Taitron Components, Inc. (NASDAQ: TAIT) manufactures and distributes electronic components. It distributes brand name electronic components and supplies original designed and manufactured electronic components. It offers discrete semiconductors and commodity integrated circuits, optoelectronic devices, passive components, and value-added engineering and turnkey services. The company was founded by Stewart Wang and Tzu Sheng Ku in 1989 and is headquartered in Valencia, CA.
On May 15th, the company announced results for the quarter ended March 31st, 2018. The company reported muted performance for the quarter. However, it remained profitable and delivered meaningful operational cash flow and dividend yields. From an operational perspective, the company has made some fundamental shift in its business profile, which is expected to support the long-term outlook of the operations.
The company has shifted its core strategy to primarily focus on higher margin ODM Projects that require custom products designed for specific applications to OEM customers, and away from actively marketing its superstore strategy of maintaining a vast quantity of electronic components to fill customer orders immediately from available stock held in inventory.
Over the year, the company has also developed a reputation for stocking a large selection of electronic component inventories to meet the rapid delivery requirements of its customers. On December 31, 2017, TAIT’ inventory consisted of approximately 12,000 different products manufactured by more than 100 different suppliers. After centralizing its sales order processing and customer service department into its headquarters at Valencia, California, the company has the ability to ship most orders the same day they are placed.
With its improving fundamentals and long-term outlook, TAIT has emerged as an attractive value pick, and the market cap of just $11.81 million.
About the company: TAIT is primarily a supplier of original designed and manufactured (ODM) services that include value-added engineering and turn-key solutions. The company focus on providing original equipment manufacturers (OEMs) and contract electronic manufacturers (CEMs) with ODM services for their multi-year turn-key projects (“ODM Projects”) and ODM electronic components (“ODM Components”).
Nature of products: The company is primarily a supplier of original designed and manufactured (ODM) products that include value-added engineering and turn-key solutions. The following is a description of major products lines:
- ODM Projects – TAIT’ custom made small devices for original equipment manufacturers (OEMs) and contract electronic manufacturers (CEMs) in their multi-year turn-key projects and marketed in specific industries such as wild animal feeders, timers for DC motors, public street light controllers, and battery chargers.
- ODM Components – Private labelled electronic components.
- Distribution Components – Name brand electronic components.
About the ODM Service Industry: ODM service providers have experienced rapid change and growth as an increasing number of OEMs outsource their manufacturing requirements. OEMs have continued to turn to outsourcing to reduce product cost; achieve accelerated time-to-market and time-to-volume production; access advanced design and manufacturing technologies; improve inventory management and purchasing power and reduce their capital investment in manufacturing resources. This enables OEMs to concentrate on what they believe to be their core strengths, such as new product definition, design, marketing, and sales. The management believes further growth opportunities exist for ODM service providers to penetrate the worldwide market. By designing private brand products to OEM customers in the US, TAIT is able to expand export sales to overseas CEM customers.
Key customers: TAIT market its ODM services to OEMs and electronic components inventory to distributors, OEMs, and CEMs. During each of 2017 and 2016, the company distributed its products to approximately 300 customers; however, its two largest customers combined accounted for approximately 51% (individually by approximately 38% and 13%) of net sales during 2017 and approximately 55% (individually by approximately 45% and 10%) during 2016.
Latest Quarter Financial position:
Net sales in the first quarter of 2018 totaled $1,655,000 versus $2,167,000 in the comparable period for 2017, a decrease of $512,000 or 23.6% over the same period last year. The decrease was primarily due to material shortages, longer production lead times and lower valued per unit products shipped.
Gross profit for the first quarter of 2018 was $654,000 versus $873,000 in the comparable period for 2018, and gross margin percentage of net sales was 39.2% in the first quarter of 2018 versus 40.3% in the comparable period for 2017.
Net income was $59,000 for the first quarter of 2018 versus $299,000 in the comparable period for 2017, a decrease of $240,000 resulting from the decrease in net sales.
Liquidity and financial flexibility:
- TAIT has financed its operations with funds generated from operating activities and borrowings under a revolving credit facility.
- TAIT believe that funds generated from, or used in operations, in addition to existing cash balances are likely to be sufficient to finance its working capital and capital expenditure requirements for the foreseeable future.
Dividend history and yields: Taitron Components pays an annual dividend of $0.10 per share, with a dividend yield of 4.68%. TAIT’s most recent quarterly dividend payment was made to shareholders of record on Thursday, May 31.
Key risk factors and potential stock drivers:
- Company’ ability to deliver a superior return relative to its industry’ performance.
- The Company’ ability to remain competitive with respect to the pricing of imported components.
- Changes in general economic and business conditions. Also, the Company is exposed to varying degrees of competition.
- The ODM services TAIT provides are available from many independent sources as well as from the in-house manufacturing capabilities of current and potential customers. Many of the company’ competitors are more established and have greater name recognition and financial and marketing resources.
- A large portion of the products the company distribute is manufactured in Asia, including Taiwan, Hong Kong, Japan, China, South Korea, Thailand and the Philippines. The purchase of goods manufactured in foreign countries is subject to a number of risks, including economic disruptions, transportation delays and interruptions, foreign exchange rate fluctuations, an imposition of tariffs and import and export controls, and changes in governmental policies, any of which could have an adverse effect on the business and results of operations
- On Friday, July 6th, 2018, TAIT closed at $2.13, on an average volume of 19,864 shares exchanging hands. Market capitalization is $11.81 million. The current RSI is 84.22
- In the past 52 weeks, shares of TAIT have traded as low as $1.22 and as high as $2.89
- At $2.13, shares of TAIT are trading above its 50-day moving average (MA) at $1.64 and above its 200-day moving average (MA) at $1.56
- The present support and resistance levels for the stock are at $1.74 & $2.71 respectively.
Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.