Joe & all,
as quite on par with many techstocks I've been watching MASK for a long time. It's valuation were always good but the company was missing leading edge technology until now. If You compare it to DPMI & PLAB You will find out that this might be the reason for the differential in PSR (Price to Sales ratio):
DPMI : PSR @ 2.57, Debt to Equity : 0.14 , net margin 12%
PLAB : PSR @ 2.90, Debt to Equity : 0.56 , net margin 13%
MASK: PSR @ 1.30, Debt to Equity : 0,00 , net margin 13%
this means: MASK can double just with sentiment change and gaining "recognition". Since margins are same, PSR ratios should also be. This is a classic disparity that will be resolved in the course of time.
This company is underfollowed that's its biggest obstacle. I'm only wondering about top AND bottom line effect of the ETEC-purchase, volume $25 million. It's good to hear that MASK closes its technology gap. But I'm wondering about bottom line effects.
For Top line this is music : 0.25 micron, OPC, PSM
for the bottom line the stance depends on financing involved. Does anybody know how such a deal is normally structured: bank loan (revolver), capital equipment leasing, installments ?
You should take into account that for bottom line there's INTEREST and DEPRECIATION to be reckoned with. Interest should be $2 million annually on the $25 financing for 8% rate. Since the company can generate $8.5 million cashflow per year and has $4 million in the bank, this would be reduced to $1.3 million for this year. However depreciation would be something like 5-8 million per year, $1-1.25 million per quarter. This means in order this deal/equipment purchse to be accretive the company has to push net SALES from quarterly levels of $11.60 million to more than $13 million. This is a conservative estimate since I didn't take into account capital stock that already is fully depreciated and won't nibble at cashflow in the future any more.
to all: do You think they can do it ? If yes, how long does it typically take for a photomask company to master new generation equipment. Will there be a period where they have the deprectiation but no revenue from the new equipment ?
best regards
CROSSY |
