The bears covering in earnest could possibly start when BRLC gives quarterly revised guidance this month. Provided there are no unpleasant surprises.
In all likelihood, BRLC will end this FY 07 final quarter with positive cash flow, given the flow of Asian receivables, and with the recent secondary cash infusion of 143 million, will most likely end this FY with zero debt and a very large cash position, creating pristine and very healthy books. Ending this FY with .50-.53 EPS and trading at a very conservative TTM PE of 17, will place BRLC in the $8.50 range by Aug of 2007.
Syntax Brillian exited the quiet period of the secondary while rolling in to the end of fiscal year quiet period, so when the revised guidance is given, I would anticipate a flood of positive developments at that time.
The catalyst for explosive upside gains beyond our conservative target of $8.50 could come in the form of a substantial new US retailer such as Best Buy (BBY), Walmart (WMT), Costco (COST) or Sam's Club. Olevia being added to any one of these large brick and mortar stores would create an immediate covering frenzy from the bears as well as attracting many new Bulls.
The addition of at least one of these giants is, in our opinion, very likely by the end of the calendar year. Such an addition from any one of these giants with a similar line up that Target stores currently carry of the Olevia brand would mean an annual boost in revenue in excess of 500 million. A smaller line up, similar to what Circuit City (CC) carried in the past, would be approximately 220 to 240 million annually.
The opening of new channels in Europe through the Vivitar existing distribution lines, would also add additional LCD revenue. But these new channels would most likely open on a smaller scale, possibly 50 million per quarter and growing slowly over time.
LCoS, being the official Chinese State approved high definition television in China, also has the potential to receive a large quantity of State purchased televisions, and the US distributor Headplay just opened for business July 09,2007. This Near to Eye product uses the Syntax Brillian LcOS chips. Depending on the popularity of this product, this higher margin revenue stream from LCoS also has the potential for a large upside surprise to any Bears caught holding a short position on this undervalued stock with proven rapid growth and growing profits.
Olevia sales remain brisk; the Olevia quality remains high and simply outshines the competitors such as Vizio, Magnavox, Polaroid, Element, etc. There are a host of inexpensive LCDs on the market, and none have the positive reviews, or consumer satisfaction that the Olevia’s enjoy or the well deserved Consumer Rated Best Buy awards. The company is well poised to ramp up for the Christmas shopping spree that most retailers start ramping up for themselves near the end of the 3rd quarter of the calendar year. Guidance for this 3rd quarter of fiscal year 2007 (BRLC’s 1st Qtr FY 08) might also catch many of the bears completely unaware.
More recent positive developments for the continued success of the Olevia brand was Circuit City adding an additional 8 SKUs to the former 2 for a current total of 10 SKUs.
If you remember the false Bears initiated rumor that Circuit City would stop selling Olevia, you can see they were not only wrong but wrong by a 400% increase in Olevia SKUs to be carried in the future versus the two previous carried. The Olevia brand also very recently showed up on the Dell (DELL) sites under higher education and Government sites, but they were listed less then 10 days and completely sold out. Impressive given they were not yet listed on the main Dell site, and will not be restocked, according to Dell representative until the middle of July.
Regardless of what may appear as a quick 50% profit at these levels, prospective buyers should be aware that BRLC will remain highly volatile, and this is simply not a stock for the inexperienced or weak. A slow methodical and cautious entry would be advised, as guidance in all likelihood will be given two to six trading days from now. If wrong and it arrives sooner, there will still be plenty of upside potential remaining. Strong upward resistance should be anticipated in the 6.20 range, and the 7.25 range will most likely be the top target prior to actual earnings announcement in August. Once the earnings and guidance for this quarter are given, a swift move to 8.50 is, in our opinion, a conservative target.
Motley the aptly named “Fool” was it again yesterday with an incredibly poorly researched article - this was at a later time somewhat corrected, but is strong evidence of buyers needing to use extreme caution for a BRLC entry. The half truths and misinformation continues to flow through the bears useful propaganda machines. But this latest article by Motley reeks of complete ineptitude or a desperate attempt to deceive. The article states BRLC had 16.9 Million in cash, when in fact following the secondary of 143 million and the accompanying prospectus stating 71 million was received from Asian accounts, the author made a 214 million dollar mistake.
This same author also used BRLC's TTM that included a negative quarter of losses, and tried to extrapolate BRLC future quarters. The article was simply so far off in facts, that it makes you wonder if anyone could possibly be that wrong, without intending to mislead the readers. Their “partial” correction in itself appears to verify that they have perhaps an agenda for painting a negative view of BRLC. Well, we say we will see this same Motley Fool again around the 8.50 range in August. That is if the Motley Fools have learned how to count and do some simple DD. 17 million bears need to cover, and they had better pray for more Motley Fools type that somehow "miss" 214 million dollars!
Disclosure: Author has a long position in BRLC
BRLC 1-yr chart