W) Surfing the MWAV
Rated a WATCH
Reason for DD
Made the summer screen
Business
M-Wave, Inc., operating through its wholly owned subsidiary, Poly Circuits, Inc., manufactures microwave printed circuit boards using Teflon-based laminates. In addition, it produces customer-specified bonded assemblies consisting of a printed circuit board bonded in some manner to a metal carrier or pallet. The Company has also developed the Flexlink process, the bonding of materials with dissimilar coefficients of thermal expansion, and the fusion bonding of Teflon based laminate for multi-layer circuit fabrication. The Company developed an enhanced version called Flexlink II in 1996. The Company's printed circuit boards and bonded assemblies are used in wireless communication systems and other devices and equipment operating in the microwave frequency spectrum of 800 MHz and above.
LITIGATION The Company is a party to various actions and proceedings related to its normal business operations. The Company believes 7 8 that the outcome of this litigation will not have a material adverse effect on the financial position or results of operations of the Company.
Net sales were $11,973,000 for the second quarter ended June 30, 2000, an increase of $10,077,000 or 531% above the second quarter of 1999. Net sales to Lucent were $10,537,000 in the second quarter of 2000 compared to $782,000 in the second quarter of 1999. Net sales to Spectrian were $299,000 in the second quarter of 2000 compared to $412,000 in the second quarter of 1999. Net sales to RF Power were $418,000 in the second quarter of 2000 compared to $137,000 in the second quarter of 1999.
Competitors
Flextronics | SCI Systems | Solectron
Per Hoovers
News
25-Jul-00 10:02 ET
M-Wave, Inc. (MWAV) 10 7/8 +2 31/32 (+37.5%): Manufacturer of high performance printed circuit boards used in wireless communications reports a Q2 profit of $0.33 a share, compared to a yr-ago loss of $0.10; sales rose 123% to $11.97 mln... volume 58K
Analysts and Other
None
Numbers
Rev 1.9M to 2.2M to 3.6M to 5.4M to 12.0M Jun00
EPS -.10 to -.22 to .01 to .07 to .33 Jun00
52-Week Low on 17-Nov-1999 $1.625
Recent Price $12.625
52-Week High on 9-Aug-2000 $16.125
Market Capitalization $28.8M
Shares Outstanding 2.28M
Float 1.40M
Price/Book (mrq*) 2.69
Price/Earnings (ttm) 64.41
Price/Sales (ttm) 1.25
Debt/Equity (mrq*) 0.20
Total Cash (mrq) $1.96M
Short Interest As of 10-July-2000
Shares Short 0
Shares Short (Prior Month) 2,000
Inventory went from $2,030,417 in December 99 to $6,775,931 in Jun00
Accounts payable $ 1,974,067 in Dec99 to $ 5,738,160 Jun00
Net cash flow $ 151,779 six months in Jun99 to $(1,719,621) Jun00 six months
Insiders
One insider sell and no buys in 2000
Four institutions accounting for 0.9% of shares out. 22K in total.
Internet Posts of Note
When Lucent spins off their microelectronics unit then MWAV will have 2 major customers. Lucent says this spinoff will allow faster growth for this unit and will not change suppliers and distributors 8/15/00 on yahoo
Does anyone remember what happened to this darling high flyer years ago?
Their one customer gave'em the heave-ho and they been fighting their way back since!
