Seeking Alpha

Value Advisors

 
View as an RSS Feed
View Value Advisors' Comments BY TICKER:
Latest  |  Highest rated
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Hi and thanks for your true comment. On the practical level I will repeat from previous reply. If I had two companies, otherwise identical, one with considerable net cash and full ownership on its assets and the second loaded with debt and renting its facilities - I would pay much more for the first one. On the theoretical level I would argue that if a company will invest its cash in upgrading its facility I would accordingly upgrade my expectation for future results (based on my ROI estimate). This may well balance out or even add to the company valuation.
    Jan 21 05:01 PM | Likes Like |Link to Comment
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Thank Buzz33. Indeed, I think some of your observations are true. The relative diversity in IXYS product line means it is not in the Boom-Bust game. IXYS won't have a 30% growth one year due to one successful product and neither will it drop 30%. It is not managed this way. I think this is exactly what makes it a long term investment (certainly not a trade). Also, remember its excess capacity and operational leverage. Even a 10% top-line growth (which it can easily do) will increase its margins considerably.
    Jan 21 05:00 PM | Likes Like |Link to Comment
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Thanks for your comments. Let me first reply in general terms and then try to be more specific. So, in general I try not to use balance sheet metrics in my valuations because they inherently capture a single "accounting moment" in the company life. The balance sheet item used for calculation may be totally different one day after the reporting moment, or under slightly different accounting policy. Cash Conversion Cycle (CCC) is one of those measures together with Inventory & receivable turnover and so forth (I am certainly using such metrics over longer period of time and in cases where I try to find "missing" cash-flow). IXYS is remarkably good at generating cash from its operations as can be seen from its CFLO statement - year after year. The CCC in IXYS case reflects accounting preferences more than anything else. Its level is largely due to IXYS Inventory policy which holds steady between 130-150 days turnover for the last 7-8 years.
    Jan 21 04:59 PM | Likes Like |Link to Comment
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Thanks Tony. I'll try to explain the rational here. We ask ourselves the following question: At the current market environment, if we had two companies that are otherwise identical except that one held full possession of its manufacturing assets and the other had to rent- would we pay the same for those companies ? Our view is that we will pay much more for the company with full ownership of its assets.
    Jan 21 04:57 PM | Likes Like |Link to Comment
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Thank you for your comment Wenqin Ye.
    You raise two legitimate concerns: (1) Industry cycle and (2) IXYS's relative advantage.
    The semiconductor industry is certainly cyclical. However, the main reason for that is the immense CAPEX required to build each new fab. This creates a step function for industry capacity increase. Yet, as explained, IXYS's playing field is totally different and is quite resilient to industry cycles. IXYS is also relatively resilient to global market downturn (although it is certainly affected by such downturns). On a general note please let me also remark that in my view the overall semiconductor industry today is a much more diversified and matured industry. As such, its inherent cyclicality is much less than in previous cycles.
    As for IXYS's relative advantage in the market- for the last 30 years IXYS fought to remain a leader and will have to guard its position going forward. This indeed cost the company a lot of investments over the years, as can be seen from the company's R&D expenses (which are expected to continue to grow going forward) and may also be seen through possible technology-motivated acquisitions in the future.
    Jan 14 03:32 PM | 1 Like Like |Link to Comment
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Actually, almost everything I wrote is company-specific.
    It is true that the whole market will show nice growth going forward (and research supports it) but notwithstanding, the magic about this company is that it makes money under any market condition. Do look again carefully, this company is the OPPOSITE from generic. Its management, its products, the segments it serves, its business model, its financial discipline - are all extraordinary.
    Jan 11 12:12 AM | 1 Like Like |Link to Comment
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Hi Joe. As mentioned during the September quarter the MCU business acquired from Samsung was still in a transition mode. Therefore, the first quarter to show the full effect of the acquisition on IXYS top line should be the December quarter (if not March). Indeed the numbers you quoted are in the reports IXYS filed for the acquisition but these are Samsung internally generated numbers. Trying to remain conservative I will wait to actual results as reported by IXYS.
