Densitron Tech. Share Discussion Threads

[michaelmouse] 04/7/2011 07:57

AdamB1978 - Just in case you missed it:-

"Let's face it even if there had been a slight decrease in margins, which there hasn't, it's the bottom line that counts, and they are about to double earnings from 2010 to 2011. On this basis DSN deserves a prospective 15 times 2011 earnings. This gives fair value of 22.5p."

Trading statement was very clear that EPS would not disappoint because of visibility going forward. Doesn't suggest a decline in margins does it? Besides applying common sense means that a slight decrease in margins which substantially increases profits is a highly desirable.

Bad luck with AVS. Just as you tried to deramp it at just over a quid (sorry expressed concerns) it leapt up 20% again. Broker note with the £2.35 price target probably didn't help your cause.

Some advice. Don't waste time trying to deramp companies that are clearly doing well. Still plenty of time to buy these or AVS.

Michael.

[heartylaugh] 03/7/2011 22:52

In China the wage cost in increasing dramatically. Even in low end factories. It used to be that young people would come to the city and work hard, sleep in the dormitories and send most of their money home. These days the first week's money goes on a fancy haircut and the second weeks money on a mobile phone.

All European companies who have / are making money from the previously low Chinese pay rate should consider that wage costs are increasing rapidly.

It is also important to consider that factory manufacturing capacity and raw material lead times are increasingly difficult.

D.Y.O.R. etc.

Ho Ho,

H.L.

[adamb1978] 03/7/2011 21:49

MM - thanks for the reply. My figures for gross margin by half are as follows:

H1 07: 31.9%
H2 07: 29.8%
FY 07: 30.8%

H1 08: 31.0%
H2 08: 29.3%
FY 08: 30.1%

H1 09: 34.4%
H2 09: 31.0%
FY 09: 32.6%

H1 10: 30.7%
H2 10: 26.3%
FY 10: 28.1%

H1 11: 29.1%

Bizarrely, 09 was the strongest year. My concerns are that
(i) H1 has, for the past 4 financial years, seen a higher margin than H2. Were this to be repeated this year then you would have a margin of perhaps only 26% or 27%. I cant understand why this co would have seasonality however teh figures above suggest that this might be the case (though clearly isnt definitive prrof)
(2) out of the last 9 half years, the last two have been the lowest margin.

Am not trying to pick holes as the co has a lot of the positives which I look for...just trying to understand where things are heading.
Thanks

Adam

[michaelmouse] 03/7/2011 21:19

AdamB1978 - The gross margin decline shouldn't concern you unduly because there hasn't been one. If you look back at their previous results then you can quite clearly see that margins have consistently been around 29%-30%. Last week's trading update indicates that margins are again around this figure. The only oddity was 2009.

EPS for 2011 looks like it will be around 1.5p which is double last year's figure of 0.74p. Let's face it even if there had been a slight decrease in margins, which there hasn't, it's the bottom line that counts, and they are about to double earnings from 2010 to 2011. On this basis DSN deserves a prospective 15 times 2011 earnings. This gives fair value of 22.5p.

EPS forecast for 2012 is around 2.2p. Looks great value still.

Michael.

[adamb1978] 01/7/2011 11:54

Thanks Penguingardener. I wont ask about your username...

Had a look at the interims last year and the turnover oddity was as you explained.

The gross margin decline concerns me though as I would have expected a company which is at the cutting edge of an industry to be able to command high margins. Maybe they're buying components from suppliers in low countries which is seeing significant wage inflation and is be able to pass that on to DSN? Dont see that any volatile raw materials would represent a massive portion of input costs.....

[penguingardener] 30/6/2011 23:53

AdamB1978

Half 2 of 2010 was a catch-up from orders received in half 1 which could not be satisfied (Densitron design and procure as I understand it, don't manufacture themselves) Order intake should give a smoother pattern.

As regards margins, there does seem to have been some deterioration over time.

The house broker Westhouse seem to be forecasting about 1.5p eps for 2011 and then 2p+ for 2012: 2011 half 1 should be about 0.7p (based on being the same as the whole of 2010) so 1.5p looks about right for the year.

