A Nice Package: Strong Growth, Increasing Margins, & Inexpensive
sgcowen.com
Amkor is the dominant player in the independent semiconductor packaging market. Growth at Amkor comes from several sources. The chip market is in the midst of a major recovery, with expectations for strong growth over the next several years. This, in turn, is driving demand for packaging/test services. The industry also is shifting to more complex types of packages (because of the need for smaller devices and highly integrated chips)—sthe segment of the market where we believe Amkor has its most compelling advantages. Traditional chipmakers are increasingly outsourcing packaging to focus on their core strengths, while fabless semiconductor firms (which outsource all manufacturing) represent a growing part of the chip market. As the largest player with the widest range of technologies and customers, Amkor is the best-positioned independent packaging firm to take advantage of these trends. The current business outlook is very positive, and we expect strong revenue growth and margin expansion. Amkor is trading at only about 17 times our 2000 EPS numbers and 11 times our 2001 estimate (less when goodwill is excluded), well below those of most chipmakers and ECMs. As a result, we continue to believe that it is undervalued and maintain our Strong Buy (1) rating.
-Drew Peck, Mark Grossman, Rick Billy, 10/4
SG Cowen Securities Corporation makes a market in AMKR securities and co-managed an offering of AMKR securities within the last three years.
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