TRT

[BigSully1]

Does this look like it's putting in a double bottom today? Looks like a really good value, but thinly traded, choppy earnings. Probably has been alot of tax loss selling.


http://stockcharts.com/h-sc/ui?s=TRT&p=D&b=5&g=0&id=p59191861522

 

Trio-Tech International
14731 Califa Street
Van Nuys, CA 91411
United States - Map
Phone: 818-787-7000
Fax: 818-365-6810
Web Site: http://www.triotech.com

DETAILS  
Index Membership: N/A
Sector: Technology
Industry: Semiconductor Equipment & Materials
Full Time Employees: 658


BUSINESS SUMMARY  
Trio-Tech International provides third-party semiconductor testing and burn-in services for semiconductor devices and other electronic components to meet the requirements of military, aerospace, industrial, and commercial applications worldwide. It operates in three segments: Testing Services, Manufacturing, and Distribution. The Testing Services segment offers various tests, including stabilization bake, thermal shock, temperature cycling, mechanical shock, constant acceleration, gross and fine leak tests, electrical testing, microprocessor equipment contract cleaning services, static and dynamic burn-in tests, smart burn-in tests, lab services, and vibration testing. This segment also performs qualification testing consisting of intense tests conducted on small samples of output from manufacturers who require qualification of their processes and devices. The Manufacturing segment manufactures artic temperature controlled wafer chucks that are used for test, characterization, and failure analysis of semiconductor wafers; wet process stations, which wash and dry wafers at a series of 100 to 300 additional processing steps after the etching or deposition of integrated circuits; and other microelectronic substrates. This segment also manufactures centrifuges, leak detectors, highly accelerated stress test systems, and �burn-in' systems that are used primarily in the �back-end' of the semiconductor manufacturing process to test finished semiconductor devices and electronic components. The Distribution segment markets and supports distribution of its own manufactured equipment. This segment also distributes complementary products supplied by other manufacturers that are used by its customers, and other semiconductor and electronics manufacturers. The company was founded in 1958 and is headquartered in Van Nuys, California.

Key Statistics

[BigSully1]

I started accumulating some of this last few days/bottom fishing as a tax-loss sale/value play.

There was a post on Yahoo board that confirms my feelings on it although I don't know who Chris Lahji is. Very thinly traded. What do you guys think?

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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[BigSully1]

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. 

[BigSully1]

Back above the 50MA now, hopefully volume will begin to kick in. I see a whole lot of value here and like my tax loss play on this.