On Tuesday, large cap LCD glass maker Corning Incorporated (NYSE: GLW) began surging some 20% in after hours trading after announcing that it will take over an existing joint venture (Samsung Corning Precision Materials) with Samsung – meaning it might be worth taking a closer look at some small cap peers like Universal Display Corporation (NASDAQ: OLED), Daktronics, Inc (NASDAQ: DAKT) and SGOCO Group Ltd (NASDAQ: SGOC) who also have a piece of the LCD glass or related flat panel display action. Specifically, the deal involves a series of transactions to give Corning Incorporated full ownership of Samsung Corning Precision Materials Co., Ltd. (SCP), which manufactures LCD glass in Korea and it should be noted that Corning already relies on sales of LCD-TV glass for the bulk of its profit. In addition, Corning Incorporated's board of directors has authorized an additional $2 billion of share repurchases through Dec. 31, 2015, dependent upon the transaction closing. Wendell P. Weeks, the chairman, CEO and president of Corning Incorporated was quoted in the press release announcing the deal as saying:
"Synergies from integrating our worldwide fusion glass assets should approach $100 million pretax in 2015 and continue to grow thereafter. We believe that accretion to Corning`s core earnings per share, on a fully diluted basis of approximately 20% in 2014 and 2015, can be generated from the combination of profits from the soon-to-be acquired 50% of SCP."
With that in mind, here is a closer look at some of Corning Incorporated's small cap peers who develop related products:
Universal Display Corporation. A world leader in the development of innovative organic light-emitting diode (OLED) technology for use in flat panel displays, lighting and organic electronics, Universal Display Corporation also has one of the largest patent portfolios in the OLED field with licensing rights to over 1,000 issued and pending patents worldwide in a broad array of OLED technologies, materials and processes. At the beginning of the month, Universal Display Corporation's shares dropped as much as 10% to close down 6% after being downgraded to sell from hold by Jonathan Dorsheimer at Canaccord Genuity because he says that his most bullish case for what the company would make off of television set, smartphone and tablet use of OLED materials doesn't support the company's valuation. In addition, Canaccord Genuity's meetings in Europe and Asia indicated increased competition and a pushed out TV opportunity plus they learned that both LG and Samsung have development programs to manufacture their own phosphorescent materials when Universal Displays patents begin to expire in 2017. Otherwise, Universal Display Corporation is scheduled to report earnings on Thursday, November 7, after the market closes. On Tuesday, small cap Universal Display Corporation rose 0.03% to $31.08 (OLED has a 52 week trading range of $21.55 to $38.10 a share) for market cap of $1.44 billion plus the stock is up 26.3% since the start of the year, down 3.7% over the past year and up 192.9% over the past five years.
Daktronics, Inc. A designer and manufacturer electronic scoreboards, programmable display systems and large screen video displays, Daktronics, Inc says it excels in the control of large display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation and video. Back in September, Daktronics, Inc reported that it had delivered and installed over $20 million of cutting-edge architecturally integrated indoor video displays at Los Angeles International Airport (LAX). Back in August, Daktronics, Inc reported a 4% revenue increase to $138.7 million on stronger results from its live events and international businesses, but transportation orders fell after it completed the LAX deal while its digital billboard and large video contract units were hurt by a decrease in large orders. Net income also fell to $5.7 million from $6.7 million and the company still expects some revenue growth in fiscal 2014. On Tuesday, small cap Daktronics, Inc rose 0.66% to $12.28 (DAKT has a 52 week trading range of $7.57 to $12.47 a share) for a market cap of $522.23 million plus the stock is up 14.23% since the start of the year, up 42.8% over the past five years and up 2.5% over the past five years.
SGOCO Group Ltd. Focused on product design and brand development in the Chinese flat panel display market, SGOCO Group Ltd main products are computer monitors, TVs, and other application specific products for consumers in China's Tier 3 and Tier 4 cities. Last August, SGOCO Group reported a 38.7% year-over-year revenue increase to $59.2 million, operating income increased 97.3% year-over-year to $4.1 million, operating margin rose from 4.8% to 6.8% and net income increased 175.7% year-over-year to $3.4 million. The CEO noted:
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"Our four-prong strategy enables us to focus on strengthening our brand portfolio, specializing in high-growth industry verticals, diversifying our product lines and expanding distribution channels across China's tier three and four cities. These strategies are being well-implemented and we are pleased with the results of our efforts."
Otherwise, it should be mentioned that although the SGOCO Group is a Chinese stock, a quick search on Google of the stock's name with the words "fraud" or "scam" does not reveal anything that might be worrisome. On Tuesday, small cap SGOCO Group Ltd fell 3.35% to $3.47 (SGOC has a 52 week trading range of $0.70 to $4.57 a share) for a market cap of $61.28 million plus the stock is up 179.8% since the start of the year, up 271.6% over the past year and down 31.3% since December 2010.
Finally, here is a closer look at the share performance of Corning Incorporated verses Universal Display Corporation, Daktronics, Inc and SGOCO Group Ltd:
As you can see from the chart, Universal Display Corporation has been the best performer for the long term albeit its been an underperformer if you got in at its peak in 2011 (the same goes for Corning Incorporated) plus Daktronics, Inc has been relatively flat while China based SGOCO Group Ltd looks like it got crushed along with other Chinese stocks.
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