    Jan 11 12:08 AM | Likes Like |Link to Comment
  • Long Syneron: Upside Supported By Competitor's IPO Valuation, Recent Peer Acquisition [View article]
    I don't think that you are wrong. Zeltiq is a very interesting company, with new technology and strong consumables business model. Their gross margin is also exceptionally high for this industry.
    For these reasons (unique IP, high margins and strong recurring revenues stream) ZLTQ receives a high EV/Sales ratio. I believe that offering a unique product with limited competition deserves a higher multiple, in any industry.
    I am currently researching Syneron's Ultrashape product, which is in the FDA submission stage, and is a direct competitor to Zeltiq's CoolSculpting product. I will share it on Seeking Alpha once I have understood the potential and pitfalls.
    Dec 23 03:45 PM | Likes Like |Link to Comment
  • Long Syneron: Upside Supported By Competitor's IPO Valuation, Recent Peer Acquisition [View article]
    That's a tough number to ascribe.
    The details, as I understand them from Syneron's releases are:
    -$30mn in Syneron home use product sales
    -$25mn cash investment into the JV by Unilever
    -Additional Unilever products injected into the JV, who's sales were not disclosed
    -Leverage of Unilever brand and global sales force and channels

    The combination of the above 4 assets creates a very attractive opportunity for both parties, which can be at a later date be taken to the public markets as a spin off. This should be the basis for any valuation of this JV.
    Syneron could not have chosen a more ideal partner to leverage its home use assets. We are anxious to see how this story unfolds in the coming quarters.
    Apart from the value of this JV, you should remember that this assets takes off the shoulders of the company a heavy financial burden, which is now borne by the JV.
    Dec 22 11:09 AM | Likes Like |Link to Comment
  • Long Syneron: Upside Supported By Competitor's IPO Valuation, Recent Peer Acquisition [View article]
    We see Syneron as a growth momentum company, with 3 engines that will support top and bottom line growth. The Syneron story is currently about growth, and the company might decide to invest in future growth at the expense of EPS. Therefore such forecast is very hard to make, and currently I am not at a position to estimate this.
    The 3 growth engines are:
    1. Existing PAD product line (aesthetic lasers). The company is adding 35 new sales reps in North America, and is shifting towards a higher margin sales target. This should generate an additional $35mn to the top line within 12-18 months. The GM for these incremental revenues is expected to be >60%.
    2. EBU sales (Unilever JV and other products such as Elure and Zap). These are expected to become significant and at a high gross margin. Currently the annual run rate of this unit is $30mn, and the company has set a mid term revenues target of $100mn within 3-5 years.
    3. Ultrashape sales: Ultrashape has the highest potential to take the company to a new level of profitability and sales growth. I am currently researching this product and its potential, and will release a paper on Ultrashape once completed.

    Each of the above 3 engines on itself can bring the company to new financial territories, and easily advance the company towards a $0.25 EPS per quarter. If I would have to bet on it, Ultrashape has the biggest potential to bring the company to the zone you are aiming for.
    Dec 22 10:45 AM | Likes Like |Link to Comment
  • Stratasys To Drop On Selling Shareholders, Unrealistic Expectations [View article]
    BTW- not all research groups following SSYS were impressed by their results. TheStreet this morning downgraded its rating for SSYS from buy to hold. Their report highlights the company’s strength, and its weaknesses: “we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share”. Furthermore TheStreet writes that “SSYS's very impressive revenue growth greatly exceeded the industry average of 18.0%. Since the same quarter one year prior, revenues leaped by 63.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share”.
    Mar 6 04:55 PM | Likes Like |Link to Comment
  • Stratasys To Drop On Selling Shareholders, Unrealistic Expectations [View article]
    @ vieilhomme
    Your next question was about the sale of shares by insiders.
    Last week Israeli newspaper Calcalist published that Stratasys is planning to perform a secondary shares offering estimated between $400 to $500 million, predominantly of existing shareholders. According to Calcalist the company is negotiating this offering with JP Morgan and Piper Jaffray.
    Yesterday, Needham & Co upgraded its recommendation on SSYS from Hold to Buy.
    I believe that a secondary offering is indeed being planned, and Needham may join the team of underwriters. The timing of Needham’s upgrade need not be connected to such an offering, but may assist the bank in joining the underwriting team.
