TREK 2000 shares soar 37% in a week

DA Article Expo Module

Written by Leong Chan Teik

Wednesday, 08 September 2010 20:25

TREK 2000, the inventor of a card to be incorporated into new Japanese digital cameras soon, sprang to life today with 21.4 million shares changing hands, compared to 3.6 million yesterday.

The stock price shot up 5.5 cents, or 15.7%, to 40.5 cents, a long way up from 29.5 cents at the start of this month.

Trek's market cap now stands at $120 million, up from $88 million just a week ago.

Could it be that the market is awakening to the potential of Trek’s revolutionary product, the FluCard?

The card, which will be showcased at the international photography fair Fotokina in Cologne, Germany, Sept 21-26, enables photographs to be transmitted wirelessly from a digital camera to another.

Trek has tied up with a consortium of Japanese camera makers led by Toshiba Corporation to incorporate the FluCard into new digital cameras.

On Aug 16, Toshiba bought 6.3 million shares of Trek via married deals, boosting its stake from 15.71% to 17.84%.

Terence Wong

The FluCard's potential to boost Trek’s earnings for years to come caught the attention of Terence Wong, the head of research at DMG & Partners, who wrote in a recent article that Trek was one of 7 stocks he would buy for a hypothetical portfolio with $1 million.

Click: TERENCE WONG: 'What I would buy with $1 m'

Terence has also spoken about this stock at the recent InvestFair 2010 at Marina Bay Sands.

His colleague, analyst James Lim, who is probably the only one covering Trek at the moment, initiated coverage of the company in April this year and issued an update on Aug 15.

He wrote: “We continue to expect high profit contributions from Trek’s FluCard venture should it take off in 4Q10 as planned, accounting for 78% and 92% for FY10 and FY11 earnings respectively.

VIPs at the launch of the FluCard in Jan 2010: L-R Hiroto Nakai, a senior manager from Toshiba; Lee Yi Shan, Minister of State for Trade and Industry and Manpower; and Henn Tan, chairman & CEO, Trek 2000. Photo: Company

“For Trek’s current core businesses, we are also forecasting a sequential pick-up for the rest of the year as the company’s focus on improving margins pays off. Nevertheless, we are still of the opinion that the

FluCard venture would be the wild card for Trek.”

At the point of his report, Trek traded at 30 cents. James said: “Presently valued at 4.3x FY11 P/E, we opine that Trek should trade up to 5.6x FY11 P/E which in turn signifies a 30% discount to the industry average of 8.0x FY11 P/E.

"Our target price is thus unchanged at S$0.39. Resultantly, we note that this translates to 1.2x FY11 P/B, a discount as compared to the company’s 5-yr historical P/B average of 1.3x.”