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Cabeza Howe

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  • Will Triumph Bancorp's IPO Be A Muted Celebration? [View article]
    Best part about TBK now: insiders are very bullish.

    They participated in directed share program to pick up shares at IPO price of $12 apiece. Then the directed share program seemed unable to meet their demand. So they jumped in on the first day of IPO buying more in the open market.

    When all was done, they collectively paid $3.35 million to pick up 278,402 shares in this IPO.

    That bodes well for this stock.
    Nov 20 12:09 AM | 1 Like Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]
    Thanks, sage. I have to agree with you on the FY15 guidance. The upside there was indeed due to Apple revenue which was not previously accounted for. However, I believe you are too pessimistic on GM view going forward as you don't see how they are going to improve it beyond 40%.

    I see GAAP GM climbing back to 45-46% level, with non-GAAP GM even higher, likely in the high 40s. There are three factors here.

    (1) The inventory issue was non-recurring and largely behind us. They might still be selling old products into alternative channels but that impact is relatively minor and should diminish over time.

    (2) Manufacturing efficiency will improve with yield approaching full production rate eventually.

    (3) Higher value products and non-phone markets are already ramping and will contribute to higher GMs. OIS market is expected to double in a year or so. China gyro is a huge opportunity. Software, microphone, gaming console, fitness, wearables, sports, etc. are beginning to ramp or will contribute in not-too-distant future.

    If we take a step back, the largest contributor to the GM meltdown in Q2 was really inventory write down. Outside of that, tier 1 pricing pressure has an impact. But GM from non-tier-1 customers have met or exceeded company target across the board. So, Q2's GM certainly was not representative of underlying trend. That’s why they were already expecting GAAP GM of 43-44% and non-GAAP GM of 46-47% in the current quarter, 3Q15. So, with factors (1)-(3) above it looks rational to expect 45-46% GAAP GM and high-40s non-GAAP GM as things normalize.

    Expense wise, part of the contribution in the past couple of years was increased R&D spending. And that appears beginning to bear fruit as mentioned above. Q3's operating margin guidance might more or less signal the beginning of a normalization process regarding operating expense.

    Customer concentration and second sourcing are real risks. Analyst skepticism is running high including doubting on quality of the 6-axis combo component supplied to iPhone 6. That partly explains the recent stock performance.

    My 1Q16 outlook given previously was based on no socket loss and assuming Samsung strength in calendar Q2 will offset potential Apple seasonal weakness. I'm tweaking my numbers on an ongoing basis and as I understand more.

    Overall, I'm quite a bit more optimistic than you are. But as you know, people just take on different stands based on what they see. We should find out eventually. Thanks again for the inputs and discussion.
    Nov 19 09:40 PM | Likes Like |Link to Comment
  • Will Triumph Bancorp's IPO Be A Muted Celebration? [View article]
    Regarding the low ALLL/gross loans = 0.67%, this had to do with purchase accounting that understated the ratio. When the loan discount is factored in, the adjusted ALLL/gross loan ratio appears adequate and properly reflects the subpar quality of the loans on TBK's balance sheet.
    Nov 18 01:45 PM | Likes Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]
    Another thing to note is the OpEx margin trend in FY15:

    50% Q1 -> 40% Q2 -> 31-36% Q3 (est.) -> ? Q4

    So, it appears trend is our friend. I'm not implying we can extrapolate forever though. Just an encouraging sign.

    Moreover, another reason for optimism that management can deliver 31-36% OpEx margin in Q3, as implied by its GAAP operating margin guidance:

    Q3 revenue is going to be $20+ million higher than Q2. Q2's OpEx margin is already at 40%. So it's simply rational to expect Q3's OpEx margin to be in the 30s!
    Nov 16 10:05 PM | Likes Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]
    "But even the high end of $76 million (vs. $67 million in 4Q14) ..."

    Should be:

    "But even the high end of $76 million (vs. $59 million in 4Q14) ..."

    Then for FY15, consensus is looking at 43% revenue growth even as management was guiding 25-30%. Obviously, everyone was agreeing that management was way too conservative. And if that's the case, there does not appear to be basis for suspecting that their OpEx margin guidance of 31-36% would be too aggressive and "will be still in 40% ranges" like you were arguing. Not impossible, but looks unlikely to me because that involves their being way too conservative on revenue while way too aggressive on expense estimate. That sounds split personality to me. But you might be seeing something I don't grasp.

