Is ASML a buy?
ASM Lithography, a Dutch company,has been steadily taking market share from their competitors (Nikon and Canon), since their founding in 1984. 65% market share in 2007.
asml.com
U.S. stock: now at $16; $13-35 = 2007-2008 range. The good news: 2 months now, without setting a new multi-year low.
earnings estimates for 2009-2010: No point in even posting them. Nobody has a clue, the analyst estimates have been falling rapidly, now expecting a loss for 2009.
backlog:
12/31/07: 1697 million euros
12/31/08: 755 million euros (close to 3Q03 trough)
gross margins:
39% = 5-year average
41% = 2007 average
34% = 2008 average
8% = 4Q08
8% = 1Q09 expected by management
dividend:
0.25 euros/share paid 2008 (their first dividend)
0.20 euros/share in 2009 (just declared; total cost: 87M euros)
shares out, at year-end:
434m 2008
486m 2007
504m 2006
543m 2005
cash: 1109m euros (end-2008)
LT debt: 647m euros (end-2008; 600m of this is 5.75% non-convertible note due 2017)
valuation:
1.38 euros/share in 2007 was the last upcycle high earnings, with the U.S. stock hitting $35. Both those numbers should be easily attainable, in the next upcycle. With a lower stock float, and higher market share at the next cycle top, an even higher stock price will be justified.
If you're looking at the valley of 2009 (canyon....abyss...black hole...), any stock price above zero is overvalued.
Got to look "over the valley". When investors start to, the stock will go up.
2008 results, announced 1/15/09:
"no visibility" repeated about 8 times during the CC.
Q4 2008 net loss of EUR 88 million, or 17.8 percent of net sales, including restructuring and impairment charges of EUR 138 million...
Low fourth quarter bookings of 13 units were the result of a virtual freeze in capital expenditure by most customers, due to declining utilization rates and the inability of some customers to finance their technology transition plans...
ASML expects Q1 2009 net sales between EUR 180 million to EUR 200 million, cash flow positive...
Management's goal: "positive cash generation at very low revenue levels"
Breakeven, after restructuring, at 450m euros sales/quarter.
DRAM and flash capacity has now been reduced by 30% and 20%...This significant reduction of capacity combined with a lower utilization rate is slowly translating into a DRAM and flash chip market price increase as we have seen in the past two to three weeks.
asml.com
I rate ASML a Strong Buy, based on:
1. I can find no reason not to trust their numbers, or management
2. I'm 100% certain that, when sector and macro conditions improve, they will be a highly profitable company. Their products are necessary for making chips, and they dominate their niche. Wide moat.
3. they have a track record of keeping cash high, debt low, and returning cash to investors by stock buybacks (and now a dividend).
JS@caryandsamwilllikethisonebetter.com |
