Hanmi Financial Corp. has had a banner few weeks, but some analysts are beginning to urge caution.
The Los Angeles-based holding company for Hanmi Bank, the largest Korean-American bank in the United States, saw its stock rise by more than $5 a share between Oct. 29 and Nov. 5. As of Nov. 11, the stock was trading at $35.90, a 52-week high reflecting an 81.6 percent rise since January.
Last month, Hanmi reported third-quarter net income of $11.1 million, compared with $5 million for the like period a year earlier.
To top it off, the company tapped a prominent industry figure, Wells Fargo Bank Chief Economist Dr. Sung Won Sohn, to replace the outgoing President and Chief Executive Jan Whan Yoo. Sohn starts in January.
Analysts see Sohn as a largely positive step for Hanmi, but they’re mixed on the outlook for the stock.
Piper Jaffray Cos.’ Kathy Steinbrecher, who had raised her recommendation to “outperform” on Oct. 22 on the strength of third quarter numbers, boosted her price target to $38 from $36 Nov. 8, largely due to Sohn’s arrival.
“We believe he’ll attract new business relationships, given his local and national recognition, which will lead to growth in business loans and deposits,” she said.
On the same day, Cohen Bros. analyst Joe Gladue downgraded his recommendation to “market perform,” citing valuation considerations. Gladue had raised his rating to “outperform” only six days before Sohn’s hiring, on the strength of the third-quarter release.
One potential concern is that Sohn, in his capacity as an economist, hasn’t had the day-to-day responsibility of setting the strategy for a bank as president and chief executive. “It’s a question of, ‘Will the senior economist be a great CEO?'” said Gladue. “And we don’t know what different direction he’ll take the bank in.”
Several analysts suggested that Hanmi’s board could look to hire a chief operating officer to help with Sohn’s transition.
Hanmi spokeswoman Stephanie Yoon said that was a possibility, but nothing had been decided. “We don’t expect any immediate changes at this point,” she said.
Regardless, many see Sohn’s more than 30 years in banking, plus a stint on the Council of Economic Advisors in the Nixon administration, as experience enough.
“Banking is a fairly straightforward business,” said Brett Rabatin of FTN Midwest Research. “He’ll hit the ground running and will surround himself with talented people.”
David Lott
Back on Top
With its stock recovering from a financial restructuring a couple of years ago, and reports that it may make a bid for the U.K.’s biggest executive search firm, Century City-based Korn/Ferry International is back on the move.
After its business melted away in the wake of the jobs recession and the dot-com bust leading to a narrowly averted liquidity crisis Korn/Ferry shares have risen to more than $19 last week from about $10 a year ago.
Last week, there were news reports that Korn/Ferry, and its Chicago-based rival Heidrick & Struggles International Inc., had both had approached the U.K.’s Whitehead Mann Plc about a possible takeover.
That didn’t surprise industry executives, since U.S. profit margins in the executive search business are the highest they’ve been in years.
With cash on hand, Korn/Ferry and others are looking for international opportunities, said Tobey Sommer, vice president in Equity Research for SunTrust Humphrey Capital Markets.
And since Europe accounted for 24 percent of Korn/Ferry’s revenue, the deal would increase its exposure there, said Sommer.
Timothy Chrisman, who runs locally based recruiting firm Chrisman & Co., agreed. “Korn/Ferry needs to establish a completely international base to be able to deal with multinational clients. So, the purchase [of Whitehead Mann] would definitely be logical.”
Korn/Ferry officials declined comment.
David Lott
Asian Shift
Diodes Inc. is one example of a how a small company in a competitive industry can grow dramatically by marketing its products in China.
Four years ago, sales to Asia made up just 6 percent of Diodes’ total sales. As demand for discrete semiconductors skyrocketed (they’re used in iPods, game consoles and computer notebooks), sales to Asia jumped to 58 percent of sales.
C.H. Chen, president and chief executive of Diodes, engineered a turnaround at the small semiconductor company by exerting strict financial discipline during the industry downturn in 2001. Diodes’ sales, general and administrative expenses are less than 13 percent of revenue, down from 20 percent several years ago.
Now, Chen sees strong growth ahead, particularly in the burgeoning software and consumer electronics segment.
“Software is very hot, we’re seeing very good sales there,” said Chen, who lives in Taipei and travels frequently to the U.S. headquarters in Westlake Village.
Investors have already bid up Diodes stock 49 percent in the past year to $27.38 a share.
Kate Berry
Late Penalties
When 99 Cents Only Stores reported last week that it needed a time extension to file its third quarter results, company officials were tight-lipped and analysts assumed the worst.
The stock toppled 73 cents, or 4.6 percent, on Nov. 10, the day the filing hit the wires. The next morning, the Commerce-based company started to open the flow of information, and the stock recovered 53 cents of its losses by the close of trading.
Analysts who made contact with the company said the delay was due to several factors. The Securities and Exchange Commission’s accelerated filing dates, now in the second year of being phased into company schedules, bumps up the filing deadline of 10-Q forms by five days after quarterly reports.
In addition, compliance with Section 404 of the Sarbanes-Oxley Act, which requires the auditor to conduct a review of a company’s internal controls before signing off on its books, is time-consuming and expensive.
And after a busy quarter, the five-member management team of the discount retailer had some trouble getting everything done on time. The company has already endured inventory woes, heart problems of company founder David Gold, and a management shakeup.
“My sense is that company management is stretched very thin,” said Joan Storms, an analyst at Wedbush Morgan Securities. “It’s a classic case of not investing ahead of growth: opening many stores without hiring enough management.”
Calls to Chief Financial Officer Andrew Farina were not returned.
The company is expected to file by Monday, (Nov. 15), Storms said.
David Lott
