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David did a video analysis on TRT awhile back and said he was going to buy the stock, rating it a 9. I can't find where he ever did buy though. Since then, the stock has taken a hell of a beating, I think mostly only because their main customer, AMD has been doing poorly. I think the stock represents a real bargain at these levels, especially if they can diversify their customers, and gain more business from existing.

Anyway, I have been accumulating/bottom fishing the stock all week as one of my tax-loss sale/value plays. The only real problem I see is that the stock is so thinly traded.

This morning, someone posted the following on the Yahoo message board, mirroring my feelings on the company, although I don't know who the writer is.

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Trio-Tech International (TRT)

Current Price: $8.50
Target Price: $15.00

Edited and researched by Chris Lahiji


You know the stock market is behaving like crap when one finds a tech company as undervalued as Trio-Tech (pronounced Treo). With revenues growing at over 50% year over year and a single digit P/E, it is hard to fathom the people who are selling the stock.

Did I also mention the fact that the stock also has close to $5 in cash with virtually no debt and owns a few factories?

We have uncovered a lot of deep value stocks in tech over the years and this one may take the cake.

Business

Trio-Tech operates in three business segments: Manufacturing, Testing Services, and Distribution.

They provide third-party semiconductor testing and burn-in services primarily through its laboratories in Southeast Asia. Trio also designs, manufactures and markets equipment and systems to be used in the process of testing semiconductors at their facilities in California and China. Lastly, the company distributes semiconductor processing and testing equipment manufactured by other vendors.

Over 80% of their annual business is done outside our borders. 2008 will mark its 50th anniversary.

Trio currently operates six testing facilities, one in the United States, three in Southeast Asia and two in China. The Company uses its own proprietary equipment for certain burn-in, centrifugal and leak tests, and commercially available equipment for various other environmental tests. These facilities provide customers with a full range of testing services, such as burn-in and product life testing for finished or packaged semiconductors.

In 2007, Advanced Micro Devices (AMD) was their largest customer and represented 60% of sales. Add Freescale and Catalyst (CATS) to the mix and you have three customers making up 80% of sales, which is quite scary.

Insiders own almost a third of the company and have recently purchased stock in the open market. The Founder and Chairman of the company, Mr. Charles Wilson and I share quite a similarity. We are both "Vikings" or graduates of Santa Monica High School. One slight difference is that he received his diploma sixty years before I did.

Can you imagine what the tech industry must have looked like in the 1950s?

The man is a pioneer and started his career when computers were as large as houses ( http://peter.stillhq.com/jasmine/blog/19...


Financials

Revenues for fiscal year 2007 increased 60.7% to $46,750,000 compared to $29,099,000 in 2006. Net income from continuing operations increased to $3,308,000 or $1.02 per diluted share compared to $597,000 or $0.19 per diluted share.

Just last month, the company announced earnings for the 1st quarter of 2008. Sales increased 8.8% to $6,507,000 compared to $5,978,000 for the first quarter of fiscal 2007, reflecting an increase in demand for Trio-Tech's semiconductor burn-in systems primarily from customers in Asia. Semiconductor testing services increased 42.2% to $5,543,000 versus $3,898,000 last year, the result of continued strong demand for burn-in services for semiconductors used in wireless and wired communications, automotive and various other applications.

EBIDTA clocked in at $1.2 million, which was 50% higher than the same quarter the previous year.

Trio also owns factories and land in Malaysia, Thailand, and recently China. In June 2007, Trio-Tech International established a subsidiary in Chongqing, China with an initial investment of $2.6 million. A few months later, the company decided to partner with a Property Development Company (Jiasheng) to jointly develop a piece of property on 25 acres of land.

Cash on hand is approximately $16.2 million dollars with virtually no debt.

Catalysts

What makes Trio so attractive is the amount of monetary discipline management has shows. On a fully diluted share count, the company only has 3.237 million shares outstanding. If we take the current share price ($8.50) and multiply it by the number of shares, you get a valuation of around $27.5 million for the entire business.

Now, let's take out the cash, and we are now buying the entire company for $11.5 million. Add the Asian real estate (has appreciated nicely in value) and a few other assets (excluding equipment), and the price probably goes down another five million.

All in, a savvy investor can see that they are buying a company on course to do another $1.00 a share in earnings for $3.00

True, one runs the risk of buying a stock that depends so significantly on just three names, and Intel has beaten AMD up with a titanium bat over the past twelve months.

