By: Dylan Sikes - AllPennyStocks.com News

Friday, March 14, 2014

Initial public offerings have been largely skyrocketing on their first week of trading, and Technology stocks have generally been producing solid returns in 2013 and 2014. Insider buying is usually a pretty reliable hint that good things are coming down the pipeline for companies. None of those broad market trends have worked in favor of Toronto’s Baylin Resources Inc. since the company entered the public domain with its IPO on the TSX on November 27, 2013. Baylin Technologies (TSX:BYL) issued 6.25 million shares at a price of $8 for total gross proceeds to the company of $47.0 million. On the first day of trading for the antenna solutions provider, director Donald Simmonds and insider Pierre Soulard picked-up 2,500 shares and 1,000 shares at the IPO price. Shares hit a high of $8.35 during the inaugural trading day and haven’t come close to it since.

According to Financial Times, three analysts firms are covering the company with two outperform ratings and one buy rating. The lowest 12-month price targets from the firms are $9, $12.50 and $13.00.

On Friday, the company offered its first quarterly report as a public company. For the quarter ended December 31, 2012, revenue sunk by 30 percent to $14.26 million from $20.37 million in the year prior quarter. Baylin blamed the reduction mostly on the timing of new product launches. Net income shriveled by 79 percent from $1.75 million to only $359,000. On a per share basis, net income was off by 88 percent at 2 cents per share in the latest quarter, versus 16 cents per share in Q4 2012.

A look at the full year was slightly rosier than the quarter. Revenue for all of 2013 totaled $80.07 million, a 16.5-percent improvement from $68.71 million in 2012. However, net income still shrunk from $1.38 million, or 13 cents per share, to $829,000, or 7 cents per share. On a per share basis, that’s a decline of 46 percent (40% on a dollar basis).

Gross profits in 2013 were $25.2 million, representing 31.5 percent of total sales, compared to $22.9 million, or 33.4 percent of revenue, in 2012. Baylin cited lower selling prices and higher subcontracting costs as cutting into profits.

Operating expenses for 2013 swelled 32 percent to $14.38 million, compared to $9.87 million in 2012. Investments in new technologies and rising costs associated with patents were culprits in research and development costs increasing 12 percent last year.

The year ended with the company having $45.1 million in cash and cash equivalents.

Looking ahead, Baylin forecasted revenue in the first half of 2014 to be negatively impact by lower-than-expected allocation on a major product launch from its largest customer.

"We now have a strong balance sheet and the resources to expand our customer base and diversify our revenue. The underlying trends in our markets -- specifically the rapid growth in mobile data traffic and devices -- are driving demand for sophisticated, highly engineered antenna systems. While near-term sales will be affected by lower allocations on a key product platform, with our 35-year track record of innovation we are well positioned to capitalize on market growth over the long term,” said Ephraim Ulmer, President and CEO at Baylin, in a statement this morning.

Investors don’t seem to be sharing Mr. Ulmers optimism. Shares closed Thursday at $5.68 and have tumbled more than 30 percent in Friday action to $3.94 as the day winds towards a close.

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