BRLCQ.PK.

[Ramsburg]

Managed to hold it until now, looking great so far, @3.8 - closing half of my position and holding the other part to the 4$ attack!

Dracull, are your still holding ?

[David Randolph]

One of the basic principles of successful trading is that one needs to rapidly correct mistakes. Perhaps "mistake" is a strong word with a negative connotation, maybe it would be better to call this "perceptions not confirmed by reality", since, in trading, as in life, there are no mistakes, only lessons.

And reality doesn't confirm perceptions not only when a stock goes down after we buy it, but also when it goes up after we decide not to buy it !

Let's take BRLC as an example: I analyzed the stock and concluded it was both technically and fundamentally attractive. But I thought it would pullback and close a huge gap it had open. But reality was that, after some consolidation, it broke out to new highs:



Now here's my initial analysis and a trading plan in the end of this post:

«1. Introduction

Oh, I miss saffeysite1, what a wonderful trader he is. I just wrote him a private message to see if I get him back to writing on 3 Stocks on Fire. The man was in BRLC @$3  (well, then the stock went up to $6 plus, back to $2.5 and now almost $8 - amazing volatility).

2. Profile

Syntax-Brillian Corporation (BRLC) (www.syntaxbrillian.com) is one of the world's leading manufacturers and marketers of LCD and LCoS(TM) HDTVs and digital entertainment products. The company's lead products include its Olevia brand (www.olevia.com) of widescreen HDTV-ready and HD-built-in LCD TVs -- one of the fastest growing global TV brands -- and its next-generation Gen II LCoS(TM) 720p and 1080p rear-projection HDTVs for the high-end video/audio market. Syntax-Brillian's global supply chain, Asian operations, and North American sales channels position the company as a market leader in consumer and high-end HDTVs and digital entertainment products.

3. Technical Analysis
3.1. All History Chart



Nothing special on this all history chart for BRLC. The stock price is below its IPO price back in 2003.

3.2. Medium Term Chart



Jesus, this stock is up 300% in just 4 months . What a catch. It looks very overbought now, but who cares about that? It was overbought already at $6. Huge gap on the beginning of November, we'll get to that in a moment.

3.3. Short Term Chart



There's no doubt the trend is bullish. I really have to read the 3rd quarter numbers and put them into historical context to get a better feeling if the stock will continue to push higher or just correct to the ascending trendline.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



Ouch, big dilution started on 4Q 2005. The number of shares issued and outstanding rose from 7 million in 3Q 2005 to the current 51,446,695. This alone makes the market cap grow seven fold without any share price appreciation. This happened because of a merger between
BRLC and Syntax, as you'll see below. Anyway, the share count has been rising rapidly over the last 3 quarters.

The current market cap is 51,446,695*$7.66 = $394.1 M.

4.2. Liquidity



These $27 M in working capital on the balance sheet mask a not so pretty reality. Check the inventory build up:



Green are inventories and blue are accounts receivable. As you see there was a build up in inventories in this latest quarter. Also, receivables are growing rapidly. The current ratio, which is current assets/current liabilities = 1.24, which is below the 2 minimum threshold level. But if we subtract from this the inventories and receivables the number gets a lot worse. But probably the inventory build up is the company preparing for the Christmas season.

4.3. Revenues



The November 2005 merger completely changed BRLC. Let me check the news for this information:

«On November 30, 2005, we completed our merger with Syntax Groups Corporation, a privately held California corporation ("Syntax"), whereby a wholly owned subsidiary of our company was merged with and into Syntax and Syntax became a wholly owned subsidiary of our company (the "Merger"). As consideration for the Merger, Syntax shareholders received 1.5379 shares of our common stock for each share of Syntax common stock held by them on November 30, 2005 (the "Exchange Rate"). In the aggregate, shareholders of Syntax received approximately 34.3 million shares of our common stock. The Exchange Rate was calculated so that former shareholders of Syntax owned approximately 70% of the fully diluted shares of the combined company at the closing of the Merger. Therefore, the Merger has been accounted for as a reverse merger wherein Syntax is deemed to be the acquiring entity from an accounting perspective. As such, the historical financial statements of Syntax became the historical financial statements of the combined company upon completion of the Merger.»

