Technology

Report by Forensic Alpha

With Q4 results released earlier this month, Forensic Alpha claims the level of inventory now looks even more alarming than when they flagged concerns in Oct last year. Even as sales continue to decline, inventory is growing in absolute terms. DSI has increased from 216 days (Q3) to 287 days (Q4). At the current level of sales, this would take over 9 months to clear down. The recent change in CEO creates a risk that NOD will take a “big bath” on the accounts in the next few months - writing off inventory and / or recognising higher provisions for rebates.

Technology

Report by Forensic Alpha

While the weak end environment was immediately priced in by the market (the share price fell 18% following the release of Q3 results), Forensic Alpha is more concerned about the fact that absolute inventory has continued to rise (from $148m at the end of Q2 to $158m at the end of Q3) even though revenues are declining. To put this in context, the cost of materials in Q3 was $67m, so this works out at over 7 months of production sitting on the balance sheet as inventory. Management painting this a strategic decision comes across as disingenuous, especially considering their guidance for a sequential revenue decline in Q4 and "limited visibility beyond the current quarter".

Technical Analysis

Report by Messels

Recycling and Renewable Energy stocks such as Umicore, Vestas Wind and Siemens Gamesa are rallying from medium term support. Selective Seafood and Tobacco stocks remain defensive including SalMar, Mowi and Scandinavian Tobacco. Banks are generally rallying in ranges; favours CaixaBank and Sabadell which have already broken out and extend relative bases.

Industrials have broken uptrends and are now losing relative momentum such as Schneider, Atlas Copco and Alfa Laval. Luxury Goods renew their 4-month price and relative tops including Pandora, LVMH, Dior and Hermes. IT Hardware and Semiconductors renew their 5-month price and relative tops; SeSa, BE Semiconductor, Infineon and Nordic Semiconductor are highlighted.