issues revolving
        around patent infringements of some of its patents and
        may pursue litigation against some companies. This
        includes infringements on packaging technology and
        materials.

        Interesting, eh? This pretty much isn't
        much different from what some of the bulls have been
        saying all along. But I felt it was necessary to put
        this here for the benefit of any/all new investors who
        might be interested in what one investment house,
        albeit one backing VLNC, has determined to date. For the
        full report reference the Multex site, and look for
        the CIBC 8/03/2000 $25 downloadable report.


        Highlow
        Disclosure, I hold a long term long position in VLNC.