Dialight has a moat

12th Dec '13 by DLG12

5 comments 9421 reads

See this excellent artcile by Todd Wenning on the company's strengths and its 'moat'.

http://www.morningstar.co.uk/uk/news/114517/small-cap-in-focus-dialight.aspx

Unlock with Email

Unlock with Google

Already have an account?
Login here

About the Author

DLG12

Premium Member

5 comments

DJLJ23

16th Dec '13

Found some general information on the LED market
extract:
"Sales of LEDs that outpace incandescent bulbs in North America are expected to soon completely eliminate incandescent bulbs. The LED lighting market is anticipated to grow 45% per year through 2019. The LED lighting market at $4.8 billion in 2012 is anticipated to go to $42 billion by 2019. The reason is the declining price points, the increased interest by the channel in pushing LEDs to consumers. LEDs provide the best lighting solution. The phase out of incandescent lights has begun, the onset of LED command of the market is upon us."
further down
"The key vendors dominating this space include Cree Inc., Dialight Lumens Inc., Dialight plc, Emerson Electric Co., and Koninklijke Philips Electronics N.V"
link
http://www.sys-con.com/node/2897912

toddwenning

16th Dec '13

Thanks for sharing my article, DLG12.

Happy to answer any questions anyone has about Dialight or my article.

Best,

Todd

loglorry

16th Dec '13

Isn't the obvious problem that when these lights become a bit cheaper the actual size of the lighting market will in effect drop dramatically because the time to failure of LED lights is so long. Simply put they'll cost 2x as much but last 10x longer. I have no doubt replacing current incandescent lights is a no-brainer and adoption will be swift. What worries me though is buying a growth company like LED which suddenly finds itself in a market which is saturated by LED lights which hardly ever break.

For that reason I'd be wary in buying any stock in this sector which was modelled on long term double digit sales growth. There will be a time (quite soon probably) where prices will drop and bulbs out there stop blowing!

Log

toddwenning

16th Dec '13

Hi Log,

All fair concerns and I agree with you on the price of LED lighting, which has come down substantially over the years. See Page 19 of this presentation.

The good thing about Dialight (LON:DIA) is that it focuses on the lighting fixtures, which, from what I understand, are the more valuable part of the LED lighting sales chain, so the cheaper bulbs actually help DIA make its ROI case to heavy industrial customers. Lighting fixtures used in the heavy industrial and hazardous markets -- where Dialight is focused -- also require additional safety certifications, etc., which could present a barrier to entry for upstart competitors.

You're right that the time to failure of LED lights is long and getting longer and I suspect that will impact Dialight's signals business more than their industrial lighting business.

Best,

Todd

roddy10

17th Dec '13

(1) This is a growth company
(2) The opportunity is such that it ought to be seeking to maintain high growth rates
(3) In view of this I am wondering if it ought to pay a dividend - especially as its FCF (ie operating cashflow minus capex) is about equal to its dividend
(4) I have not had the time to go through the numbers in detail but I would want to keep an eye on WC, Capex and FCF going forward.

Unlock the metrics for all these stocks and more...

Take a free trial

Facebook Twitter Youtube Instagram RSS

This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.

Unlock the metrics for all these stocks and more...

Take a free trial

Dialight has a moat

Unlock the rest of this article with a 14 day trial

About the Author

DLG12

5 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...