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LONG MX: “Bucking The Semiconductor Sell-Off” And “Banking On The Rise Of OLED”

Summary

MagnaChip (MX) is a low-multiple semiconductor company with a $200 million market cap that has undergonea radical transformation and positioned itself to be a leader in the emerging OLED DisplaysDDIC.

MX Display solution largest Customer is LG Display. LG is committed to invest $17.9b to shift into OLED. LG plans OLED to account for 50% of its total revenue by2021.

OLED revenue only accounted for 10% of THE $24.68b LG generated in '17 and is set to expected to increase 5x. MX will be a beneficiary of this OLED Bonanza.

  • I expect the management to unlock shareholders value by divesting the legacy Foundry Services Group (FSG). I believe recent FSG management changes point in that direction. FSG was selected as ELAN's foundry partner (2017 announcement) primarily because of the company's specialized foundry capability, and manufacturing processes with robust analog performance. ELAN's stock price skyrocketed 100% since October 2018 to almost 1b in market cap. I believe the following is the reason: "Integrated chip (IC) makers in Taiwan and China are gearing up for an expected surge of shipments to meet increasing demand for biometric identification chips in 2019, industry sources told Chinese daily Digitimes.". This spells good news for MX Foundry business (even in case of no Divestiture. It could surprise MX investors to the Upside at the upcoming conference call / results or 2019 guidance!
  • November 26, 2018 Nader Tavakoli was appointed as Chairman of the Board of MX. Mr. Tavakoli is also the Chairman and CEO of EagleRock Capital Management, a private investment partnership based in New York City. This should insure good corporate governance after problems MX encountered earlier this decade.
  • As of yesterday, January 31, 2019 I believe a big buyer is out there accumulating shares on the cheap (multiple 100k block trades). You will find all the details in the report.
  • Short term Catalysts translate into a $17 price target (190% upside from here).

Read the full story at: 

http://unemon.com/ResearchEasy/201902_MX/20190201_MX_LongThesis.html

Disclosure: I am/we are long MX.