(If memory serves me, it was AT&T.) Hope they learned their lesson! 8/14/00 on yahoo
I Shorted MWAV @ $12.25 a few days ago. Looking at the chart it shot up to fast. I figured it would drop around $8.00 soon. It is the first stock I ever Shorted. So I wanted to keep it small. 7/31/00 on SI
2 contract manufactures for Lucent are set up for using MWAV's Flexlink bonding process so the royalties should start rolling in.Lucent plans on using MWAV's bonding process for all of their bonding needs.If these are big manufactures we could see some other companies jumping on board and really be big for MWAV in the licensing area.I suggest listing to the conference call at www.vcall.com for a replay before shorting this stock.MWAV reminds me of DIGL a little over a year ago when Lucent was their only big customer.Word got out and business boomed.Watch out shorts a sqeeze on a low volume stock can hurt.Remember KTEL. 7/27/00 on yahoo
The float is way too low and the action is too hot. I don't think that is an issue. I think the insitutions are waking up to mwav and so are the daytraders. It is really anybodys guess where this can go short term. Over the next 18 Mo this could be a 30+ stock. Then it will split. Another important issue is the fact that Joe said in the CC that they like the stock to be around 10 and will split accordingly. So I would't be surprised to see some of the big money run the stock up there to wait for the split. In fact that is probably why Joe went public with that comment. 7/27/00 on yahoo
Web, LU apparently likes MWAV's patented FlexLink bonding technology so much it's asked MWAV to license the technology to 2 other LU suppliers. 7/25/00 on SI
Margins sound like they will expand,customer base growing and backlog at 15 million.Customers changing their products to use FLEXLINK. 7/25/00 on Yahoo
On the subject of LU/MWAV, I want to tell you something really exciting and potentially very big deal for MWAV. LU is very enthusiastic about MWAV's virtual manufacturing model. Recognizing MWAV's years of experience in working with subcontractors, and its relationship with many Asian suppliers, LU has expressed a strong interest to let MWAV handle a large deal with an Asian manufacturer. This manufacturer visited LU this week and is meeting with Joe Turek at this very moment. In essence MWAV acts as the "general contractor" for LU to manage the manufacturing process in Asia. This is the kind of high margin, value-added services that fits into Turek's virtual manufacturing business model. It also allows MWAV to broaden its base into new products. 7/23/00 on SI
The opening of an office in Asia is part of MWAV's "virtual manufacturing" process to bring better value to clients while expanding the company operations in the States. It's good news all around. Joe Turek is setting Mr. Lee loose on the Flextronics account following the announcement between Motorola and FLEX. Could be huge potential for MWAV. 6/3/00 on SI
i'm not trying to "scare" other longs, but i hope you know MWAV is heading back to the 2s and 3s
good luck. 6/27/00 on SI
While I must admit I sold about 60-70% of my position after the run to $15 3/4 because I thought the stock was a bit ahead of itself in my 12/28/99 post I gave a 6-9 month target of $8-10) I have accumulated almost a full position again. I was hoping to finish off my position around $4-1/2 but a big buyer came in and popped it to $6. I believe Q2 will come in around $6 to $6.5 million in revenue and I would guess that earnings will be 10c-15c after tax. Keep in mind that they have over $2 million in tax loss carryforwards so the numbers are actually much better then they report (they report taxed numbers). I was glad to see the company tighten up the range of revenues they expect this year. They are looking for a 100% increase in revenues and I would guess they are looking at around 60c-70c a share in earnings as I mentioned in my 12/28/99 post when I mentioned I thought this was an $8-10 stock within 6-9 months. I was surprised to see people run the stock to $15 3/4 but this is the kind of stock that will do that due to a thin float and an exciting industry (3G Wireless).
I would think that MWAV, being a clear beneficiary of the rollout of 3G Celluar/Internet service, should peform well over the next several years. Based on comments from QCOM and IDCC there will clearly be an upgrade of all cellular towers (as well as many new towers) which is precisely where MWAV products go. The Lucent business is for power amplifier boards that go into these towers and should remain robust for years to come. 3G should be a multi-year rollout and margins should be very high as the population demands bandwidth, speed and now wireless connectivity. Additionally, I believe that MWAV is starting to see demand from many of its other customers such as Motorola, Spectrian, and others. They will need additional capacity in order to handle the increased business.
MWAV did state that they would be buying a 50,000 square foot facility to consolidate their operations. Despite some seemingly irrational posts to the contrary, I think this is a brilliant move. MWAV currently operates out of three facilities (one they own(administrative) and two (manufacturing) that they lease with leases up). Buying this facility should not cost more than $3-4 million including equipment which, with some municipal financing, will be a wash in terms of costs of their present set up. They will however gain in efficiencies and capacity which will allow them to grow the business four-fold with few pains. I believe Joe Turek has the vision to lead the company and is making the right moves. He owns 750,000 shares and has bought additional shares over the last six months.
With a $4.90 book value and virtually no debt I think MWAV is a great buy. If they put up the 60c-70c I think they will this year and $1.00-$1.20 next year with double and maybe triple digit revenue gains the stock should approach the old highs. The company is in the best position it has ever been in and has fewer share outstanding now then before. I would look for a 9-12 month target in the $18-24 range, which would give it a modest P/E, and then I would split it if I were the company in an effort to increase the float. We shall see.
6/6/00 on Yahoo
Chart
Ran Jul24 on earnings and doubled from $8 to $16. Big days are green. Big runup in March to $14 from $6 and back to $6.
Links
mwav.com
Summary
Good deal at $5, not sure at $12. I hate dependence on a few companies for revenues. Chart shows momo players are pumping this. Jingle me when it retreats to $6 as history tends to repeat. I live 40 minutes away so it tempting to make a call. Website does not work. Can’t pull up a press release. Vcall has MWAV on it but only a postponement of the CC. Volume very low. Don’t like those inventory and account receivables numbers. What should be an invisible conpany has shorts posting but no short interest. Strange indeed.
Jack |