    Seasonality might make it harder for great operating margin to sustain in Q4. But (a) if they can get OpEx just a tad lower and (b) given consensus had Q4 revenue a tad higher than Q2 and (c) Q2's OpEx margin was right at 40%, we might well be looking at an OpEx margin <40% in Q4 again. Then if we could take 1Q15 as a reference for 1Q16, we would be looking at sequential top line growth of 13% in 1Q16 which could lead to improving operating margin again. Thereafter, we are on to "high quarters" of Q2 and Q3 again.

    So I do not really see the gloomy pictures for "4-6 quarters of hard time." Competition is fierce, so maybe you are counting on huge loss down the road?

    Any more specifics, or arguments on either side from anybody are welcome and appreciated.
    Nov 16 09:45 PM | Likes Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]
    On Q4 you seem to be much more optimistic than management actually. You said:

    "Keep in mind that next quarter is seasonally a lower quarter and operating expense my shoot way up as percentage of less than $100M revenue, may be even $90M."

    I'm referring to your numbers on "less than $100M revenue, may be even $90M," not on the expense part. Based on management's 25-30% YoY growth for FY15 and $108-115 million for 3Q, you would get roughly $56-76 million range. (FY14 net revenue was $252.5 million.)

    Pressed by analysts on the CC, management then admited that the actual result might come in at high end or beyond. But even the high end of $76 million (vs. $67 million in 4Q14) is much lower than your $90-100 million. So wouldn't you characterize management as conservative? Doesn't that bode well for the stock going forward?

    It appears that nobody is buying the $76 million number for 4Q. So consensus number is more in line with yours. So >30% growth in FY15 seems to be writing on the wall. $90 million in Q4 means top line growth of 41-43% in FY15.
    Nov 16 06:31 PM | Likes Like |Link to Comment
  • Solazyme Repositions Up The Value Chain Amidst Moema's Setback [View article]
    Most likely you won't see any indictments. And in particular, I don't think Quon deserves to be on the list. KQ put his money where his mouth is, and is a victim himself of an incompetent management team and a rough industry that's likely still years away from its prime time.

    So, please give him a break. You won't pay him a penny for his time if any of his ideas works out. So you shouldn't blame him when things do not go your way. Remember there are lots of premium newsletters that are still not responsible for your losses.

    And it's interesting you were making a flattering statement on management but not KQ?

    "Maybe you will get a bottle of Algenist in the settlement. At least your wrinkles will be gone."

    I'm not so sure how much wrinkle Algenist can remove for you. Otherwise, its sales would have reached into hundreds of millions by now?
    Nov 16 12:23 PM | 3 Likes Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]

    This is what management said on 2Q conference call (straight quote from SA transcript):

    "You’re modeling us on a GAAP basis, our gross margin should be between 43% and 44%, our operating margin should be between 8% and 12% and our GAAP EPS should be between $0.06 and $0.10 in Q3."

    So, we are going to see GAAP profit right in current quarter according to the management. Please share your detailed logic or math on the following arguments:

    "My calculation say they won't be profitable for at lease 4-6 quarters."

    Please do not take this as anything against you. Debate and counter-arguments should benefit everybody. I really do appreciate any well-researched and well-thought-out counter-arguments that you can share. At least market is on your side now.
    Nov 16 01:46 AM | Likes Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]
    If we are bothered by picking a definite GAAP GM, let's just use 43-44% range. Then the OpEx margin comes out to be 31-36%, which just broadens the low end by 1%.
    Nov 16 01:14 AM | 1 Like Like |Link to Comment
  • InvenSense: Making Sense Of The Financials [View article]

    I'm just beginning my research on INVN, so I love to hear bearish arguments. Yours seem to be quite compelling. However, you said:

    "With 45% GM and 45% operating expense ..."

    45% GM seems to be in line with management guidance. However, 45% OpEx margin appears to be out-of-whack at least for 3Q15.

    Management was guiding 8-12% GAAP operating margin for current quarter, which translates into 32-36% OpEx margin. Math follows:

    Take 44% GAAP GM (43-44% was given, but taking 43% would actually lower OpEx margin, i.e., 1 more percent away from your 45%.)

