|
|
 |
|
|
|
|
|
|
Home | Getting Started | Personal Finance | Q & A | Sample Portfolio | Glossary | About Us |
| Date: Monday 01st 2008f December 2008 03:28:53 PM |
|
EPS Estimation for KOMG |
| Is Komag undervalued? What is its fair value? To find out, we need to do this exercise. This is the heart of our analysis. All we try to do is to predict the company's profit for the coming fiscal year. We spent most of the analysis predicting revenue because without it, there will be no profit! Therefore, predicting revenue is essential for other components of the income statement. |
| Revenue Estimation |
| Revenue for Komag is dependent upon the health of PC and other storage industry such enterprise servers and consumer electronics. With advanced electronics device, the need for durable storage space has become common. Combined, these industries can grow 10% annually in the long run. However, Komag's main customers such as Seagate Technology and Western Digital are not doing that stellar. Komag is mainly supplying component for 3 1/2 inch disk which is used in PC, rather than laptop. This generally grows slower than the overall PC market. Further, for fiscal year ending on December 2006, Komag had reported revenue growth of 37%. Therefore, for the coming fiscal year, conservatively, we are estimating revenue decrease of 10%. |
| Gross Profit Estimation |
| For fiscal year 2004, 2005 and 2006, Komag reported gross profit of 24.5%, 27.5% and 26% respectively. Thus far, Komag command significant market share to supply the hard drive industry. Therefore, we can use the past margin of 26% for our fair value calculation. |
| SG&A Estimation |
| Komag has 90% of its workforce located in Malaysia. That is cost-competitive. This year, however, as the US Dollars fell against major currencies (including Malaysian Ringgit), Selling General & Administrative Expense will increase. For your reference, the Malaysian Ringgit has strengthened from 1 USD = 3.52 MYR in January 2007 to 1 USD = 3.40 MYR currently. We predict the Malaysian Ringgit to strengthen 10% to 1 USE = 3.17 MYR by year end and as a result, Komag's Selling General & Administrative expense will rise 12 % to 38.5 Million. Consequently, we predict Research & Development expense to rise 12% to $ 71.9 Million. |
| Interest & Income tax expense |
| Komag has more cash equivalents & long term investment than it has long term debt. Therefore, we predict interest expense to be $ 0. Meanwhile, tax rate for fiscal year 2004, 2005 and 2006 is around 5% due to some tax advantage. We will use 5% for our income tax expense in 2007. . |
| Shares Outstanding Estimation |
| Shares outstanding for Komag Inc. 27.8 Million recently. Assuming some dilution, we can use 29 Million shares outstanding for fiscal 2007. |
| Pro Forma Income Statement for KOMG | Fiscal year 2007 |
| Revenue | $ 844 M |
| Cost of Goods Sold | $ 625 M |
| Gross Profit | $ 219 M |
| SG & A | $ 38.5 M |
| R& D expense | $ 71.9 M |
| Interest Expense | $ 0 M |
| Profit Before Tax | $ 108.6 M |
| Income Tax Expense | $ 5.4 M |
| Net Income | $ 103.2 M |
| Shares Outstanding | 29 M Shares |
| EPS Estimate | $ 3.56 |
|
[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ] |
|
Novice Investing 2004-2008. All Rights Reserved. |
|
|