Is Deswell Industries Seeing an Uptick?

Jun.27.10 | About: Deswell Industries, (DSWL)

Deswell announced its 4Q results last Wednesday. The numbers were in-line with my expectations. The balance sheet reflects a little bit of cash burn coupled with a reduction in receivables and inventory. We can also see that there was a reduction in PP&E [Property, Plant & Equipment], reflecting depreciation, but we should remember that the PP&E is booked at cost and doesn’t reflect appreciation on the underlying real estate. Current liabilities decreased by quite a bit to offset a lot of the shrinkage on the assets side. On these new numbers, once again not adjusting for real estate appreciation, my liquidation value calculation is roughly $3.64.

Unexpectedly, management has announced that they will be distributing a $0.05 per share dividend on July 28th, 2010 to shareholders of record as of July 7th, 2010. At our entry price of $4.00 per share, assuming continued dividends in the future, that would be a dividend yield of 5%.
I’m wondering if this means that management is seeing an uptick in customer orders.

Disclosure: Long DSWL