So, comparisons between what the company is now and what it was a year ago are futile. I should consider just the latest 4 quarters. Analysts expect sales in 4Q to come in at $186.33 M, which is 3.1 fold more than in the same period of last year. Indeed, sales are growing very rapidly on BRLC.

Estimates for the 12 months until Jun 07 are for $583.5 M in revenues, and for Jun 08 are for $797 M. The current market cap is $394 M and the industry's price to sales ratio is 1.22 (so, exclusively according to this, market cap should be about $711 M in Jun 07 to be at market average. This means an 80% rise in the share price (or say, 50% on the share price plus 30% on the share count looks more realistic).

Let's check the net income (now I'll forget about the period before November 05).

4.4. Profits



Please note that the last 3 bars represent the expectation for full fiscal years 2006, 2007 and 2008. For fiscal 2007, which ends in June 07, the estimate is for $0.48, so the current earnings multiple is 15.9. For Jun 2008, if estimates are met, the earnings multiple is 11.

5. General Overview

Man, this stock is hard to analyze. Analysts are seeing incredible growth here, and if they're right BRLC is trading at a huge discount.

Let's see, by parts:

- Technical analysis is very bullish, but the stock is up 300% in just 4 months or so. It may correct a chunk here.
- The increase in the number of shares outstanding is after all, normal. The big jump in the end of 2005 was because of the merger with Syntax, and the share count growth since then is the company financing itself to ramp up production, as demand is building.
- Probably the problems I see on the balance sheet are a seasonal thing. Inventories and receivables building up for the Christmas shopping season.
- Revenue and EPS growth is impressive, but even more impressive are estimates going forward

My general overview goes to this idea: wait for a pullback to get in. Probably the stock will come down to fill the gap at $6.38 or touch some of its ascending supports. I would buy then.»

Current Trading Plan:

Buy BRLC below $8.51 today. 6.66% of capital as usual.[/size]
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[Stocky2000]

Stocklemon updates Syntax-Brillian

Syntax-Brillian (BRLC) - A Roadmap for a Money Losing Business

As Black Friday approaches, it is no surprise that the must have item of the year is an LCD -Television.  This known fact has caused the recent run up in stock price of low cost LCD middleman Syntax- Brillian (BRLC).   We can only hope that the picture given off by the televisions of Syntax is brighter than the picture given by their most recent balance sheet.



As CBS Marketwatch just reported,



"Many analysts had been forecasting that flat-screen TV prices this holiday season would be down 25% to 30% from last year, said Joe Feldman, managing director and the senior retailing analyst at research firm Telsey Advisory Group."

http://www.marketwatch.com/news/story/story.aspx?siteid=mktw&guid=%7B5EA2CB3D-2DF3-4B12-9012-E263F2287DBA%7D



The drop in LCD Prices has become a hot topic as the holiday Season Approaches.

http://www.digitimes.com/displays/a20061113PR205.html





Yet, we are supposed to believe that Syntax-Brillian can maintain 18% gross margins as just a reseller of LCD Televisions. Let us look into the recent Q and get a "clearer picture" of the company.



Cash Does Not Lie



As of Syntax's most recent filing, their net cash position was (30.2 million) yes that is negative $30 million



This is cash plus long term investments minus total debt and converts.  Compare this to their last filing as of September 13, when the stock was trading at $4.5 a share and their net cash was ($29.95 million)



So the market cap increased by $150 million but net cash decreased by 300k.



The future of Syntax-Brillian is not so bright.  Just look at what we found in the recent 10Q filing:

http://www.sec.gov/Archives/edgar/data/1232229/000095015306002765/p73129e10vq.htm



1.  Price Protection from Kolin (largest shareholder) was $4.3 million which is larger than their net income.



2.  Kolin's price protection is no longer guaranteed so they might not be able to enjoy its protection in future quarters.  This was never discussed by management in the conference call and extremely relevant considering price protection for the year ending June 30, 2006 was $61 million



3.  The company wrote up inventory $5,319,000.  Yes, that is not a misprint they wrote it up, not down.  In a time when LCD prices have been slashed by up to 30% over the past 6 months, Syntax-Brillian wrote up their inventory



4.  If you reverse all the charges for costs of goods sold (price protection, warranty accrual, and inventory writeup) BRLC is LOSING MONEY on every television sold.



