Fabrinet Prices IPO Below Range

Jun.24.10 | About: Fabrinet (FN)

Fabrinet (NYSE:FN), a provider of optical and electro-mechanical services, priced its IPO on June 24 at $10 per share, below its anticipated range of $12-$14 per share.

Business Overview (from prospectus)

We provide precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (OEMs) of complex products, such as optical communication components, modules and sub-systems. We offer a broad range of advanced optical capabilities across the entire manufacturing process, including process engineering, design for manufacturability, supply chain management, manufacturing, final assembly and test. We focus primarily on low-volume production of a wide variety of products, which we refer to as “low-volume, high-mix.” Based on our experiences with, and feedback from, customers, we believe we are a global leader in providing these services to the optical communications market.

We have also expanded our customer base to include companies in other similarly complex industries that require advanced precision manufacturing capabilities, such as industrial lasers and sensors. Our customers in these industries support a growing number of end-markets, including semiconductor processing, biotechnology, metrology, material processing, auto safety and medical devices.

Offering: 8.5 million shares (5.6 million shares by selling stockholders) at $10 per share. Net proceeds will be used for general corporate purposes.

Lead Underwriters: Morgan Stanley (NYSE:MS), Deutsche Bank Securities (NYSE:DB)

Financial Highlights:

Total revenues increased by 61.4% to $136.9 million for the three months ended March 26, 2010, as compared to $84.8 million for the three months ended March 27, 2009...Gross profit increased by 100.6% to $19.1 million, or 14.0% of total revenues, for the three months ended March 26, 2010, as compared to $9.5 million, or 11.2% of total revenues, for the three months ended March 27, 2009...Operating income increased by $11.6 million to $14.8 million, or 10.8% of total revenues, for the three months ended March 26, 2010, as compared to $3.2 million, or 3.7% of total revenues, for the three months ended March 27, 2009...Net income increased to $13.5 million, or 9.9% of total revenues, for the three months ended March 26, 2010, as compared to $3.4 million, or 4.0% of total revenues, for the three months ended March 27, 2009...

Competitors

Although the manufacturing services market is highly competitive, there are significant barriers to entry in our existing and target markets, including the lengthy sales cycle, the need to demonstrate complex precision optical and electro-mechanical engineering and manufacturing capabilities to a prospective customer and the ability to protect a customer’s intellectual property.

Competitors in the market for optical manufacturing services include Benchmark Electronics, Inc. (NYSE:BHE), Hon Hai Precision Industry Co. Ltd (HNHPF), Oplink Communications, Inc. (NASDAQ:OPLK), SAE Magnetics (HK) Ltd, Sanmina-SCI Corporation (NASDAQ:SANM) and Venture Corporation Limited, as well as the internal manufacturing capabilities of our customers. Our customized optics and glass operations face competition from companies such as Alps Electric Co., Ltd. (OTCPK:APELY), Browave Corporation, Fujian Castech Crystals, Inc. and Photop Technologies, Inc.

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