Lets do some simple math.
FWIW I think 2022 numbers will end up ABOVE what follows, but just to see where we are today.
Lets say 2022 revenues are about $1.2 billion, with 30% operating margins, that's $360m operating profit, with 20% tax, that's $288m net profit.
Due to the $200m share buyback SIMO today probably has 33m shares outstanding, so $288m/$33m = $8.72 EPS for 2022.
That's a minimum forecast if they don't increase guidance when they report on May 4th. I think they will increase forward guidance because they said they would if they got more allocation from TSMC, and the reports of order cancellations in Q1 means it's likely TSMC has found more foundry capacity for SIMO.
For the balance sheet, SIMO also probably has about $9 per share cash, and no debt.
So if we give a lousy 15x PE to $8.72 and add in the $9 per share cash we get $140/share acquisition price.
I don't think SIMO management / investors will sell at that level because 15x is too low.
Perhaps it's better to look forward one more year to 2023. In 2023 with 5%-10% sales growth SIMO can easily get EPS up to perhaps $10 EPS. To convince everyone to sell the buyer should pay perhaps 18x PE off 2023 $10.00 EPS plus end of 2023 cash of $15 per share, and, voila you've got a $10 EPS x 18 = $180 plus $15 per share cash = $195 acquisition price, with the deal expected to close in Q1 2023.
THAT seems reasonable to me, and hard for SIMO management to resist.
It looks like a VERY large premium to the current share price, but that difference exists ONLY because SIMO is currently so undervalued relative to it's growth and market position. Put SIMO's sales, earnings and cash flow growth into a larger diversified semiconductor stock, and it's easily worth 18x or more. MCHP, AVGO, INTC and MRVL would be negligent not to buy SIMO for 18x 2023 expected EPS plus cash. Hopefully they all want to do that, and can begin to try to outbid each other.
This is the key point. It seems the battle to be the dominant merchant flash controller maker is over, with SIMO as the winner. So.....who wants to own the global leader in a growing necessary semiconductor market segment. Everyone should.
The reason why the market doesn't agree with that perception remains a mystery to me, if anyone can explain SIMO's current crap valuation I would love to read the explanation. |