5.  One Asian customer accounted for 54% of revenue ($47 million dollars).  This can only be the same customer that was responsible for the $53.4 million accounts receivable.  So basically, this customer is taking televisions and not paying so fast.  The amazing thing is that it appears as if the customer actually owes more money than the amount of product they bought in the entire quarter.



*Note this receivable could not even be factored because of the difficulty in repatriating money from China.  Nothing is to say we will even see this cash in the next Q.



The CEO would like us to believe that in the future, price protection might come from other avenues besides Kolin.  We are sorry to say that even LG Phillips, the panel provider to Syntax-Brillian will not provide price protection as stated in their most recent 20-F.



""...the company does not offer any form of price protection or a returns policy..."



It is the opinion of Stocklemon that BRLC stuffed their channel in order to put a good top line number and used accounting tricks to attempt to produce a healthy bottom line number. All of this to take the stock up in the short term and allow the company to do an equity raise from one of the many cheerleaders (Brean Murray, Utenberg)



Why would a company go through all these measures to get the stock higher? On January 5, 2007 the company has a loan payable to Preferred Bank for $13.8 million.  This is more than the cash position of the company.  More noted, this loan is personally guaranteed by certain of the officers and directors of BRLC.



We are not doubting the Syntax-Brillian can sell televisions.  What we are doubting is if they can make a business selling televisions at a loss, not to mention a $400 million business.



Maybe the insiders were keen to this as they have been unloading stock on the investing public.  In a marketplace where low priced flat panel televisions are becoming commodities and margins are decreasing, Syntax-Brillian has need to worry.  This one trick pony is undercapitalized to compete in the space and when the accounting tricks and price protection run out, so will the investors.



As Jim Cramer said on November 6 about BRLC.... time to ring the cash register. 



Cautious Investing To All.

[Stocky2000]

i havent read it yet that precise because i am at work....but if a stock is on stocklemon site people will get nervous and start to think about the stock....so mostly those stocks mentioned there were good shorts...like hom...

[David Randolph]

i havent read it yet that precise because i am at work....but if a stock is on stocklemon site people will get nervous and start to think about the stock....so mostly those stocks mentioned there were good shorts...like hom...

Well, although I enjoyed reading Stocklemon's due diligence, I believe the market is proving him wrong too. The analysis was written on November 14th just before the stock broke out to a new high yesterday.

Time will tell who's right, but I would never consider shorting a stock with a chart like BLRC. In fact, I'll buy it today.

[David Randolph]

BRLC opened with a small gap up that was followed by profit taking. Profit taking did last until the stock exactly touched it's support, prior resistance, at $8.18. Then a recovery unfolded.

The plan was to buy below $8.51, so I bought at $8.40 when the stock was coming down after the small gap up. Finished the day in the green as it closed at $8.47.

BRLC will be selling flat panel TV's this Christmas for $499. I bet it will be a huge success. Also, it will give much more investor awereness to this small $435 M market cap company.

I'll continue holding BRLC.

[anvilring]

David, you said:

"since, in trading, as in life, there are no mistakes, only lessons."

  But believe me... if you step out in front of a speeding autobus: its a mistake! you gotta "live" to "learn"! I hope tomorrow's open will help confirm the strength of the gap up.
  I was sorry to see our site down this morn but since I'm only smart enough as to follow instructions, I followed orders and picked up my BRLC  a little under yours! 

                 regards, m

[David Randolph]

I was sorry to see our site down this morn but since I'm only smart enough as to follow instructions, I followed orders and picked up my BRLC  a little under yours!

Good job anvilring

Usually I'm not very good at intraday timing, but I really don't care about a few dimes. Trying to grab the big moves.