Suggests a reasonable share price of 15p-20p during the next 12 to 24 months, plus up to 7p/share if planning permission is obtained for Blackheath (medium term prospect) With a bit of luck the 2011 divi could be 0.5p, as the business has little cash requirement to prohibit this.

All IMHO DYOR

[adamb1978] 30/6/2011 23:27

....and a second quick question for all you wise people. Is there any reason why for the last 4 financial years the gross margin in H2 has been somewhere around 2% - 4% below the gross margin achieved in H1? Based on the recent trading statement, gross margins were about 29% in H1...what should we expect in H2?

Am not trying to pick holes in the company but just trying to think about what EPS is realistic in 2011 and 2012

Thanks

[adamb1978] 30/6/2011 23:14

Just started following this one....unfortunately a bit too late! (though it still looks cheap)

Trading statement looks great and teh comment re the bottom line is as clear as can be but can I ask people who know more about this company than I do one question:

Turnover for H1 of this year of £11m is about 10% down on that which was achieved in H2 of last year (£12.19m). Can someone help me understand this? I dont really see why there should be seasonality in this business....was there some big order in H2 last year? Why is the top line down?

Thanks

[michaelmouse] 28/6/2011 19:35

Updated with a brief paragraph about DSN.

Michael.

[owenski] 28/6/2011 13:54

Based on current M.cap and the first half profit update, full year going to be very much ahead of 2010, looks very cheap.

[valhamos] 28/6/2011 13:25

Nice and not unexpected considering the positive newsflow over recent months.

[michaelmouse] 28/6/2011 12:09

Well, that's the trading update we were looking for :).



I particularly like this bit:-

"Sales and gross profit have increased substantially and we expect to finish the first half with sales of approximately GBP11.0m and gross profit of GBP3.2m compared with GBP8.6m and GBP2.6m respectively achieved in the first half of 2010. We expect to achieve net profits for the first six months along similar lines to those achieved for the full year in 2010."

Although it's all very encouraging.



Michael.

[woodcot] 27/6/2011 13:00

Westhouse Securities this morning have released another buy note and more information/opinion.


Westhouse have reiterated a buy note with a new price target of 18p, a very interesting read indeed.


Weshouse are DSN's in house broker!

[penguingardener] 17/6/2011 15:07

Not my original post, but if you go to greenwich.gov.uk and follow the menus for Planning, use case no. 10/2477/F, you should find it.
No detail available of the appeal other than the date received of 25 May.

[woodcot] 17/6/2011 14:43

Yes Penguingardener, all interesting stuff.

Could you give a hyperlink to the planning or what I believe is the first stage to try and remove the MOL.

Thanks regards

Bill.

[penguingardener] 17/6/2011 09:25

All starting to bubble up nicely ready for the AGM on 28th June - should be seeing 15p for this soon.

IMHO DYOR

[penguingardener] 17/6/2011 09:22

Posted by exbeancounter on iii

LAND AT BLACKHEATH

Looks like the appeal went in on 27 May

Check it out on greenwich.gov.uk, planning ref 10/2477/F

May get an update around AGM

[penguingardener] 17/6/2011 09:21

Posted by SpikeyDT on iii
Densitron – bright future ahead LONG-TERM BUY
15/06/2011 Miles Nolan



Over recent years electronic displays group Densitron has undertaken a major restructuring exercise to streamline its operations. At the end of 2006 it sold its public information displays operation for £1 million, and at the beginning of 2007 the gaming arm was also disposed of.

The recent disposal of its 24.4 per cent stake in Taiwan-based display manufacturer Evervision completed the transformation. This generated £3.5 million and allowed Densitron to reward its investors with a 4p-per-share capital reduction and a 1p-per-share dividend – a significant chunk of the current share price. For income seekers the intention is to continue a progressive dividend policy, and on forecasts by house broker Westhouse such payments would be well covered.

The core business that remains is that of a designer and developer of electronic display solutions. These products range from LCD to touch screens and are used in applications such as pagers, hand-held terminals, control devices, cash machines, medical devices and even yachts. By using skilled engineers, it can provide a solution by customising display screens. The customer base is wide and includes Germany-based solar firm SMA and Orange.

