Barron's is bashing LDK again on the same issue of "inventory"
This will be another in a series of bashing by Barron's on so called inventory issue.....
If I can recall accurately as I do NOT subscribe to Barron's...this IS the 6Th time in last 90 days or so that Barron's is being persistent about the same "allegation"
It is interesting to see that how much time & energy is being spent by Barron's on one issue of allegations by a former employee......
LDK took the right step of doing their own audit immediately & then asked outside auditors to do independent audit of inventory...which cleared LDK of any inventory issue.......
So what is the issue now........
Short side analyst zeroed in on inventory numbers in CC on 25Th Feb......
PJ & Lazard kept asking about inventory ......to my surprise !!!!
Then they both issued negative comments on 26Th about LDK to bring the stock down...obviously they have been short and wanted the stock to go LOWER......
PJ & Lazard cited "issues which LDK is facing"...no issues were identified......
PJ went to sell with $27 price target.........
Lazard went to neutral..with "vague remarks about Solar industry challenges"
But the stock was trying to stabilize around $29 even in a bad tape of Feb 28.......
So now PJ & Lazard....are getting another helping hand from Barron's with an article by Bill Alpert questioning one line from LDK earning release........
LDK has broken down inventory in many stages of production.....
In process......
@ hand....
Inventory to be used in over 12 months......
Over 12 months total of $30 million (corrected) is the latest issue being raised by Barron's...implying that it IS "unusable"...I did not know that Barron's are in metallurgical business also...How does Barron's KNOW that certain inventory IS NOT usable.......which has been CLEARLY line item by LDK....
Barron's is also implying that they have to take a write down of this $30 million inventory....which in turn will eliminate 66% (corrected)of last Q earnings......so a 29 cents(corrected) per share write down.......
Barron's has single minded focused on LDK for months now.....which is a sign of an agenda which IS driven by a collaborative motive.......
LDK business is to buy scrap poly silicon & scrap wafers and they mix it up with virgin poly silicon to make wafers...an extremely cost effective way to produce wafers for PV cells.......
So...LDK maintains inventories with various grades of purity which IS mixed in production based on their schedule......
LDK based on their contracts with a timeline...are avoiding some production which may take longer process....& keeping those inventory aside.....which IS where this inventory beyond 12 month comes.........
So even if we take a worse case scenario & assume that LDK @ some point MAY have to write off part or all of $30 million in inventory then there MAY be a charge of 29 cents or less.......
So.....let us adjust the consensus earning estimates by 29 cents for 08 and see where the PE ratio will fall & compare to analyst favourite solar stocks......who have 100% perfect accounting.....if there IS such a thing ????
FSLR.......................................PE 81.73
SPWR......................................PE 41.86
STP........................................PE 19.88
LDK..............$1.80 becomes $1.51 PE 18.92(corrected)
CSIQ.......................................PE 12.80
I am sure that this whole issue of $30 million in next year inventory will be all used UP as part of their production plans.....unless Barron's wants to dictate their production schedule also.....as per their AGENDA.......
So...we will have an upside surprise when LDK reports and "inventory in question is GONE one way or another......
In case anyone is wondering what IS the consensus estimate of LDK for 2009........
$3.62 by 5 analyst
Current LDK stock price $28.58
PE based on 09 consensus est 7.90......
Tell me which solar stock IS trading @ 7.9 PE ????
Please do your OWN due diligence as I currently OWN LDK for my portfolio.
BLOG does NOT give buy or sell.
Saleem
12 comments:
Hi Saleem
This is my first post but since I am involved with LDK, I will post the Barron's piece you refer to today.
SILICON-WAFER MAKER LDK SOLAR'S DECEMBER-QUARTER balance sheet showed $30 million of "inventories to be processed beyond one year" -- a strange long-term asset that seems to validate LDK's former controller, who quit in September complaining that the Xinyu City, China, company refused to write off silicon inventory that was unusable ("China's Solar Boom Loses Its Luster," Oct. 8, 2007). Shareholders have dumped its shares (ticker: LDK) from 76 in September to 29.
Most of LDK's raw-material inventory is silicon scrap. LDK reports profits, but it is cash-flow negative as it plows money into a growing scrap pile. Its cost of goods sold grew $25 million from the September quarter; inventories grew $155 million to 250 days' worth. That's awfully high, but less than a year's supply -- particularly if LDK hits its $1 billion '08 sales goal. So why does LDK think $30 million worth won't be processed this year?
