PLANAR SYSTEMS INC PLNR
February 14, 2013 - 9:55am EST by
kiss534
2013 2014
Price: 1.80 EPS def $0.05
Shares Out. (in M): 21 P/E nmf nmf
Market Cap (in $M): 39 P/FCF nmf nmf
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 39 TEV/EBIT nmf nmf

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  • Manufacturer

Description

At first glance, the annual results of Planar (PLNR) for the year ending Sept 2012, showed declining sales and losses. The first quarter just reported for period ending Dec 2012 seemed to show little improvement, but a closer look at the financials exhibited a distinctly different picture.

 

But I get ahead of myself. First a description of the company lifted from the company’s recently reported first quarter.

 

Planar Systems Inc. (NASDAQ: PLNR) is a global leader in digital display technology providing premier solutions for the world's most demanding environments. Retailers, educational institutions, government agencies, businesses, utilities and energy firms, and home theater enthusiasts all depend on Planar to provide superior performance when image experience is of the highest importance. Planar solutions are used by the world's leading organizations in applications ranging from digital signage to simulation and from interactive kiosks to large-scale data visualization. Founded in 1983, Planar is headquartered in Oregon, USA, with offices, manufacturing partners, and customers worldwide. For more information, visit www.planar.com.

 

 Ok we have a company in the monitor business which has lost money for many quarters,

and as you know “a trend in motion……” -so then what is new or why should we care?

 

Well let me tell you. We are at an inflection point for Planar. Exciting growth is surfacing

which up until now was relatively unknown, hidden in the numbers.

 

Plastics was the word in “The Graduate”. Today it would be biotech, 3 d modeling or digital signage. Maybe a bit over the top but an industry growing 25-30% is nothing to sneeze at. Shedding a no growth division in the back half of 2012 for about $4 million and an earn out, the first quarter (Dec 2012) shows flat sales compared to same time last year and up 14% sequentially. Digging into the numbers show exploding digital signage growth of 55% y/y, reporting $16.9 million for the quarter. Planar reported continued increased demand for its digital signage products from its customers in the current quarter. The CEO on the quarterly conference call spoke of “tremendous growth” for tiled LCDs. Touch monitors are showing very good results at $4.9 million up 38% y/y,  with combined sales of signage and touch at $21.8 million – 49% of total sales for the quarter- a record high as old legacy products decline in sales and relative importance to the company.

 

Placements of digital displays seemingly are becoming almost ubiquitous, finding their way into airports, stadiums, museums, college campuses, department stores, security, 3d gaming and include Wal-Mart, Nike as typical customers. Currently product is being tested for restaurant drive-thru’s, (quick service restaurants-QSR) enabling quick interactive change for morning, lunch and dinner menus. It is truly astounding to learn that about 70% of all restaurant sales are generated thru these drive-thru’s.

 

Actions recently taken by the company to shed a non-strategic product line and to cut costs, are enabling the new fast growing segment to finally overcome declines in the older lines. Guidance suggests a 5-10% sales increase- the first in years - and Planar expects non-gaap profits in the back half of year ending Sept with full fiscal year profitability. Guidance for the second quarter is $34-37 million and a non-gaap loss of about $.05 compared to $32.4 million y/y.

 

The balance sheet shows adequate strength with $19.3 million cash at quarter end, up $1.5 million from year-end. PLNR is debt free with $1.81 per share in working capital and an enterprise value to sales ratio of 0.25.

 

December saw a director, David Sandberg purchased over 155k of stock on the open market bringing him to 800k shares of ownership in the company. On Jan 27,2012, Red Oak Partners, a hedge fund which is controlled by Sandberg signed a standstill agreement with the company, ending on the day after the Company’s 2013 Annual Meeting expected in the near term. At that time he was given a board seat, and recently added these new shares.

 

At this point we feel that $160 million sales could result in $.05 in eps, but this is the inflection year with digital signage driving sales.

 

Going into 2013 – 2014, we expect the digital signage business to grow at 25-40%.  This should provide PLNR with $175 million in revenue, and at 3% net margin give us an earnings estimate of $0.25 per share.  With the digital signage business growing so quickly, it will not take long for the company to see impactful top and bottom line results.

 

 

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

1.Realization of the  fast growth in digital signage with added venues on the horizon.
 
2.Possibility of corporate event thru expiration of standstill.
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