Counter-Cyclical Trends Driving MBA Applications Higher

Written by StockJockey

Wednesday, August 27, 2008 12:53 pm

Tired of sending out resumes for non-existent jobs on Wall Street? Go back to school, everyone is doing it....

Applications to business schools are surging, buoyed by a shaky economy and lingering fears over job security, the organization that administers the main business-school admissions exam said Aug. 26.

The Graduate Management Admission Council (GMAC) said that 77% of business schools surveyed by the group reported an increase in application volume in 2008, up from 64% in 2007. It's the second-largest year-over-year surge in applications to full-time programs since 2002, and the highest level of increase in five years, GMAC said. And early signs are that the upcoming admissions cycle will continue to be strong.

The strong demand for business school did not surprise admissions officers, who note that applications for MBA programs typically go up when the economy slides. A similar upturn was seen following the dot-com crash earlier in this decade. Business Week

The for-profit education stocks get little respect on Wall Street, but they are known to be counter cyclical. And while Corinthian Colleges (COCO-NASDAQ) has had a few issues of late, I continue to look for big things out of the new management team at Apollo Group (APOL-NASDAQ).

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In the News

August 26th, 2008 2:15 PM EST

LDK Solar is a thrill a minute...the stock has found its sea legs again, although credibility issues will likely restrain the multiple for some time to come...ThinkPanmure has an update in case you are involved:

Recently, we visited JYT Corporation, LDK's new supplier of multicrystalline casting furnaces, and Tangshan Silicon, an aspirant in Fluidized Bed Reactor (FBR) polysilicon production. We gained confidence in JYT's capability to meet LDK's expansion needs. While Tangshan Silicon represents potential competition in polysilicon production, LDK could actually benefit by actively participating in new technologies. We are confident in LDK's expansion plans and reiterate our Buy rating and $55 price target.

KEY POINTS:

JYT: Out Of The Blue, But Right On Time

When LDK announced a supply contract, which essentially replaced GT Solar with JYT as the main supplier for multicrystalline casting furnaces, it put JYT in focus. LDK plans to expand its wafer production capacity by about 2GW in 2009 and 2010, using JYT's furnaces for the most part. JYT seems to have come out of nowhere and become one of the biggest furnace producers in the world.

During our visit, however, we learned that JYT has been in the vacuum and crystalline growth business for over 10 years, starting as practically a workshop for research projects from nearby institutes. JYT, like many others, identified solar PV as the next big opportunity and first developed its own monocrystalline ingot pullers. Its 800kg multicrystalline furnace is one of the first in the industry and could improve yield, while saving production costs.

JYT Is Expanding Rapidly To Meet Surging Demand

The company has a 220,000 sq. ft. plant in operation and is building another 420,000 sq. ft. new plant to meet surging demand. It has a capacity to produce 1,000 mono pullers and looks to add multi furnace production capacity of over 500 units per year. If it were not for the "Olympic stoppage" (the company is located in the outer suburbs of Beijing), the new plant could be in operation now.

JYT is an example of combining technology know-how with low-cost production. By our estimates, JYT's furnaces are at least 50% cheaper than imports. However, Chairman and CEO Huanpei Feng is not content with just being a low- cost producer.

As an experienced businessman who has grown the company into a leader in its field in China, Mr. Feng has set his eye on upgrading JYT into an international powerhouse. Mr. Feng hired Dr. Zhixin Li, an MIT-educated engineer and manager, as President and COO, to develop new technologies and improve operations. Mr. Feng is also hiring management talent in Japan to implement precision production procedures to improve quality and efficiency.

Tangshan Silicon: An Endeavor To Lead

Tangshan Silicon, a startup founded by Dr. Steve Xi Chu, aspires to build the first FBR polysilicon plant in China, and has secured support and initial funding from the local government. Formerly a research scientist in material science at Lawrence Berkeley National Laboratory and a senior engineer at Medtronics, Dr. Chu developed proprietary FBR process for polysilicon production and is now ready to bring his ideas and prototypes into commercial production.

FBR technology has been the crown jewel in polysilicon production as it consumes much less electricity and lowers production costs considerably. The only company that has successfully ramped production is MEMC. REC has been building its own FBR plants, but has yet to produce polysilicon in commercial quantities from these new plants.

Tangshan Silicon is facing a number of hurdles, one of which is the need for additional funding. Polysilicon plants are capital-intensive and take a long time to build. More importantly, we believe Tangshan has yet to convince investors of the viability of its technology.

However, we believe that existing polysilicon producers should find Tangshan's proposal appealing, as they can add FBR at relatively low cost, utilizing a portion of the existing facility. For this reason, while startups like Tangshan are potential competitors to LDK, they could also be LDK's opportunity.

RISKS TO PRICE TARGET:
Risks include, but are not limited to: 1) changes in government regulations and the continuation of government subsidies, 2) technology risks, 3) currency volatility, 4) wafer production capacity build-out and polysilicon plant construction, 5) interest rate increases, 6) changes in the competitive landscape, 7) changes in supply and demand balance, and, 8) legal risks.

ThinkPanmure Research Note

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