Jerry Labowitz is the Merrill Lynch analyst who made this report today:
Connectors/Passive Components
q AVX (AVX; $30; B-1-1-7), Kemet (KEM; $32; B-1-1-9) and Vishay (VSH; $37; C-1-1-9) will be speaking at a conference this week and we expect upbeat presentations.
q We believe the stocks are very attractive with VSH and KEM selling at less than 9x 01 numbers and AVX at roughly 10x.
q The Japanese has built a lot of capacity in very small units. Tantalums (smaller size, lower cost product that the Japanese are excelling at) represent roughly 20% of AVX, KEM and VSH's businesses (less than 10% of dollars). With regard to ceramic multi-layer/chips our Japanese counterparts have discussed the large amount of capacity that has come on. These represent less than 10% of units for AVX, KEM and VSH and 4-5% of dollars. Tantalums and ceramics represent no more than 15% of dollar sales for any of these companies and is the least profitable product, in our view.
q We expect the new wave to be IPC's (Integrated Passive Components), which should be easier for companies such as Solectron, Celestica and Jabil to insert as the products are so small. They are very high margin products, which should bode well for the earnings of AVX, KEM and VSH.
q Business appears strong.
We expect upbeat presentations and reiterate our Buy ratings on AVX, KEM and VSH. |
