Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (74225)

11/11/2023 11:23:52 AM

From: E_K_S

Read Replies (1) | Respond to of 78744

Re MKSI - looks like they made a $4.4Billion acquisition in 2022 (Atotech Limited (ATC). MKSI took on an equivalent amount of debt. Deal s/d be accretive in early 2024. Most importantly 67% of Atotech Limited (ATC) revenues come from ASML a strategic partner for ASML!

So (it appears) you get a pure play in ASML through MKSI from their acquisition of Atotech in 2022.

-----------------------------------------------

The acquisition s/d be accretive early 2024. My main motivation for MKSI (a relatively small position) was their low PE relative to the other semi equipment companies. I own AMAT (scaled into a position starting in middle 2022) and KLAC which I bought in 2015 at $50/share. I tried to pick up ASML in 2022 but never hit my order price.
---------------------------------------------------
MKSI's revenue from ASML is a significant source of income for the company. In 2022, MKSI reported revenue of $3.8 billion, of which $2.1 billion came from ASML

-------------------------------------------------------
My Question to BARD:

Did Mks Instruments Inc (MKSI) make any acquisitions in 2022 as it appears they issued debt and showed a similar size acquisition in their cash flow statement, if so did they state what their ROI would be as ROA appears to be low

MKS Instruments Inc (MKSI) made one significant acquisition in 2022: the acquisition of Atotech Limited (ATC) for approximately $4.4 billion. The acquisition was completed on August 15, 2022. Atotech is a global leader in process chemicals, equipment, software, and services for printed circuit boards (PCBs), semiconductor IC packaging, and surface finishing. The acquisition is expected to significantly expand MKS's product portfolio and customer base, and to provide access to new technologies and markets.

MKS has not yet disclosed its expected ROI for the Atotech acquisition. However, the company has said that it expects the acquisition to be accretive to earnings within two years.

MKS's ROA has been relatively low in recent years, but this is largely due to the company's significant investments in research and development. The company has stated that it expects its ROA to improve as its investments in R&D begin to bear fruit.

Overall, the Atotech acquisition is a significant strategic move for MKS. The acquisition is expected to provide MKS with access to new technologies and markets, and to drive growth in the coming years.

----------------------------------------------------------------

In 2022, Atotech reported revenue of €2.4 billion, of which €1.6 billion came from ASML. This means that ASML accounted for 67% of Atotech's revenue in 2022.

These are the specific products/components supplied to ASML (NOTE:The components and products that Atotech supplies to ASML are not exclusive to Atotech.)

Electroplating chemicals: These chemicals are used to coat semiconductor wafers with a thin layer of metal, such as copper or aluminum. This metal layer is essential for the electrical conductivity of the chips.
Electroplating equipment: This equipment is used to apply the electroplating chemicals to the wafers. It includes tanks, pumps, and filters.
Photoresists: These are light-sensitive chemicals that are used to create patterns on the wafers.
Etchants: These chemicals are used to remove unwanted material from the wafers.
Cleaners: These chemicals are used to clean the wafers and remove impurities.

Interesting to Note: (some of the other suppliers of electroplating chemicals include Ebara Corporation, Hitachi High-Technologies Corporation, and DuPont Teijin Films. Some of the other suppliers of electroplating equipment include Tokyo Electron Limited, ASM Pacific Technology Pte, and TEL Semiconductor Holdings Co., Ltd.)

Atotech's margins on its sales to ASML are not publicly disclosed. However, the company's overall gross margin is 40%, which suggests that its margins on its sales to ASML are likely to be in the same range.

AI BARD provides even more information about Atotech's partnership with ASML:

Atotech is a critical supplier to ASML, and the two companies have a long history of collaboration. Atotech is committed to providing ASML with the high-quality components that it needs to manufacture its cutting-edge semiconductor manufacturing equipment.

Here is a table that summarizes Atotech's sales to ASML:

YearRevenue from ASML (€ billion)Percentage of Total RevenueGross Margin (%)
2022 1.6 67% 40%
2021 1.4 63% 38%
2020 1.2 58% 36%

------------------------------------------------------

It may be worth looking at some of these other companies that provide the supplies and/or electroplating equipment.

The value thesis is you get a company selling at 13x PE which could see PE expansion. You may or may not get the equivalent move from owning the semi-equipment manufacturer. Maybe AMAT at 18x PE is still in the 'value' category, so I will be looking to add to that on any pull backs.