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IBDvalueinvestin (99.66)

HPJ posted 800% rise in EPS

Recs

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November 23, 2009 – Comments (1)

 

    Earned net income of $0.18 per diluted share for third quarter 2009,
    an 800% increase year-over-year, and 157% increase sequentially;

    -- Generated gross margins of 25% on net sales of $21.1 million for third
    quarter 2009, an 8% points increase year-over-year, and 5% points
    improvement sequentially;
    -- Gross profit up 49% year-over-year and 70% sequentially;
    -- Debt-to-capital ratio remained healthy consistent with prior quarter;
    -- Inventory reduced 36% from the year-ago quarter greatly decreasing
    inventory carry exposure.


    "Our business trends in the third quarter clearly show that the ill effects of the global recession on our business are fading," said George Pan, Chairman and Chief Executive Officer of Hong Kong Highpower Technology. "We produced a substantial increase in both our net sales and gross profit over the second quarter, which demonstrates that we are poised to capture even greater rechargeable battery market share as the economy continues to strengthen due to our ongoing customer relationships and strong financial position.

    "Recently, we also announced a significant new contract with Siemens Gigaset Communications to supply rechargeable batteries for cordless phones sold in Europe under the Gigaset brand. This contract represents a significant new ODM relationship for the Company.

    "The Company's lithium-ion battery products division, which was launched in 2008, continues to grow. At the end of the third quarter, average monthly production reached over 800,000 pieces, which is still well ahead of our initial expectations.

    "As we head into the fourth quarter, we believe 2009 will be a much stronger year for us in terms of profitability and overall financial performance," said Mr. Pan. "Our net income through the first nine months is already double of where it stood for the comparable time frame in 2008. This strong financial performance is mainly the result of the fading effects of global economic recession on Hong Kong Highpower Technology's business and better raw material cost management."

    Third Quarter 2009 Financial Results

    Net sales for the third quarter ended September 30, 2009 increased 2.8% to $21.1 million, compared to $20.5 million for the third quarter ended September 30, 2008. On a sequential basis, third quarter net sales increased by 36.3% compared to $15.4 million for the second quarter of 2009. The year-over-year increase was largely due to an increase in the number of battery units sold and was partially offset by a decrease in the average selling price of our battery units.

    Gross profit for the third quarter ended September 30, 2009 increased 48.7% to $5.2 million, compared to $3.5 million for the third quarter ended September 30, 2008. On a sequential basis, third quarter gross profit increased 69.9%, compared to $3.1 million for the second quarter 2009. Gross margin was 24.8% for the third quarter ended September 30, 2009, compared to 17% for the third quarter ended September 30, 2008, and 19.9% for the second quarter 2009. The increase in our gross profit is primarily due to a decrease in the average per unit cost of goods sold during the three months ended September 30, 2009 as compared to same period in 2008.

    Selling and distribution costs were $767,200 or 3.6% for the third quarter ended September 30, 2009, compared to $800,000 or 3.9% for the comparable period in 2008 and $580,000 or 3.8% for the second quarter 2009.

    General and administrative expenses, including stock-based compensation, were $1.5 million or 7% of net sales for the third quarter ended September 30, 2009, compared to $1.9 million, or 9.4% of net sales for the third quarter 2008, and $1.0 million or 6.8% of net sales for the second quarter 2009.

    During the three months ended September 30, 2009, the exchange rate of the Renminbi ("RMB") to the U.S. Dollar ("USD") only decreased approximately 0.03% from the level at the end of June 30, 2009. There were no obvious effects that resulted from the foreign current exchange rate.

    The Company recorded a provision for income taxes of $529,200 for the third quarter ended September 30, 2009, compared with provisions for income taxes of $35,700 for the third quarter 2008 and $229,000 for the second quarter 2009.

    Net income for the third quarter of 2009 was $2.4 million, or $0.18 per diluted share, based on 13.6 million weighted average shares outstanding. This compares with third quarter 2008 net income of $289,400, or $0.02 per diluted share, based on 13.6 million weighted average shares outstanding, and second quarter 2009 net income of $969,000, or $0.07 per diluted share, based on 13.8 million weighted average shares outstanding.

    Balance Sheet

    At September 30, 2009, Hong Kong Highpower Technology had cash and cash equivalents and restricted cash totaling $11.7 million, total assets of $52 million, working capital of $6.5 million and stockholders' equity of $20.5 million. Bank credit facilities totaled $23.2 million at September 30, 2009, of which $16.7 million was available as unused credit.

1 Comments – Post Your Own

#1) On November 23, 2009 at 11:10 AM, IBDvalueinvestin (99.66) wrote:

Amazing my theory worked again, I wanted to buy this stock at lower price and saw it was trading at $5/shr so I posted about it on Motley Fool and what do you know within minutes of the post, HPJ dives to $4.76

This can't be coincedence, but I love it, keeps giving me great entry prices.

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