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Thursday, May 04, 2006

Sunwin (SUWN) Q3 results

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I previously looked at Sunwin here and here and here and here.

Q3 results (vs Q2 results)

64 million shares on March 6, 2006. 2.8 million options outstanding on Jan 31 (with a strike price of only 15.4 cents). I'm assuming about 70 million totally diluted shares (but keep in mind that last year they only had 35 million shares outstanding).

Cash is up, but so is AR and inventories. PP&E is way up. Equity jumped from $7 million to $10 million.

Revenues for Q3 were $3.8 million (down from $4.1 million in Q2). Gross profits are down. They had $619K bad debt recovery which makes the results look better. If we back out the bad debt recovery, we get income from operations of about $521K vs $527K in Q2. There was a big benefit from income tax in Q2 of $625K. The benefit in Q3 is close to zero. Minority interest gobbles up a bit less than a quarter of the profits. So I figure they'd have about $390K net income without the bad debt recovery. And I figure that around half a cent per totally diluted share, which would annualize to about 2 cents.

Cash flow from ops for 9 months is $2.3 million but capex was $2.2 million. 2005 was better. Stock options and warrants raised $2 million in cash.

Now I realize that they got purchase orders for 150 tons of stevia.
In the first three months of 2006, the company has received purchase orders in excess of 125 tons of Stevia, a 100% increase compared to same period in 2005, or 80% of Sunwin's Stevia production for the entire 2005 fiscal year. The company's production of Stevia during 2005 was reduced due to construction of the new Stevia production facility.
Sunwin's Stevia division alone could achieve approximately $12 to $15 million in annual sales in the coming fiscal year, prior to any potential acquisitions, and the potential Stevia sales in North America.
Total stevia revenues for the last 9 months would annualize to around $6 million per year, so that would add another $6 to $9 million to next year's revenue. Of course the margins on stevia seem to be low based on Note 5 in the Q3 results (costs were $3.45 million for $4.44 million in revenues). They claim they'll need to outsource some of the stevia production, so I'd expect even lower margins overall for the coming year. So I'd guess there'd be about $1.44 million in additional operating profits in the year ahead due to the hopeful increase in stevia revenues. If all of that became net profit, it would add about 1.5 cents per totally diluted share. Even if they ended up with 5 or 10 cents in earnings per share next year, is the stock worth much more than the $1.17 it's currently selling for?

I guess the stock is really like a gamble that stevia will take off in the US. That's not something I know anything about.

These are simply my opinions and the math could contain mistakes and it's far from being GAAP.

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