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Technology Stocks : Mattson Technology -- Ignore unavailable to you. Want to Upgrade?

To: Bill Hermesmann who wrote (2062)	10/25/1999 1:48:00 PM
From: Philip W. Dunton, Jr	Read Replies (3) \| Respond to of 3661

Here's the H & Q report: * Hambrecht & Quist Hambrecht & Quist Hambrecht & Quist ** Company: Mattson Technology Price: 11.56 Recommendation: Buy Notes: a, b,f Date: 10/22/99 Returning to profitability on record revenue and bookings. Reiterate BUY. * Mattson reported record-setting revenue and bookings. * EPS was $0.02, beating our estimate and consensus of break-even. * Book to bill remained at a high 1.22, outpacing industry average of 1.08. * Increasing estimates and reiterating BUY. 1998 A 1999 E 2000 E Q1 EPS $(0.09) $(0.16)A $0.08 Q2 EPS (0.09) (0.01)A 0.13 Q3 EPS (1.10) 0.02A 0.23 Q4 EPS (0.33) 0.06 0.33 FY EPS (1.62) (0.08) 0.77 FY REVS (M) 59.2 100 148 CY EPS (1.62) (0.08) 0.77 CY P/E NM NM 15 FY Ends Dec Current Price $11.56 52-Week Range $3-15 Market Cap (M) $182 Shares Out (M) 17.2 Book Value $2.83 Net Cash/Share $0.37 3-Year EPS Growth 30% CY98 P/E-to-Growth 50% Profitable quarter on record-setting revenue and bookings. Mattson reported Q3 EPS of $0.02, beating our estimate and street consensus of break- even. Revenue set a new record at $29.2 million, ahead of our forecast of $26.5 million. Gross margin and expenses are essentially inline with our model. Lower tax rate of 15.7% (as opposed to 35%) contributed to approximately $0.01 to the bottom line. Overall, Mattson's Q3 is a solid, profitable quarter. Order momentum very strong: Bookings during the quarter were $35.6 million, also setting a new record. Book to bill ratio reached 1.22, significantly exceeding the newly announced industry average of 1.08. Approximately 90% of bookings came from Mattson's core business of photoresist strip. The company has also won a major new foundry customer in Taiwan. Overall, the Asia Pacific region totaled 68% of all orders, indicating the company's strong position in the Asian market. Backlog amounted to $41.4 million, or 3.8 months worth of forward expected revenue. Mattson becoming the market leader in photoresist strip. Our analysis shows that, given the new orders Mattson has secured during Q3, Mattson is overtaking Gasonics (O/GSNX, $14 5/16, NR) and becoming the market leader in photoresist strip. We believe that the company is well positioned to continue its market share gain beyond its current position. Significant management additions during the quarter. The company has added two senior executives to its management team during the last quarter, one for the position of General Manager of the EPI business, and the other for VP of Global Sales. Both positions are focused on marketing and sales and should bode well for the company's top-line growth. In addition, the company has continued to build infrastructure in order to support the manufacturing and marketing of multiple product lines, and in anticipation of increased business level in the coming quarters. Balance sheet. Days inventory stretched from 108 days to 118 days, reflecting increased materials purchasing for the backlog. DSO also increased from 77 days to 89 days, due to an extended term to a Korean customer. The company expects to collect from this customer in Q4. Cash declined to $6.4 million. Most of the cash decease was used to finance growth in inventory and receivables, a reflection of the rapid growth of the company's businesses. Mattson remains one of the best-positioned companies to supply the foundries. In our view, Mattson has an excellent position to grow its market share, as the foundry customers continue to outpace the overall semiconductor industry. We believe that Mattson has an exceptionally high market share on the foundry front. We believe the strength is likely to continue because the company's products possess significant advantages in the foundry manufacturing environment. Raising estimates. For Q4, we are bumping up our revenue and EPS estimate to $32.4 million and $0.06 from $28.0 million and $0.04, respectively. The lowering of tax rate from 35% to 10% accounted for half of the $0.02 EPS increase. For CY00, our current revenue and EPS forecast are $148.0 million and $0.77, versus our previous estimates of $135 million and $0.57, respectively. Tax rate reduction from 35% to 15% for CY00 accounted for $0.18 of the $0.20 differential. On a fully taxed basis, we are raising our estimate of CY00 EPS from $0.57 to $0.59. Stock view. Shares of Mattson were largely ignored in the last substantial upturn in equipment stocks. We believe that, as the cycle continues in the positive direction and as capacity purchases pick up pace, the MTSN stock is a very attractive investment vehicle for investors wanting to participate in the semiconductor up-cycle. We also hold a very positive view on the company's long-term growth potential, particularly due to the company's aforementioned strength in the foundry market, and the growth potential of several new products (CVD, EPI, RTP). We reiterate our BUY on shares of Mattson. 1999 Copyright Hambrecht & Quist LLC. All rights reserved. The information contained herein is based on sources believed to be reliable but is neither all-inclusive nor guaranteed by our firm. Opinions reflect our judgment at this time and are subject to change. We do not undertake to advise you of changes in our opinion or information. In the course of our regular business, we may be long or short in the securities mentioned and may make purchases and/or sales of them from time to time in the open market, as a market maker, or otherwise. In addition, we may perform or seek to perform investment banking services for the issuers of these securities. Most of the companies we follow are emerging and mid-size growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. For these and other reasons, the investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. This report is not a recommendation or a solicitation that any particular investor should purchase or sell any particular security in any amount, or at all. on suitability considerations, please contact your account executive. RESEARCH NOTES: H&Q publishes brief Research Notes covering very recent or developing events or situations regarding companies or industries covered. These reports are made available to interested clients of H&Q on a request basis. They often contain only partial information in very brief, often in outline form; their purpose is to provide rapid information and preliminary evaluations of such events or situations which may very rapidly be changed as a result of subsequent additional information and analysis. Please contact your Note Legend: (a) Hambrecht & Quist LLC maintains a market in these stocks. (b) Hambrecht & Quist LLC has been an underwriting manager, or co-manager, or has privately placed securities of these companies within the last three years. (c) Hambrecht & Quist LLC has an investment position in these companies. (d) A Hambrecht & Quist LLC employee is a director of these firms. (e) The analysts covering these stocks have investment position. (f) Options are available on these issues. (g) Entities associated with Hambrecht & Quist LLC have an aggregate beneficial ownership of more than 5% of the outstanding equity securities of these companies. (h) Hambrecht & Quist acts as a financial advisor to this company. (r) Restricted. No recommendation at this time. May, but does not necessarily, designate company in registration.