Stocklemon made reports on just 17 companies this year, IIG and BRLC being two of them . I think he's right on IIG, but I believe he's missing the big picture on BRLC.

It's not that what he writes isn't true, it is, but it is a partial truth. He talks a lot about the relationship between Syntax Brillian and Kolin, but that is in direct conflict with this Brillian's move for production in the US:

TV manufacturer moves operations to U.S. plant

Unit volume growth is staggering, as this is the only company making LCD's and LCoS in the United States.

Let me quote just this:

The upstart TV maker introduced its first Olevia sets in 2004, selling them only online at 20 to 30 percent below name-brand prices. It's now the 10th-largest maker of LCD TVs as measured by units shipped, according to market researcher iSuppli.

Now, Olevia TVs are also sold at two dozen retail chains, including Circuit City, Kmart and CompUSA.

And this:

Overall sales of LCD TVs in North America are predicted to rise from 10.9 million units to 17.8 million in 2007, according to iSuppli. That number is expected to rise to 32.6 million by 2010.

Sollitto said the savings will add 5 to 7 percentage points to the company's gross profit margin.

Look at the company's products, don't you think they will sell well this shopping season, since they are much cheaper than other brands? If you live in America you can go to a shop near you and compare prices and quality.

I think BRLC can be worth $12 before the year's end. I'll continue holding the stock.

[rickjust]

hi,
in at 847
maxi

[David Randolph]

Nothing new on BRLC today, the stock is holding fairly well above the $8.18 support level. As soon as we digest recent gains it will push higher again, as this is probably one of the best plays on this Christmas shopping season. I'll continue to hold BRLC without restrictions.

[David Randolph]

We had this news before the open on BRLC: Syntax-Brillian Completes Acquisition of Vivitar

I believe this acquisition makes sense, especially because of Vivitar's distribution channels:

«The company has a diverse portfolio of intellectual property assets and patents and maintains a variety of international distribution channels in the U.S., France, the United Kingdom and Hong Kong.

Syntax-Brillian expects to leverage Vivitar's existing distribution channels to create new outlets, notably in Europe, for its LCD televisions as well as any new Olevia or co-branded digital entertainment products that the company may develop.»

This means Europe, currently the biggest LCD market in the world, will have access to Olevia's LCD and LCoS.

After the close some details on the acquisition were disclosed:

«Upon the closing of the merger, we issued 4,565,141 shares of our common stock to the sole shareholder of Vivitar, and Vivitar became our wholly owned subsidiary.»

This increases the number of shares outstanding, from 51,446,695 to 56,011,836. This means the market cap increased $38.4 M due to this acquisition, even without any share price rise. It's hard to know, but I expect the value Vivitar brings in terms of revenues, profits and assets is at least these $38.4 M, hopefully more.

The stock is up about 0.8% after hours, so the market is taking the news well.

Volume is declining as BRLC consolidates recent gains. I'm expecting a powerful white marubozu anytime soon and I'll continue holding without restrictions.

[rickjust]

hi,
volume and price action, a good combination.
maxi

[rickjust]

hi,
volume and price action, a good combination.
maxi

and a little long term resistance

[David Randolph]

Thanks for that long term chart rickjust

I don't think that resistance level is relevant, though, look at the volume traded on that area, it was insignificant.

www.smartmoney.com has a bullish article on BRLC today: Big-Picture Potential

I think nothing will stop the tape now, not until Black Friday. By the way, when is that?

Of course I like this company and the stock, but back in my head I still worry about dilution. I don't think I'll hold this for more than a month, but I'm not selling now ... wait a few more days. By the way, the market is probably giving headaches to StockLemon, never fight the trend is his lesson.

[rickjust]

thanks david,
for pointing out the volume discrepancy. that does make a huge difference. two other things i noticed about the resistance on the long term chart. back in sept 04 where  the stock met resitance today, brlc was trading under the 200 day and as you can see on the chart was about to take a dive.  so this situation is different.
it finished nicely today.
black friday is this friday. no trading tomorrow because of thanksgiving.
max