However, I do believe that they will get a few Asian companies who are currently clients to ultimately expand the amount of business they do with Trio. Lack of customer diversification is normally dangerous, but not when you are trading at a valuation comparable to TRT.

Conclusion

Even though management has yet to announce a buyback in the open market, and a special one-time cash dividend might be wishful thinking, the stock is "stupid cheap".

Since they did over $46 million in sales last year, it would seem only fair and prudent to base our price target on 1/2X sales or $7.50 bucks a share. Add the real estate, intangible assets, land, cash, and equipment in this equation, and you gain another $7.50 in value at a minimum.

The bottom line is Trio might be the cheapest technology stock we have ever uncovered.

Take a look and see if it's worthy of investment.
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And also this;

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TheStreet.com Ratings Report Rates TRT BUY     9 minutes ago     Here are some key excerpts from the December 17th report:

RECOMMENDATION
We rate TRIO-TECH INTERNATIONAL (TRT) a BUY. This is driven by several positive factors, which we believe
should have a greater impact than any weaknesses, and should give investors a better performance
opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its
robust revenue growth, largely solid financial position with reasonable debt levels by most measures,
attractive valuation levels and notable return on equity.

HIGHLIGHTS
The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year
prior, revenues rose by 22.0%. Along with this, the company maintains a quick ratio of 2.57, which clearly demonstrates the ability to cover
short-term cash needs. During the past fiscal year, TRIO-TECH INTERNATIONAL increased its bottom
line by earning $1.02 versus $0.17 in the prior year.

Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of
strength within the company. When compared to other companies in the Semiconductors & Semiconductor
Equipment industry and the overall market.

FINANCIAL ANALYSIS
TRIO-TECH INTERNATIONAL's gross profit margin for the first quarter of its fiscal year 2008 has increased
when compared to the same period a year ago. TRIO-TECH INTERNATIONAL is extremely liquid. Currently, the Quick Ratio is 2.57 which clearly shows the
ability to cover any short-term cash needs. The company's liquidity has increased from the same period last
year.
During the same period, stockholders' equity ("net worth") has increased by 23.21% from the same quarter last
year. Overall, the key liquidity measurements indicate that the company is very unlikely to face financial
difficulties in the near future.

VALUATION
BUY. The current P/E ratio indicates a significant discount compared to an average of 27.34 for the
Semiconductors & Semiconductor Equipment industry and a discount compared to the S&P 500 average of
17.29. For additional comparison, its price-to-book ratio of 1.24 indicates a significant discount versus the S&P
500 average of 2.82 and a significant discount versus the industry average of 4.00. The price-to-sales ratio is
well below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of
these and other key valuation criteria, TRIO-TECH INTERNATIONAL proves to trade at a discount to
investment alternatives within the industry. 

QuoteDavid did a video analysis on TRT awhile back and said he was going to buy the stock, rating it a 9. I can't find where he ever did buy though.

Hi BigSully1, I bought it for www.stocksonvideo.com. This was a new project we launched but then I couldn't keep up with working in both websites (even though I intended to). Of the "Video Portfolio" I still like INSW, EDAC, PFSW and TRT. You know I sold ETLT.OB from the Main Portfolio a while back at $0.56, so I don't like that stock anymore.

TRT is currently a $29.4 M market cap company and it is trading at less than 10 times earnings. It seems very attractive at this point, using valuation metrics like the book value, the price/earnings ratio or the price/sales ratio.

I just wonder about future growth plans, since it appears that TRT is diversifying into a completely different sector:

«In the first quarter of fiscal 2008, Trio-Tech (Chongqing) Co. Ltd., a wholly owned subsidiary of the Company, entered into a Memorandum Agreement with Jiasheng Property Development Co. Ltd. to jointly develop approximately 25 acres owned by Jiasheng located in Chongqing, China. Pursuant to the agreement, an investment of $1,331,000 was transferred in the quarter by the Company into a special bank account jointly monitored by Trio-Tech (Chongqing) and Jiasheng Property Development.»

A semiconductor company entering the real estate business? Doesn't seem like a smart thing to do, even if it's a good business, because investors usually prefer "pure and simple plays".

XING also made a similar move into mining and that meant its core mobile phone business was about to turn bad.

