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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: eabDad who wrote (41098)	12/28/1998 4:30:00 AM
From: Skeeter Bug	Read Replies (2) \| Respond to of 132070

z, thanks for the feedback. will appreciate your analysis on nvls. a couple points, though: 1. copper - heavily bet on by nvls - is being delayed by intel. 2. the semi industry's sales are down 50% while nvls stock price is up 175% since early 1996. granted, the world is slightly different, but these are MASSIVE disparities. 3. when the pc inventory crunch hits - EVERYTHING is going down, imho. sell offs are no more rational than panic buying, imho. btw, i never said nvls wasn't a well managed company. i only say that it is currently way overvalued. also... semibiznews.com "In going from 0.25 to 0.18, over 90% of the tools for those two technologies essentially are the same," stated Peter Rickert, TI's platform development manager who is based in Dallas. "We have gotten to the point where we are asking the production fab to 'approve' any changes. We have an authorized equipment list that is agreed upon by the development team and the production facility," he explained. "This type of practice is becoming pretty common," he added, "especially when you consider the cost of this equipment."

To: eabDad who wrote (41098)	12/28/1998 4:47:00 AM
From: eabDad	Respond to of 132070

Skeeter: Fundamental analysis methodology on semi-equips.... I have noticed that prices fluctuate between 0.8-5x sales for semi equip stcoks generally over the years. Ratios to book values have a similar and close fluctuation, but sales is more telling. That is the measure I will use here. (1) I looked at 29 companies, closing price 12/24. I did not count the materials nor components guys, and excluded Varian since it was not a pure play. (2) Since the market values companies in three segments, so did I. I took the 29 companies and split them into three groups. Blue chips gaining share and good product position (9 "A" companies), companies with solid management but only stable product position (subject to overall market fluctuations - 13 "B" companies), and companies which had deteriorating product positions and/or dog management (7 "C" companies). (3) Assumed the following thesis: stocks would rise on order rates and peak in the Jan/Feb time frame, orders would then stall causing a correction in the stocks, settling to a low late in Q3. Order rates would not go to the low seen in Q3-98. Why? In wnd half 1998, the capital spending to semi revenue ratio dipped below 17%, an unsustainably low level given technology migration needs. Average for the ratio is 21-22% based on return on asset analysis of building a fab. Recent peak was over 30% in 1996. Assumed a recovery to about 19% by year end 1999, as there will still be overcapacity. (4) IMPORTANT - Assumed peak and trough Price to sales ratios for all three segments based on investor confidence in company. "A" stocks range from 4.0-4.5x at peak (lower than historical peaks in 1995 and 1997) and 1.5-3.0x at trough (AMAT was 3x, SFAM was 1.5x). "B" companies 2-3x at peak, and 0.8-1.3x and trough. "C" companies worse. (5) MORE IMPORTANT - Sales comparisons in the next several quarters will be bad, so the sales number used to calculate P/S ratio targets for the lows in Q3-99 needs to be 25% lower than current 12-month trailing figures (based on quarterly forecast analysis assuming the overall equipment market is flat to down slightly in 1999 relative to 1998). Results .... "A" Companies - avg P/sales 3.1x, avg P/book 4.0x, possible upside +43% avg, possible downside -44% by Q3-99 "B" Companies - avg P/S 1.6x (surprisingly low to me), avg P/B 1.5x, possible upside +65% avg (doubtful), possible downside -48% by Q3-99 "C" Companies - avg P/S 0.55x (wow), avg P/B 2.4x, possible downside -43% by Q3-99 Observations... Of the 29 companies, only 9 recorded trailing 12 mo. profitability, and with the next quarter release that number will go to 6. NVLS has the highest net profit margin, followed by TER The best shorts are in the "A" group since they have the higher valuations (list of top 5 in next post) Conclusions... Equipment companies fairly valued but trading opportunities will exist both ways in the next year - AS ALWAYS in this sector. ** Downside targets mentioned in this thread are not realistic targets based on fundamental analysis. Z

To: eabDad who wrote (41098)	12/28/1998 5:05:00 AM
From: eabDad	Respond to of 132070

Z's analysis on semi equips by company: These are good companies, all... ASMLF $30.25 PS=5.1x PB=7.6x Above peak target Trough target $13.50 KLAC $41.63 PS=3.4x PB=3.0x Peak tgt $48-50 Trough target $23 ETEC $38.75 PS=2.9x PB=3.5x Peak tgt $50-52 Trough target $24 ADEX $12.63 PS=1.6x PB=1.1x Peak tgt $15-16 Trough target $5 For reference... AMAT $43.94 PS=4.1x PB=4.9x Peak tgt $47-49 Trough target $24 NVLS $54.00 PS=3.3x PB=5.2x Peak tgt $64-66 Trough target $32 You will notice ADEX is a "B" stock, but other fundamentals drive this. Stories: ASMLF: Stepper units falling off badly, DUV growing but will not save. KLAC: Mask inspection falling off worse than market in 1999 ETEC: Mask capital spending curtailed early 1999 ADEX: Silicon industry capital spending in dire shape - not recovering Z