After LDK rebuffed our inquiries, we searched all filings at the Securities and Exchange Commission since 2006 to see how companies treated inventories they didn't expect to sell within a year. Whether Tantalum or pine forests, natural gas or jewelry, pharmaceuticals or silver, all but a handful took reserves against the inventory's value. If LDK wrote off its $30 million in noncurrent inventory, two-thirds of its reported profits for December would vanish.
-- Bill Alpert
Hi Kenny,
Thanks for posting the actual piece by Bill Alpert.....
As I mentioned I do not subscribe to Barrons......so I posted what I could gather from some postings on LDK board.......
My number of $8 million is now $30 million but my thesis of writeoff ended accurate...thank goodness for that.....
25 cents writeoff is still accurate or pretty close to it....
LDK being supported by finest accountants as auditors...would NOT allow them to show any line item unless it has merit.....especially after "inventory issues in the past"
I will correct the $ value in my post......
I am hoping that LDK will issue a press release before open...explaining the quality & valuation metrics of this inventory.
Saleem
Saleem,
Thanks for the analysis and sharing your DD regarding LDK.
Hi Doug,
I can offer this view......
Are we close to the bottom or not....
LDK is one stock...I have faith based on current valuation....
After everything IS said & done...Valuation matters especially in dicey market....like now.....
Sure they can try to knock off $2 more.....but then what......
They all cover & we go higher or stay stable ....imho
Saleem
Greetings Saleem,
Your right on the money with Barron's and Bill Albert. Their yellow journalism is par with Citizen Kane.
It's unfortunate Barron's didn't take this "inventory" issue and spin it for the benefit of the whole PV Solar Energy sector.
Describing the challenges of solar cell manufacturing and LDK's strategic move to secure as much recyclable polysilicon material to fulfill their +10Billon of future contracts.
In my book, Barron's and Bill Albert are working their self-fulfilling prophecy of this Chinese company failure. Which is unfortunate in our global economy.
Thanks for your analysis and validating my long position.
Hi Budda,
Thanks for your appreciative post.
LDK is all set to thrive in the upcoming solar revolution....
Barron's is fighting a losing war with LDK.......
Current LDK retail holders are strong and will NOT sell in this "bogus slander"
Keep the faith....do not be surprised if we close "green"
Saleem
as you guys know, I own LDK too...
My question is why LDK management is not releasing a report once for and all about the inventory and audit and get this chapter closed....this will be a huge favor to current shareholders and stock can be correctly priced...
what do you guys think?
Hi Troy,
Yes...release of audit report will help LDK stock price.
I am expecting some kind of statement from LDK before open...
Saleem
Hi Saleem,
I agree with you on Barron's. Years ago I trusted their investigations. Not anymore! They have turned into something of an entertainment magazine. Stopped my subscription altogether. They now report past events. All old news.
Lost a bundle of profits on the CMED tumble, but the last hour saw the price start back up. Still looking towards next year. We should see higher prices than these.
Have a great week.
Standards
Emergency Fed meeting tomorrow:
Interesting information: FED in an emergency meeting tomorrow, check out link:
Advance Notice of a Portion of a Meeting
under Expedited Procedures
It is anticipated that a portion of the closed meeting of the Board of Governors of the Federal Reserve System at 11:30 a.m. on Monday, March 3, 2008, will be held under expedited procedures, as set forth in section 26lb.7 of the Board's Rules Regarding Public Observation of Meetings, at the Board's offices at 20th Street and C Streets, N.W., Washington, D.C. The following items of official Board business are tentatively scheduled to be considered at that meeting.
Meeting date: March 3, 2008
http://www.federalreserve.gov/boarddocs/meetings/2008/20080303/advancedexp.htm
Hi Standards,
Sorry about your CMED situation.
It IS a very good company...they just have a temporary blip in the current Q due to HIFU shipment.
Barrons/analyst negative reports are generally a good time to buy not sell...if you have done your OWN dd.....
It always boils down to how well you know your stocks and its prospects going forward....I work very hard towards that....
Saleem
Hi Troy,
Thanks for sharing fed news.....
Saleem
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