    44% - 12% = 32%
    44% - 8% = 36%
    Hence OpEx margin = 32-36%

    I did notice that for 1H15, OpEx margin = 44.3%. So I can see why you have picked 45%. But at least this won't hold for 3Q15 if management turns out to be right.

    So my question is: given they expect improving OpEx margin at least in current Q, what is in the way of continuing this improving trend rather than falling back to 1H15's poor performance?

    Anything you can share will be appreciated, which should save me a little time since I'm doing work on quite a few companies in different industries and countries. Of course, I will be verifying your argument too. Thanks.
    Nov 16 12:49 AM | Likes Like |Link to Comment
  • Solazyme Repositions Up The Value Chain Amidst Moema's Setback [View article]
    Great science + bad execution/poor economics = value destruction.

    Great science has to be in great hands to create shareholder value. A team that can't execute would run into all sorts of problems, like dissolved (Roquette) or non-productive (Bunge) partnerships, would habitually miss milestones, would overspend, under-produce and undersell ... Then the whole thing could remain a lab-scale-like, great-demo story with constant need to dilute shareholders and might eventually risk being shut off by the capital market.

    Credibility is important because it's an indicator of success or failure. If you can deliver, there wouldn't be any need to lie to investors. You just keep on throwing out remarkable financials that impress shareholders and create value. On the other extreme, you begin to procrastinate, miss, distort and mislead.

    That's why these factors are inter-related. I'm afraid that mere faith in science won't be adequate for a rewarding investment.

    JMHO. Not trying to predict that this won't work out or be a wonderful bet when looking back in five years. But one does need to be vigilant and might be opportunistic as well. Anyway, if your goal is to make money.
    Nov 14 08:25 PM | 3 Likes Like |Link to Comment
  • Will Triumph Bancorp's IPO Be A Muted Celebration? [View article]
    Yield and NIM for 1H14 were inflated a bit (125 bps) by discount accretion associated with Equity Bank and NBI acquisitions. After adjusting for this positive impact NIM=5.46% and interest spread=5.37% in 1H14. Yield and NIM likely will come down a bit more going forward as discount accretion fades, though growth of high-yielding commercial products could partially offset this negative yield/NIM trend.
    Nov 14 02:09 PM | Likes Like |Link to Comment
  • Will Triumph Bancorp's IPO Be A Muted Celebration? [View article]
    The organic growth for 1H14 above was my rough estimate and could be overstated a bit by acquisition of ABL/healthcare business in June 2014. Actual organic growth could be a little lower still.
    Nov 14 12:07 PM | Likes Like |Link to Comment
  • Will Triumph Bancorp's IPO Be A Muted Celebration? [View article]
    + Great business model
    + Great yield and ROE (if not for NBI drag)

    Cons (or things to be mindful):
    - Asset quality is subpar
    - Efficiency ratio and ROE were dragged by NBI acquisition (completed Oct. 2013)
    - Apparent hyper-growth in 1H14 was mainly due to NBI acquisition
    - When NBI acquisition is factored in, organic growth in 1H14 was roughly:

    *NII 17%
    *Noninterest income -19%
    *Net income 15%

    *Efficiency ratio (adjusted) improved by 1% from 71.9% in 1H13 to 70.6% in 1H14
    Nov 14 02:03 AM | Likes Like |Link to Comment
  • Refuting A Short-Selling Solazyme Critic [View article]
    Thanks, mykiemon.

    It's good or bad depending on which angle you look from. Like you pointed out, the problems have been pretty bad. And yet Wolfson has kept hiding them and hyping his rosy story to the investing community, while at the same time he was selling his shares and reaping huge profit out of it. All while shareholders were crying. So shareholders watch out, don't be so naive to think you can trust him and his team. Now he has no choice but going into conservation mode and trying his best to keep the whole thing going. Judging from his credibility so far, is it really a great idea to trust his vision/words from this point on? Each shareholder would have to make his own call. I honestly do not know how the whole thing will really play out. But I'm watching with interest. Solazyme might succeed or fail in the end. But in the end, Wolfson will be a winner regardless of how the company ends.

    Nov 13 11:10 PM | 1 Like Like |Link to Comment