Tuesday, May 01, 2007

Syntax Brillian (NASDAQ:BRLC): Will the shorts be feeling a load of pain soon?

- CIBC has some interesting comments on Syntax Brillian (NASDAQ:BRLC) saying they are reiterating their Sector Outperformer on BRLC following poor CC results, blamed on soft
large-sized DTV sales. Firm believes the shortfall is due to poor Tier-1 pricing & lack of value SKUs, which is precisely why CC's new TV chief has expanded its 2Q-4Q Olevia SKU orders from 2 (27,32) to 6 (larger sizes).

Firm's Circuit City checks indicate large-sized DTV inventories & SKU diversity were poorly managed, and were the reason for CC's recent TV management change. Tier-1 TV inventories have been lingering for 50+ days, while well-priced Olevias (27, 32) have been turning over in under a week.

CIBC believes Target & Kmart are ramping Olevia quite well, & are only limited by BRLC's ability to finance receivables (especially in China). With C1Q AR's currently converting into cash, and an Asian factoring deal on its way, they expect favorable CY07 guidance, when BRLC reports before mid May.

At 8x conservative CY07 EPS estimate of $0.90, they believe BRLC is a compelling value. With a 46%-of-float short position, 9.6 days to cover, rapidly-expanding Tier-1 retail penetration, and a watershed factoring deal on its way, they believe the shorts will soon be feeling a load of pain.

Notablecalls: Interesting comments by CIBC's Daniel M. Gelbtuch. BRCL may be one to watch over the next couple of days.

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