I haven't been following TRT closely , but I know you know what you're doing, good luck BigSully1

TRT is currently a $29.4 M market cap company and it is trading at less than 10 times earnings. It seems very attractive at this point, using valuation metrics like the book value, the price/earnings ratio or the price/sales ratio.

I just wonder about future growth plans, since it appears that TRT is diversifying into a completely different sector:

«In the first quarter of fiscal 2008, Trio-Tech (Chongqing) Co. Ltd., a wholly owned subsidiary of the Company, entered into a Memorandum Agreement with Jiasheng Property Development Co. Ltd. to jointly develop approximately 25 acres owned by Jiasheng located in Chongqing, China. Pursuant to the agreement, an investment of $1,331,000 was transferred in the quarter by the Company into a special bank account jointly monitored by Trio-Tech (Chongqing) and Jiasheng Property Development.»

A semiconductor company entering the real estate business? Doesn't seem like a smart thing to do, even if it's a good business, because investors usually prefer "pure and simple plays".

[/quote]

I agree David. I am a little concerned about this possible deviation from their business plan. I wish they would be more transparent as to their intents. I thought they might intend to develop this (at least partially) for their own use, but now today this came out, again with no explanation. I have to assume this is for their own office use, but again the company isn't saying. I'll keep holding for now, but I have to say my hands are somewhat weaker. Thanks for your comments.
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On January 4, 2008, Trio Tech Chongqing Co. Ltd., a wholly-owned subsidiary of Trio-Tech International Pte. Ltd ("Company") entered into a Memorandum Agreement with MaoYe Property Ltd. ("MaoYe") to purchase an office space of 827.2 square meters on the 35th floor of a 40 story high office building located in Chongqing, China. The total cash purchase price was RMB 5,553,804.00 (Chinese yuan) or approximately $764,681.33 (U.S. dollars). Under the terms of the agreement, the Company paid the purchase price in full on January 4, 2008 using internally generated funds of the Company.

Hi BigSully1, probably you already sold TRT since your hands were weak on this one.

The stock went down another 40% or so. The market cap is just $18.7 M now and the company has about $11 M in net cash. Book value is $23 M.

I guess the following part of the analysis above explains the story:

QuoteIn 2007, Advanced Micro Devices (AMD) was their largest customer and represented 60% of sales. Add Freescale and Catalyst (CATS) to the mix and you have three customers making up 80% of sales, which is quite scary.

AMD continues to lose market share to Intel.

Also, in the latest quarter TRT made just $0.05 EPS, if we multiply by 4 we get $0.20 EPS for a full year. Since TRT closed yesterday at $5.84, the earnings multiple can be viewed as 29, which is quite expensive these days.

I guess TRT is a stock to keep an eye on, since it is such a micro cap and can turn on a single piece of positive news. But for now, it's dead.

I wonder if there aren't losses ahead ... and about those plans to move to real estate. Is it possible that they'll lose AMD as a costumer?

Quote from: David Randolph on April 11, 2008, 07:27:57 AM
Hi BigSully1, probably you already sold TRT since your hands were weak on this one.

Quote
I guess TRT is a stock to keep an eye on, since it is such a micro cap and can turn on a single piece of positive news. But for now, it's dead.

I wonder if there aren't losses ahead ... and about those plans to move to real estate. Is it possible that they'll lose AMD as a costumer?

Yes, I had to cut it fairly fast, without too much damage and partially thanks to your comments.

Yes, I think there may be losses ahead for TRT. Here was their latest PR, I assume they were referring to AMD and it doesn't sound good for the near term at least. I also think it worthy of keeping on watch however. Insiders still own a healthy 34%, and have not been selling for last nine months. Still unclear of their purpose for the real estate.

Trio-Tech Provides Business Update
Friday February 29, 1:45 pm ET


VAN NUYS, Calif.--(BUSINESS WIRE)--Trio-Tech International (AMEX:TRT - News) announced today that it has received notification from a customer of the phase-out effective April 1, 2008 of a semiconductor burn-in program provided by Trio-Tech from its facilities in Singapore and China.

"This particular burn-in program is ending somewhat sooner than we had expected as our customer transitions to a new generation product over the coming months. We hope to have the opportunity to provide burn-in services for this new product as well. In the meantime, we are taking steps to reduce our costs in view of the anticipated reduction in service revenue," said Chief Executive Officer S.W. Yong. He said that revenue from this burn-in program represented approximately 20% of Trio-Tech's total revenue during the past twelve months.