Hi Bull,
I'd like to throw one candidate into your list COHU.
It is a semi equipment maker that in October of 2018 acquired their only competitor Xcerra. It was an acquisition made possible by the refusal of the Cifius Committee to allow a Chinese hedge fund from acquiring them. I've owned Cohu off and on since 1978
It was a rare case of the smaller company buying a larger company. I've owned Cohu off and on since 1978.
Cohu was a debt free maker of test handlers. Xcerra has more revenue, more cash and higher margins, but had fallen behind Cohu in the leading edge test handler designs.
To complete the acquisition Cohu had to take on debt and offer stock in a cash stock acquisition.
This quarter Cohu has paid back 200 million of their term loan - the result of a small secondary offering and the sale of the acquired printed circuit test division.
Their current debt remaining is 102 million. They have 297 million in cash as of the last quarter. I expect Cohu to be debt free by year end if not soon.
During these almost last three years Cohu has consolidated manufacturing facilities, sold off lower margin divisions and find themselves with two large growth sectors: automotive ADAS systems and 5G rollout on both the handset sides and the 5g infrastructure side.
Additionally the stable part of their business is the sales and service side of maintaining an installed owner base of some 28,000 test handlers. This essentially roles up the global installed base of all types of test handlers, Gravity, pick and place, turret, and the newest form of test used for handsets wafer scale packaging (about 20% of all chips). This is a high margin business (60% ish and it is very stable). It currently represents 48% of their quarterly revenue.
Cohu is a turnaround story that is now completed and benefitting from strong orders of their new systems which has lagged during the right sizing of the new firm.
It is a mini but very similar story like AMAT was and is when they acquired Varian.
It is a story of a single company merging with a competitor, and keeping the high margins in tact, while also gaining global scale.
Tentatively Cohu will announce earnings on 7/29.
I expect it to be hugely up and on the edge of becoming a 1 billion revenue firm.
Cohu has found support at 33.ish for three times recently: stockcharts.com
I have been selling $35.00 puts out into August and November. with the hopes of getting them assigned.
I think in the long term the stock may well be a triple and an easy and quick double by year end.
Other view points welcomed.
Bob |