Densitron has amassed a network of 35 different factories to source products from, which are largely in China. In a technology crazed world, demand for its range of technologies is on the up.

Orders booked last year soared 64 per cent to £21.8 million, as customers started to restock from recession lows. However, this recovery has continued with the current order book up 25 per cent to a robust £10.1 million.
The underlying performance in 2010 revealed a more than trebling of underlying profits to £700,000 (before the loss on disposal) – proof that Densitron is firmly back on the growth trail.

Densitron is targeting growth markets, with new displays and touch screen technology. Moreover, due to the relatively fixed nature of its cost base, as new orders flow through this drops straight to the bottom line.

The AIM-listed group employs 65 people and has a network of overseas offices to help win new business. With the help of distributors it sells into 35 counties so is well spread geographically. Last year 13 per cent of sales were recorded in the UK – proof of its international exposure. As its focus is on the i ndustrial marketplace, business tends to be repeat business.

Finance director Tim Pearson says, 'Our markets continue to grow and the outlook is encouraging.' Following the restructuring that has taken place and a refinancing exercise, Densitron has paid down substantial debts. It is now well positioned to continue its expansion and expects to deliver 'substantial growth' over the next three years. Organic growth is the most likely avenue for Densitron, but it will consider suitable acquisitions if appropriate.


Densitron also owns a 1.25 acre site in Blackheath, which is in the books for £500,000. It is a derelict strip of land on a private road and the plan is to seek development approval. An application for six houses at 4,500 square feet a go (such homes can sell for £2.5 million), has been rejected, but this is in the process of being appealed.

Value investor Peter Gyllenhammar owns a 29.8 per cent stake, however there are no notable institutions.

Densitron has valuable tax losses worth £1 million, which may take some time to exhaust due to its overseas operations. A trading update at the AGM on 28 June should confirm that current trading is strong.

With the shares trading on a prospective price/earnings ratio of seven, the rating appears anomalous. Westhouse predicts a 15p share price target, which is not unrealistic.

[woodcot] 10/6/2011 14:38

Michael,

Another nice positive movement today, AGM on the 28th and would expect a trading update which I believe will show the management have made progress. I'm pencilling in somewhere between 15p and 20p by year end.

At this stage I'm taking a 24 to 36 months view and would expect in that time period for the BH land to be sorted to max any possible value. Plus that time span will give the management the time to grow the Display's business.

I've very optimistic and believe your valuation of 30p to 50p is possible and in the meantime I'll sit tight and take a good dividend yield.

Regards

Bill.

[michaelmouse] 10/6/2011 12:44

woodcot - Thanks. I had read the reference to the land at Blackheath, and I agree that it's a potential bonus in future.

Tightly held stock this one it appears. If growth continues as anticipated the share price should continue to move up sharply.

Michael.

[woodcot] 06/6/2011 19:36

Hi Arthur,

Nice to hear from you, hope all is well.

I think you should get back in, I've bought a few more at just under 11p a few weeks back and believe the Display's business is worth more than the present market cap. Plus the BH land could work out to be very lucrative if they can get planning but believe it will take a few years to sort out. I'll just take the dividends while I'm waiting.

Regards

Bill.

[arthur_lame_stocks] 06/6/2011 15:31

Hi Woodcot

Long time no chat. Bet you're glad with the return you've already made out of DSN and still with the potential for substantially more. I've sold mine now for a very healthy gain but still keep an eye on them as that Blackheath land may still prove to be worth an arm and a leg.

Cheers

[woodcot] 04/6/2011 12:49

Hi Michael,

Excellent summing up but they also have a 1.25 acre strip of land along Park Road in Blackheath as well. Which if they can overturn the MOL will be worth a substantial amount of money however I believe it will take time to sort out if at all it can be!

I agree with assessment and believe the share price does not reflect any potential regarding the Display's business.

Regards

Bill.

[michaelmouse] 03/6/2011 20:29

I recently bought shares in this company. I have listed the reasons why in my blog below:-



Cheers.
Michael.

[lcd interest] 03/6/2011 17:00

You will not hear anything judging on past AGM's.

You can ask , but they will brush it under the carpet.