Questions/Comments for the thread:
I'm thinking of buying a few semi-equips(KLAC,ASMLF,AMAT), when I think the sector has bottomed (ain't there yet, sorry guys, still far too much semi capacity and nothing on the horizon to pump up chip demand). Should I add CYMI to the list?
1. The most negative thing about the company is that it is new, without much of a track record. Morgan of AMAT has been through about a dozen cycles, and has proven he knows how to survive. I haven't been able to find much on CYMI management.
2. P/S=2 now, the same as during the 96 low. Good value, and possibly indicating it won't go much further down. TA is also encouraging, as the stock has support at 15 going back to 3/97.
3. Why doesn't ASMLF stock track exactly with CYMI? Doesn't improving or declining business conditions for one imply the same for the other?
4. CYMI owns its niche, and has high margins. How high are barriers to entry? That is, when will Komatsu become a serious competitor? The Nikon-Cymer-Komatsu relationship looks a lot like Compaq-intel-AMD. Compaq doesn't like having only one vendor for a key part, so they keep on fostering AMD, so far with limited success. Every time the market begins to take AMD seriously, has turned out to be a good time to invest in INTC, because AMD consistently fails to execute. Just how hard is it to make lasers?
5. The second most worrisome thing about the company is its balance sheet. Too much long-term debt. Not enough cash (yes, I know they have 5.50/share). Survivors in this zero-visibility cyclical high-fixed-cost industry must have pristine balance sheets. Servicing a high debt load when orders vanish can quickly push a company to the wall, no matter how bright their long-term prospects. Ask the Koreans. Debt-to-equity is 58%, far too high. Using cash to buy back shares is a discussion I've heard on several sem-equip threads. It won't happen, as it would be a very irresponsible action. The purpose of cash is to continue vital R&D during unforeseen downturns.
6. Worst case scenario (no, I don't think it'll happen, but it might): Japan goes into depression, the U.S. has a recession, IT budgets are used to fix Y2K, no new killer-apps emerge, everyone decides their present computers will work just fine for a couple of years. Does Cymer have the resources to continue R&D, and enter the upturn (in 2001-worst case) with the best lasers?
7. If such a downturn happened, which segments of semi-equip would still get some business? AMAT has the largest installed base, and gets a steady cash flow from service. Would test equipment (KLAC) do OK? Die-shrinks would probably continue; 300 mm/copper/balls/other blue-sky stuff would continue to get pushed out into the indefinite future. Who benefits most from this incremental movement to .25 => .21 => .18?
8. CYMI is only 5% institutional-owned. Too small to appear on their radar screens. So who owns the rest? Management? Small investors? Venture capitalists?
TIA everyone. Hope we all get rich on the next upturn. |
