Aug 27, 2010 10:04 AM PDT
Trends, Observations, and Exclusive Opinion
Three SmallCaps Turning Q2 2010 into Something of Value
UCTT: Semiconductor Supplier Makes Remarkable Y-O-Y Comeback
WIBC: Sells off $48 million in non-Performing Assets in Q2
XTXI: Will Add 15 Miles of Natural Gas Pipeline to its Existing 3,300
First up this morning we have Ultra Clean Holdings Inc., (UCTT) http://www.uct.com/ currently trading in the $10.72 range on a 3-Month average daily trading volume of 197,809 shares. UCTT has a 52-week high of $10.87 set on 07-27-10 (yesterday) with current trailing twelve month revenues of $235+ million. Research house Dougherty & Co initiated coverage of UCTT with a ‘buy’ rating yesterday. The day before that, UCTT reported its Q2 ’10 financials. UCTT makes and sells critical subsystems for the semiconductor capital equipment, flat panel, medical, energy and research industries. Revenue for Q2 was $105.9 million, an increase of 7.5% from Q1 and an increase of 355.4% from the same period a year ago. UCTT recorded Q2 net income of $5.7 million, or $0.25 per share, compared to net income of $3.9 million, or $0.17 per share, for Q1 and a net loss of $14.1 million, or $(0.66) per share, for Q2 ’09. Those are some very impressive numbers and are indicative of the semiconductor sector’s comeback. Management also gave a little guidance Monday, ‘In the third quarter, we are projecting record revenues and earnings along with continued improvements in gross margin. Revenue guidance for the third quarter is $118 million to $123 million, with earnings per share in the range of $0.29 to $0.33.’ Even at its high, UCTT would be a short-term (6 Mo) ‘Buy’ consideration for me.
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Next up this morning we have S&P SmallCap 600 company Wilshire Bancorp Inc., (WIBC) http://www.wilshirebank.com/ currently trading in the $7.77 range on a 3-Month average daily trading volume of 169,475 shares. WIBC has a 52-week high of $11.93 set on 03-25-10 with current trailing twelve month revenues of $67+ million and a positive, corresponding diluted EPS of +$0.57. I really like those earnings. Yesterday the Co reported Q2 numbers that were very encouraging. WIBC posted a net loss of $4.6 million, or ($0.15) per basic and diluted common share, for the quarter ended June 30, 2010. Net loss for Q2 ’10 was partly attributable to provisions for losses on loans of $32.2 million. Of this amount, $13.4 million resulted from the sale of approximately $48.0 million in non-performing and delinquent loans. That’s the story for WIBC: the recession put its commercial real estate portfolio at high risk and the Co has been aggressively making corrections and selling off bad assets ever since. Management at WIBC gets an ‘A’ rating with me for putting up a good fight and getting results. Ms. Joanne Kim, President and CEO of Wilshire Bancorp said, "We were able to dispose of a large number of problem loans with only a small impact to our capital ratios. We will continue our proactive approach to managing credit quality including additional sales of non-performing and delinquent loans if problem assets remain elevated in the near future." During Q2 ’10, WIBC sold 18 non-performing and delinquent loans with a carrying balance of approximately $48.0 million at an approximate 15.7% average weighted discount to their carrying values. These loans consisted of $42.9 million in commercial real estate loans and $5.1 million in commercial loans. As of December 31, 2009, WIBC operated 23 branch offices in California, Texas, New Jersey, and New York; and 5 loan production offices in Dallas, Houston, Atlanta, Denver, and Annandale. WIBC would also be a short-term ‘Buy’ consideration for me as I believe the Co will report an even stronger Q3.
Finally this morning we have Crosstex Energy Inc., (XTXI) http://www.crosstexenergy.com/ currently trading in the $7.07 range. XTXI has a 52-week high of $9.94 set on 03-03-10 with current trailing twelve month revenues of $1.54 billion and a positive, corresponding diluted EPS of +$0.41. I really like those earnings as well. That’s a billion and a half dollar stock for $7. Yesterday XTXI announced it will expand its natural gas gathering system in the Barnett Shale play in North Texas by constructing a $25 million 15-mile pipeline project to serve major gas producer customers. The project, scheduled to be completed and operational in the first-quarter of 2011, is expected to have throughput of approximately 100 billion cubic feet of gas during the first four years of operation. XTXI operates approximately 3,300 miles of pipeline, nine processing plants and three fractionators. XTXI is a long-term (1 Yr) ‘Buy’ consideration for me.
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