This is from Collins Stewart (7/23/2008) after earnings...
Results and guidance light, but valuations compelling. Retain BUY.
May quarter results below estimates, offset by tax benefit
Aehr Test reported fQ4’08 pro-forma EPS of $0.77 on sales of $10.9M (+1% Q/Q) compared to our pro-forma EPS estimate of $0.26 on sales of $11.8M (+9% Q/Q). While revenues were below our estimate, EPS was much better as the company recorded a one-time tax benefit of $4.6M due to the reversal of a valuation allowance against Aehr Test’s deferred tax
assets. Even though revenues were slightly below our estimates, the company was able to grow its sales in FY08 by about 43% Y/Y. During the quarter the company recorded the sale of its FOX-15 burn-in system, we believe to an Analog IC company for testing and burn-in of automotive ICs.
While the company did not sell any of its FOX-1 full wafer testers to a Flash IC vendor, who is believed to be Spansion (SPSN, $2.62, NR), the company shipped a large number of wafer contactors (“wafer packs”) for use with that customers large installed base of FOX-1 testers. Due to the overall weak Capex investment climate, management guided cautiously for fQ1’09, only saying that revenues would be up from year-ago levels.
Adoption likely to ramp as FOX cuts test costs sharply
While we are disappointed that over the past two years the company has been unable to diversify its FOX-1 customer list, the industry downturn could potentially accelerate customers’ adoption of Aehr Test’s solutions, as both the FOX-1 and FOX-15 significantly cut per-die test and burn-in costs. Even though fQ4 ending-backlog of $18.6M was lower than the
$21.3M a year ago, we think this is largely the result of normal lumpiness in order patterns. In addition the large installed base of FOX-1 systems should mean that the company has another growth driver in its wafer contactors, as the large number of testers in the field would need an even
larger number of wafer contactors.
Lowering estimates, but growth still strong; maintain BUY rating. We are reducing our fQ1’09 estimates to $0.20/$9.7M from $0.28/ $11.8M, and for FY09 from $1.18/ $50.6M to $1.00/ $46.5M. Despite this reduction CY08 sales should still grow about 35% Y/Y, while FY09 sales should grow ~19% Y/Y, well in excess of the ~20%-30% decline expected for the equipment industry. Most of Aehr Test’s peers are not profitable, and won’t be for a while. We are maintaining our BUY rating, and using our prior 10x multiple on our forward 12-month EPS estimate of $1.00 to arrive at our $10 target, down from $12 previously. The stock remains inexpensive, and we would use any pull-back in the stock as a buying opportunity. |