    There is a lot of common sense in a scenario whereby the company is planning a secondary offering in order to assist Objet shareholders to liquidate their holdings in an orderly manner. If these shareholders sell their shares directly to the market (without a secondary offering) the result on the share price could be devastating. Sooner or later, these shareholders will sell some or all of their shares, and they all have an interest to maximize the share price.
    This might be the reason no insider has yet reported such sales. It would not surprise us if management and insider shareholders agreed to work jointly on a secondary offering, which may be beneficial to them all. The timing of such a secondary may be as soon as April, after the first quarter of 2013 has ended.
    Mar 6 04:44 PM | Likes Like |Link to Comment
  • Stratasys To Drop On Selling Shareholders, Unrealistic Expectations [View article]
    I find your question a great one, and it is not easy to answer. You are not the only one who could not easily understand the report. Motley Fool yesterday published an article titled: “Stratasys Earnings Report Lacks Transparency” because management chose to report financials in a non ‘user friendly’ manner.
    Let me try to shed some light.
    In December 2012 SSYS merged with Objet. The merged company was expected to report figures of both the merged entity for Q4 & FY 12, as well as for the pre-merger Stratasys. Wall Street analysts forecasted 2012 revenues of ~$200 million and profits of ~$30 million for the pre merger SSYS. When Stratasys reported its Q4 results this Monday it reported only the combined results of both companies, without providing clarity on the results of each company alone.
    In the company’s conference call analyst Brian Drab of William Blair specifically asked: “I think people are going to be trying to discern what the growth was at the legacy Stratasys business in the quarter, and what the growth was at Objet and it’s hard to discern from what you released. So maybe if I could just start with that question, what was organic growth from the legacy Stratasys business and the legacy Objet business in the fourth quarter?”
    Erez Simha, SSYS’ CFO responded: “We are not providing standalone pro formas of the company”.
    Drab pressed on and stated: “I was hoping that we could just get -- since everyone’s estimates and models for the quarter were largely focused on the Stratasys business, it would have been interesting to get a idea for the health of that standalone business one last time”. Stratasys management chose again not to elaborate or provide guidance to this question (a full transcript of the conference call is available here at SeekingAlpha.com).
    We at New Angle Research are also looking for the answer to this question and are hopeful that management will be more cooperative with the analysts that cover the company regularly. We will share our findings with you as soon as we can understand better.
    Generally speaking, management’s lack of cooperation with the investment community’s legitimate questions is not a good sign, and we are unclear as to why management declined clarifications. We hope that management is not trying to cover unfavorable facts. We believe that we will be able to answer this question in the coming quarters.
    Mar 6 04:14 PM | 1 Like Like |Link to Comment
  • Stratasys To Drop On Selling Shareholders, Unrealistic Expectations [View article]
    @Squallvn-
    If you read through SSYS F-4/A (links to Edgar database are in the article) you will see that locked up shareholders are allowed to sell upto 7.5% of their resricted shares in the open market under certan conditions, such as minimal share price. These conditions will be met next week hence they can start selling shares as early as next week.
    Mar 1 06:57 AM | Likes Like |Link to Comment
  • Stratasys To Drop On Selling Shareholders, Unrealistic Expectations [View article]
    These are Wall Street consensus numbers. I don't buy into them because I think they are too 'rich'. Specifically:
    JP Morgan's Paul Coster in his coverage estimates FY 2013 pro forma net income to reach $76.92mn, or $1.90 EPS on 40.5 million shares;
    Needham's James Ricchiuti estimates FY 2013 pro forma net income will reach $73.18mn ($1.81 EPS).
    The net income you see reported for SSYS so far are pre merger, on SSYS sales alone, so very far from the ~$76mn forecasted. The merger with Objet brings a lot of sales and bottom line revenues. Can they reach these numbers in 2013? I doubt it for numerous reasons, but even if it were true, I think a company with this growth level and risk from competition etc should get a lower PE multiple of about 15.
    Feb 28 12:27 PM | Likes Like |Link to Comment
COMMENTS STATS
20 Comments
3 Likes