Syntax Brillian Gains on Revised Guidance

Syntax-Brillian (BRLC) had a good run yesterday, gaining 18.88% on strong volume of 17,563,202 shares traded following the company's revised guidance of 190 - 210 million and guided towards the higher end of margins, 15 - 17%.

Additionally a matter that had weighed heavily on BRLC and lead to it's recent down turn, Asian receivables, were in fact collected and back in terms. " Moreover," said Chief Financial Officer Wayne Pratt, "during the quarter ended June 30, 2007, we collected $129.6 million of cash from South China House of Technology, our Asian distributor, and as of June 30, 2007 there were, as expected, no invoices outstanding for more than the stated 120-day terms.

Lastly they gave a substantial increase to this CY guidance "we are raising our revenue outlook for the calendar year ending December 31, 2007 from our previous range of $950 million to $1.1 billion to a revised range of $1.1 billion to $1.3 billion."

According to Syntax-Brillian's 10-K filed September 13th 2006, 06 CY revenue was 192,990,000. This newly released CY 07 guidance represents a staggering and torrid growth of over 600%! And the bulls must be taking a closer look at the 17 million bears that have lined up against a profitable company with explosive growth and growing margins and wondering just was it that compelled them to short such a rapidly growing profitable company.

An analyst covering BRLC stated:

Because Syntax-Brillian has always had lower operating expenses, Tieu says it'll be easier for the company to sustain 18% to 20% margins "for the foreseeable future" even as retail prices for flat-screen televisions fall nationally.

Overseas growth will also help, and ease pressure on U.S. sales, which now account for just over 50% of revenue, says Gerra. Syntax-Brillian has factories in Taiwan, Nanjing, China, and Ontario, Calif., but can expect its biggest gains from China, at least in the next several quarters.

"The China market's doubling every year," he says. "The 2008 Olympics will be in Beijing, and this is a once-in-a-lifetime thing. The fact that they will be broadcasting it digitally means it's not free to air, and people [there] will have to upgrade their televisions or buy setup boxes to watch."

The Chinese government rarely shies away from imposing measures to stimulate consumer growth, from expanding holidays to forcing electronics upgrades, and the Olevia brand, which is ranked highly in China, should benefit.

BRLC is on track to reach a 18 - 20% gross margin target by the end of this CY, through increased ASPs, growing margins, revenue CY over CY growing at 600%, demand for Olevia, being the only LCD maker to be awarded the Consumer Rated Best Buy, production that will be increased this quarter, the Beijing 2008 Olympics and 17 million bears that made a horrible mistake not covering at the predictable annual lows accompanied by the seasonality in the LCD business and are now facing the predictable annual highs as retailers ramp up for the Christmas season. Obviously we remain highly bullish on BRLC and believe BRLC will be one of the top performing stock picks in our portfolio this year.

Prospective buyers should seek a moderate entry as BRLC is highly volatile, and we believe the upside potential is large enough that a slow and steady entry will provide more than enough profit over the months ahead.

Disclosure: Author has a long position in BRLC

BRLC 1-yr chart