Tuesday, July 14, 2009

Wells-Gardner up 4%. To 95cents. (WGA)

AlphaNinja - About 19,000 shares of video-screen maker Wells-Gardner (WGA) have traded today (nearly triple the 3month average), after the company announced that they'll be comfortably profitable this quarter:

-- Sales for the second quarter 2009 are now expected to be approximately $14 million compared to previous expectations of $12.5 to $13 million. This compares to $14.5 million in the prior year quarter.

-- Net income for the second quarter is now expected to be between $350,000 and $500,000 compared to previous expectations that the Company probably would be more profitable in the second quarter than the first. This compares to $170,000 in the prior year quarter. It is anticipated that this will be the best quarterly net income the Company has had this decade.

The CEO goes on to warn that pricing will weaken in the latter half of the year, although they expect to remain profitable. That means we can't annualize the (roughly) $425k in net income per quarter, which would have suggested $1.8m in Free Cash Flow this year. Sounds puny until you look at the company's market value -->> at $9.9mil, that would've been a healthy 18% FCFY.

Cut the expected Free Cash Flow I mentioned in half, and it's still a decent yield, but this is one very risky, micro-cap stock, so it had better give a large yield to compensate for that risk. I'm staying away.
More details from the release:

"The OEM manufacturing business was stronger than expected in the second quarter 2009," said Tony Spier, Chairman, President and CEO. "The cost reductions we have implemented have lowered our breakeven point, thus enhancing profitability when sales are above that point. While many end markets are still weak, the market seems to have stabilized though at a lower level than the last several years. This is positive news for our customers as well as our Company."
Spier continued, "I would also like to address a question asked by some shareholders regarding the listing requirements at our current share price. The NYSE Amex requires the Company to maintain net equity of $2 to $6 million depending upon certain criteria. The Company currently more than meets the continued listing requirements as it has net equity in excess of $14 million."
The Company expects sales will be around $50 million for the full year 2009. Although average selling prices and margins are expected to be slightly lower in the second half of 2009, management continues to take proactive steps to control expenses and expects to remain profitable.

A look at the company's "strategic plan" -->> efforts to improve its LCD offerings to gaming clients.

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