Hoku was a bright spot in lackluster local stocks
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It's a matter of supply and demand as far as Hoku Scientific Inc. is concerned.
The Kapolei-based company, which is building a polysilicon plant in Pocatello, Idaho, will begin making deliveries of the scarce component of solar panels starting in the second half of 2009. The global shortage of polysilicon already has led to Hoku lining up deals totaling about $1.5 billion.
That pent-up demand also sent Hoku's stock soaring 336.8 percent in 2007, to easily post the best performance of any Hawaii-based company.
Altogether, seven of the 11 companies in the Bloomberg Honolulu Star-Bulletin Index were down in 2007. Besides Hoku, only Alexander & Baldwin Inc. had a standout performance, rising 16.5 percent on the strength of subsidiary Matson Navigation Co.'s still-growing China service and strong commercial real estate sales in Hawaii.
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Hoku Scientific Inc. is in the sweet spot of the polysilicon industry.
Once known only as a developer of fuel-cell technology, the Kapolei-based company's quick-change act to polysilicon supplier woke up its sleepy stock and sent the shares soaring 336.8 percent in 2007 for the best performance of any Hawaii-based company.
With the exception of Alexander & Baldwin Inc., whose shares jumped 16.5 percent in 2007, it was a subpar year for the rest of the local companies as seven of the 11 stocks in the Bloomberg Honolulu Star-Bulletin Index posted losses and another -- Hawaiian Holdings Inc. -- eked out a gain. The remaining Hawaii company to post a gain last year -- Mera Pharmaceuticals Inc. -- trades at less than $1 a share.
Hoku, which expects to begin polysilicon shipments in the second half of 2009 from the plant it is building in Pocatello, Idaho, wowed Wall Street this year by lining up deals with four major clients totaling about $1.5 billion over a seven- to 10-year period.
Darryl Nakamoto, chief financial officer of Hoku, said the company is excited about its polysilicon business, but also committed to remaining in Hawaii for its solar installation business.
"We believe there is a significant polysilicon shortage, and we are positioned to capitalize on this opportunity," said Nakamoto about the material that is used to make solar panels.
The golden opportunity awaiting Hoku can be seen in the size of the contracts it lined up as it was preparing for construction of Phase I of its 2,500-metric ton, $290 million plant. Hoku already has another contract for Phase 2 of the plant.
"We are working to partner with leaders in the solar market that we can work with for many years to come," Nakamoto said. "We currently have customers from Japan, China and Germany relating to our polysilicon business."
Hoku's stock, which has surged with the signing of each customer, began the year at $2.61 and closed 2007 at $11.40 after hitting a closing high on July 13 of $14.05.
Alexander & Baldwin, the parent of ocean shipper Matson Navigation Co., also had a strong year on a big increase in container volume in its still-developing China service, as well as strong real estate sales and low vacancy rates in Hawaii's strong commercial market. Fuel costs continued to be a concern, with Matson raising its fuel surcharge five times during the year on its mainland-Hawaii service with another potential surcharge increase looming in early 2008. A&B's stock ended the year at $51.66
Hawaiian Airlines, the lone operating subsidiary of Hawaiian Holdings, battled high fuel prices and an interisland airfare war in squeezing out a 3.9 percent gain to $5.09. Still, it was a momentous year for Hawaiian, which made two significant announcements and won a key court ruling.
The airline said it will offer its first-ever nonstop service into Asia -- specifically Manila -- that will start in March 2008. And it signed an agreement worth up to $4.4 billion with Airbus for as many as 24 new wide-body aircraft that would give the airline the capability to fly nonstop from Hawaii to Asia, Australasia, the Americas and Europe.
On the legal front, federal Bankruptcy Judge Robert Faris ruled in favor of Hawaiian in a federal lawsuit and ordered
Mesa Air Group, the operator of interisland carrier go!, to pay Hawaiian $80 million in damages, plus interest and attorney fees, for using confidential information obtained as a potential investor during Hawaiian's bankruptcy to gain a competitive advantage when entering the Hawaii market in June 2006. Mesa, which is appealing the decision to federal District Court, was ordered to put up a $90 million bond in the interim.
The only other local company with a gain this year was Kona-based Mera Pharmaceuticals, a maker of nutritional products from microalgae. Its sub-penny stock rose 40 percent to $.007 as the company's revenue increased on sales of its AstaFactor line of products and contract research services.
It was a rough year for banking stocks. The worst hurt was Central Pacific Financial Corp., the parent of Central Pacific Bank, because of its indirect exposure to California's subprime housing meltdown. Central Pacific took a $21.2 million provision for loan and lease losses after national homebuilders unloaded California inventory at 10 percent to 30 percent discounts and nearby local contractors who Central Pacific had provided loans to were left without buyers. Central Pacific's stock lost more than half its value, falling 52.4 percent to $18.46
Bank of Hawaii Corp., painted with the same brush as many of the struggling financial institutions nationwide, had no problem with asset quality and posted stable earnings, yet its shares fell 5.2 percent to $51.14.
Hawaiian Electric Industries Inc., the parent of American Savings Bank and the state's largest utility, struggled on both fronts this year and saw its stock fall 16.1 percent to $22.77.
Increased operating and maintenance expenses hurt the performance of the utility, which has sought rate increases for all its subsidiaries. The bank was hurt by a compressed net interest margin as customers shifted their money from lower-costing deposit accounts to higher-costing CDs. HEI continued to offer the highest dividend of any local company at 5.5 percent.
Maui Land & Pineapple Co. endured a year of transition as it shut down its money-losing Kahului pineapple cannery, the last of its kind in the nation, and later outsourced the North American sales, marketing and distribution of the company's sweet, fresh pineapple, Maui Gold, to California-based Calavo Growers Inc.
MLP also rescheduled capital projects, renovated golf courses and reorganized its agricultural division. The company eliminated 120 jobs with the cannery's closure -- on top of 75 workers laid off in late 2006 in connection with its new fresh fruit-packing facility -- and reduced its work force by another nine employees due to the outsourcing pact with Calavo Growers. MLP's stock fell 14.4 percent to $29.05.
Kona-based Cyanotech Corp., which makes nutritional products from microalgae, endured a tumultuous year as it delayed earnings results several times due to an internal accounting probe that resulted in three years of restated earnings, and discontinued a wholly owned Japanese subsidiary because of poor sales of NatuRose, an astaxanthin used in animal feeds.
The company also saw Gerald Cysewski, its founder, chairman, president and chief executive, step down to become chief scientific officer as part of the company's shift from the processing and distribution of microalgae products to a marketing-oriented focus on its human nutrition products, astaxanthin and Spirulina. Less than a month after Cysewski stepped down, Cyanotech laid off 13 employees, or about 20 percent of its work force. Cyanotech's stock, which had a 1-for-4 reverse split in November 2006, saw its stock tumble 25.5 percent to $1.40.
ML Macadamia Orchards LP also had a rough year as its merger with Mac Farms of Hawaii LLC fell through and deprived ML Macadamia, the state's largest grower of macadamia nuts, of the opportunity of expanding into nut processing and marketing. The company also slashed its dividend 40 percent as a result of lower prices and soft demand in the global macadamia market. ML Macadamia's shares fell 43.5 percent to $3.47.
Barnwell Industries Inc., the darling of momentum investors in 2004 and 2005 when its stock doubled each year, fell back to earth and saw its shares plunge 48.4 percent to $12.36. Barnwell, which gets nearly three-fourth of its revenue from its oil and natural gas operations in Canada, was hurt as lower natural gas market prices and higher industrywide oil and natural gas operating expenses cut into profits.
