Scott and Kam,
Here is a compilation of information about companies involved in printed-circuit
boards (PCB) and related contract manufacturing. The last two are often
characterized as 'backplane assemblers' and are given higher valuations than the
rest of the group. I became interested in this group after Altron came up in
a quantitative screen done by one of my coworkers. As stated below, all this
has been academic to date as I have not bought a single share on any of these
companies.
Zycon (ZCON) Phone 408 241 9900 Santa Clara, CA
Merix (MERX) 503 359 9300 Forest Grove, OR
Hadco (HDCO) 603 898 8000 Salem, NH
Continental Circuits (CCIR) 602 268 3461 Phoenix, AZ
Elexsys (ELEX) 408 743 5400 Sunnyvale, CA
Sanmina (SANM) 408 435 8444 San Jose, CA
Altron (ALRN) 508 658 5800 Wilmington, MA
To make my job easier I am not recalculating ratios with the most current stock
prices but I will indicate the price used for the calculation
Company Price (May 31) PE ROE P/Sales P/Book Rec. GR(5yr)
ZCON 13.75 16.9 15.0 0.8 2.5 1.7(3) na
MERX 31.125 15.7 19.5 1.4 3.1 1.6(7) 30%
HDCO 23.5 8.5 25.5 0.8 2.2 1.0(2) na
CCIR 13.5 12.3 18.6 0.9 2.3 2.0(2) 20%
ELEX 10.625 18.9 27.6 0.9 5.2 1.0(2) 35%
SANM 36.875 28.0 26.0 3.0 7.3 1.1(7) 25%
ALRN 23.75 21.9 19.1 2.3 4.2 1.3(4) na
ROE is return on equity or EPS/book value or, equivalently, net earnings /
stockholder equity. This is often used to estimate a sustainable growth
rate.
P/Sales or PSR is the market cap to total revenue ratio. See the Motley Fool site
(http://fool.web.aol.com/news/news_mn.htm) for a recent discussion of the PSR in the
June 10 "Evening News" I am not sure how long that discussion will be available in
the (open) web. One can always get back to it thru AOL access. The discussion there
focuses on semi and semi equipment but I think the "cycle" for PCB manufacturers or
assemblers is somehow coupled to the semi's.
Rec. is the average of analyst recommendations according to First Call as of
May 27, 1996. 1 is strong buy, 2 is buy, 3 is hold, 4 is weak hold, 5 is sell.
The number in parenthesis is the number of analysts giving recommendations.
GR(5yr) is the median *projected* annualized growth rate according to the same First
Call report (May 27)
Further data:
ZCON customers include Bay Networks, Cabletron, Cisco, Compaq, DSC Comm, HP,
Lockheed Martin, SGI and Solectron. The company went public in 1995, their
growth rate over the last 5 years is 66% annualized.
MERX was the 'captive' PCB manufacturer for Tektronix and it was spun off in 1994.
Their main customers are Tektronix, Motorola, Teradyne and Storage Technology. The
CEO is Debbie Coleman who was a high-up executive with Apple. Merix recently
acquired some of HP's captive PCB facilities.
HDCO has been public for quite a while. I do not have a list of customers handy but
may be able to get it later. Stock tanked a few weeks ago after reporting a drop
in backlog. It has drifted a bit lower since.
CCIR, I think, competes most directly with HDCO and ZCON. Went public in 1995.
Customers include HP, DEC, Apple, IBM and Northern Telecom.
ELEX is a turnaround story. It is run by one of the founders of Sanmina. Stock
has been hit hard lately, have not checked the wires to see why. It started
trading in the National Nasdaq (from the SmallCap Nasdaq) recently. Customers
include Northern Telecom, DSC Comm, DEC, Honeywell, Tandem, Motorola and AT&T
SANM was higlighted recently as one of the major holdings in a couple of
Wasatch funds (just got a report from them). Do not have list of customers, but
again, could get it if there is interest.
ALRN had a 3-2 split recently. It was also highlighted in the Wasatch report.
Sources for this information include Morningstar stock reports, First Call and
company annual reports, prospectus and/or 10-K's (except for Zycon, which never
replied to my requestS for information)
See also westergaard.com:8080/Select/ea2.html for an old (Dec 95) but
still interesting overview by Needham (scroll about half way to get to the
reports on some of these companies)
Comment: Hadco looks to me at this point as the most attractive alternative because
of low valuation coupled with a more consistent (and longer) track record than the
others. Merix is also attractive but the valuation may still be high. I do not
have positions on any of these companies (except indirectly thru mutual funds; besides
Wasatch, Seligman's Comm and Info is supposed to have large holdings on ALRN and
SANM and, I believe, MERX - I do not have access to the most current info on this
point)
ELEX and ZCON may have better upside potential but they do seem riskier to me. I
have seen postings by a former ALRN salesman on AOL Motley Fool boards. He/She
made me aware of Zycon many months ago and of ELEX 1-2 months ago. He/She thinks
highly of the managements at Hadco and at Altron. Elsewhere in SI (do a search
on Merix if interested) someone made positive comments about Merix's operations.
Continental's stock dropped from 15-17 to the current 12-13 range after issuing a
warning on earnings (very similar story to Zycon's); this was several months ago so
the stock seems to have stabilized at these levels (note: I know ZERO about technical
analysis so I do not know if this is a "base" or a "trading range" or whatever)
I hope you find this informative, given the little interest in the PCB arena within
SI, I would not mind at all to keep the discussion of PCB companies other than
Zycon within the Zycon thread.
Max |
