VLine: Helix Technology continues to face a
difficult headwind. The company
derives roughly three-quarters of its business
from semiconductor chip manufacturers.
However, demand for semiconductor
capital equipment will, in our opinion,
remain weak as corporations continue to
curb spending habits in light of economic
and geopolitical uncertainty worldwide. In
fact, recent data show a 2% month-tomonth
decline in February chip sales. As a
result, we do not expect the supply/
demand picture to improve until the
third quarter, in a best-case scenario.
Thus, any earnings recovery will likely not
occur until the second half of the year.
Helix finalized its purchase of
Polycold Systems. The company acquired
the California-based producer of
high-speed water vapor cryopumping and
cryogenic cooling products for $49.2 million
in cash and the assumption of approximately
$515,000 in tax liabilities. Although
the deal puts a minor strain on the
company’s cash reserves, we think that it
is a good add-on for Helix, extending its
customer reach as well as product line. We
also like the new unit because it helps,
somewhat, to diversify the company away
from the highly cyclical semiconductor
market. Still, we have lowered our fullyear
2005 earnings estimate to account for
weak first-half sales. We now look for the
company to suffer a 20%-plus earnings
decline this year, posting $0.60 share net.
The company should enjoy a recovery in
2006, however, given brighter demand.
Most investors will want to take a
pass on this offering, as sluggish capital
equipment markets will likely stymie advances
over the near term. Meanwhile, the
stock’s volatile pricing history and low
score for Earnings Predictability add a degree
of risk. However,
We think that more-patient investors
could be well rewarded over the long
haul. The company is a leading manufacturer
of cryogenic vacuum pumps and
measurement systems and is well positioned
for growth when the semiconductor
market rebounds. Too, the company’s financial
flexibility affords it the ability to
continue expanding its presence outside
the semiconductor market via further
endeavors in the acquisition market.
Andre J. Costanza April 29, |
