Australia | Nov 15 2007
By Rudi Filapek-Vandyck
It’s been a tough couple of months for shareholders of high technology developer Arasor International (ARR) but this morning sees the share price surging by nearly 30% – though admittedly from a price level thought impossible earlier in the year.
Patersons Secutities analyst Russell Wright appears equally enthusiastic this morning having sent out a research note to the broker’s clientele with an underlying tone of “See!? That’s why this company is a buy!”.
So where does all this renewed enthusiasm stem from?
Arasor has just announced the formation of a new 51% owned joint venture with ZTE Corp aimed at the commercialization of its key technological laser display technology. What will have inspired today’s share price surge is the fact that the China Development Bank has agreed to provide financing to the JV of up to USD$300m.
As pointed out by Wright, the JV will commence operations in Q1 2008 and its financial contribution to Arasor’s bottom line will come on top of management’s current 2008 earnings guidance.
Fueling the overall positive assessment regarding the freshly announced JV is the fact that Arasor management, no doubt inspired by the share price slump, has provided some concrete numbers in today’s announcement.
These numbers appear to have inspired Wright’s bullish research note, with the analyst noting that under the assumption Arasor will be able to charge USD$100 per laser source and USD$200m per light engine we should be talking about more than USD$1 billion in annualised sales for the JV. (Yes, you read that correctly – US$1 billion).
Further assuming the company can obtain a 60% gross margin we are talking about an additional gross profit of some USD$330m per annum (mind you: these are Wright’s calculations, not Arasor’s).
Patersons Securities has rated the stock as a Buy ever since the broker initiated coverage on the stock. ZTE is listed on thestock exchanges of Shenzen and Hong Kong.
Arasor’s share price was trading at $1.95 at around noon on Wednesday, 49c above Tuesday’s closing price in a mildly positive share market.