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Here's the H & Q report:
*** Hambrecht & Quist **** Hambrecht & Quist **** Hambrecht & Quist ****
Company: Mattson Technology
Price: 11.56
Recommendation: Buy
Notes: a, b,f
Date: 10/22/99
Returning to profitability on record revenue and bookings. Reiterate BUY.
* Mattson reported record-setting revenue and bookings.
* EPS was $0.02, beating our estimate and consensus of break-even.
* Book to bill remained at a high 1.22, outpacing industry average of 1.08.
* Increasing estimates and reiterating BUY.
1998 A 1999 E 2000 E
Q1 EPS $(0.09) $(0.16)A $0.08
Q2 EPS (0.09) (0.01)A 0.13
Q3 EPS (1.10) 0.02A 0.23
Q4 EPS (0.33) 0.06 0.33
FY EPS (1.62) (0.08) 0.77
FY REVS (M) 59.2 100 148
CY EPS (1.62) (0.08) 0.77
CY P/E NM NM 15
FY Ends Dec Current Price $11.56
52-Week Range $3-15 Market Cap (M) $182
Shares Out (M) 17.2 Book Value $2.83
Net Cash/Share $0.37 3-Year EPS Growth 30%
CY98 P/E-to-Growth 50%
Profitable quarter on record-setting revenue and bookings. Mattson
reported Q3 EPS of $0.02, beating our estimate and street consensus of break-
even. Revenue set a new record at $29.2 million, ahead of our forecast of
$26.5 million. Gross margin and expenses are essentially inline with our
model. Lower tax rate of 15.7% (as opposed to 35%) contributed to
approximately $0.01 to the bottom line. Overall, Mattson's Q3 is a solid,
profitable quarter.
Order momentum very strong: Bookings during the quarter were $35.6
million, also setting a new record. Book to bill ratio reached 1.22,
significantly exceeding the newly announced industry average of 1.08.
Approximately 90% of bookings came from Mattson's core business of photoresist
strip. The company has also won a major new foundry customer in Taiwan.
Overall, the Asia Pacific region totaled 68% of all orders, indicating the
company's strong position in the Asian market. Backlog amounted to $41.4
million, or 3.8 months worth of forward expected revenue.
Mattson becoming the market leader in photoresist strip. Our analysis
shows that, given the new orders Mattson has secured during Q3, Mattson is
overtaking Gasonics (O/GSNX, $14 5/16, NR) and becoming the market leader in
photoresist strip. We believe that the company is well positioned to continue
its market share gain beyond its current position.
Significant management additions during the quarter. The company has
added two senior executives to its management team during the last quarter,
one for the position of General Manager of the EPI business, and the other for
VP of Global Sales. Both positions are focused on marketing and sales and
should bode well for the company's top-line growth. In addition, the company
has continued to build infrastructure in order to support the manufacturing
and marketing of multiple product lines, and in anticipation of increased
business level in the coming quarters.
Balance sheet. Days inventory stretched from 108 days to 118 days,
reflecting increased materials purchasing for the backlog. DSO also increased
from 77 days to 89 days, due to an extended term to a Korean customer. The
company expects to collect from this customer in Q4. Cash declined to $6.4
million. Most of the cash decease was used to finance growth in inventory and
receivables, a reflection of the rapid growth of the company's businesses.
Mattson remains one of the best-positioned companies to supply the
foundries. In our view, Mattson has an excellent position to grow its market
share, as the foundry customers continue to outpace the overall semiconductor
industry. We believe that Mattson has an exceptionally high market share on
the foundry front. We believe the strength is likely to continue because the
company's products possess significant advantages in the foundry manufacturing
environment.
Raising estimates. For Q4, we are bumping up our revenue and EPS
estimate to $32.4 million and $0.06 from $28.0 million and $0.04,
respectively. The lowering of tax rate from 35% to 10% accounted for half of
the $0.02 EPS increase. For CY00, our current revenue and EPS forecast are
$148.0 million and $0.77, versus our previous estimates of $135 million and
$0.57, respectively. Tax rate reduction from 35% to 15% for CY00 accounted for
$0.18 of the $0.20 differential. On a fully taxed basis, we are raising our
estimate of CY00 EPS from $0.57 to $0.59.
Stock view. Shares of Mattson were largely ignored in the last
substantial upturn in equipment stocks. We believe that, as the cycle
continues in the positive direction and as capacity purchases pick up pace,
the MTSN stock is a very attractive investment vehicle for investors wanting
to participate in the semiconductor up-cycle. We also hold a very positive
view on the company's long-term growth potential, particularly due to the
company's aforementioned strength in the foundry market, and the growth
potential of several new products (CVD, EPI, RTP). We reiterate our BUY on
shares of Mattson.
1999 Copyright Hambrecht & Quist LLC. All rights reserved. The information
contained herein is based on sources believed to be reliable but is neither
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this time and are subject to change. We do not undertake to advise you of
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investments discussed or recommended in this report may be unsuitable for
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