Van Nuys Company’s Stock Doubles After Posting Impressive Earnings

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After posting strong earnings, a tiny Van Nuys semiconductor company has seen its stock nearly double recently.


Trio-Tech International tests the reliability of microchips and integrated circuits for manufacturers through a process called “burn-in testing,” in which large amounts of heat are applied to the components to ensure integrity. The company has more than 460 employees, nearly all of whom work at the company’s half-dozen or so facilities in Asia.


Trio-Tech released its quarterly and annual earnings last week, showing its net income jumped to $705,000 for the quarter ended June 30, up from $72,000 a whopping 11-fold increase.


And Wall Street took notice.


The company’s shares were trading just over $6 when the market closed on Sept. 21. The next day, on news of the earnings, volume was up from a daily average of just 500 shares to more than 700,000. The stock closed at over $9.50 and has since gone on to about $12 per share.


“We’ve been very pleased with the response form Wall Street and we hope it continues,” said company Chairman A. Charles Wilson, who credited the strong earnings to growth and repositioning of the company’s testing services segment.


Trio-Tech has recently expanded one lab in Shanghai and opened another near semiconductor manufacturers in the area while trimming employment at its Van Nuys facility. Wilson said this contrasts with competitors who built testing facilities in Silicon Valley.


“We’ve done some cleaning and made strategic moves,” he said. “We’ve been positioning ourselves in Asia for nearly 30 years when we opened up our first facility over there. And now it’s paying off.”


The moves also have resulted in more business for the company, which saw its revenues increase 16 percent to $29 million for the year ended June 30. This is a stark contrast to the semiconductor testing market as a whole.


“The industry has seen a slight downturn the past two years,” said Dave Duley, an analyst with San Francisco-based Merriman Curhan Ford & Co. “Because technology is making the testing of this equipment so fast and so effective, manufacturers are expecting more and faster service for less money effectively pinching the companies that provide the testing.”


Though Duley hesitated to talk specifically about Trio-Tech because of his unfamiliarity with the company, he pointed to Milpitas-based Credence Systems Corp. as an example of how Wall Street treats sector firms.


“Credence has seen its stock drop from nearly $8 a share to just over $2. There have been some internal problems there but the market has contributed as well,” he said.


However, Duley said that investors may want to think twice before investing in Trio-Tech given finicky changes in military and commercial testing specifications and shrinking industry margins that could impede its long-term growth.

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