I don't think anyone ever posted the text of the 11/12/97 H&Q BUY:
Align-Rite International, Inc., manufactures and markets photomasks for the
semiconductor industry and is the third largest independent manufacturer of photomasks in the United States and Europe. Photomasks are used primarily by semiconductor
manufacturers as master images to transfer circuit patterns onto semiconductor wafers
during the fabrication of ICs.
Align-Rite currently serves a diversified base of more than 225 customers in 21 countries from three manufacturing facilities and six technology and service centers strategically
located throughout the United States and Europe.
We expect Align-Rite to continue to benefit from the overall strength of the photomask
market. We believe that the consumable suppliers, such as the photomask manufacturers,
are far less cyclical than capital equipment suppliers. Photomasks are tied to the growth in
design activity, which continues to remain strong even in times of excess semiconductor
capacity as companies generate new designs to remain competitive. Align-Rite also is
benefiting from the continued outsourcing of photomask manufacturing to merchant
suppliers as well as a continued consolidation of the merchant mask market to a few
suppliers. We believe that these fundamentals will continue to drive growth in Align-Rite's
business.
Align-Rite is focused on mainstream photomask requirements that fulfill the vast majority of
the semiconductor industry's demands. The company has strategically developed a large
and diverse customer base -- only one customer represents more than 10% of revenues.
Align-Rite is the primary supplier to several high-volume mainstream users such as Hughes,
Linear Technology, Maxim Integrated, Read-Rite, and TRW. In addition, given the
number of suppliers consolidating, Align-Rite is becoming a second-source vendor of
choice for several of the large semiconductor companies such as Analog Devices,
International Rectifier, and Motorola. This provides the company with a diverse customer
base that is driving stable, predictable earnings growth.
We believe that the company's internal growth will be between 15% to 20% over the next
three to five years, with upside driven by opportunistic acquisitions. Align-Rite is trading at
a compelling valuation of 12 times our calendar 1998 earnings estimate of $1.41. We
initiated coverage on November 12 with a BUY recommendation and a six- to
twelve-month price target of $24 based on 17 times our calendar 1998 estimate.
As the title indicates - this stock is cheap. |
