ferrariedgardo (< 20)

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February 04, 2011 – Comments (6) | RELATED TICKERS: ASYS , FSLR , SPWR

Earnings for Q1 FY 2011 are going to be released on Tuesday. I expect them to beat the estimates of $0.37 by quite a bit and thus I have loaded with stocks and out of the money february options expecting the price to go up by quite a lot.

Asys has done one of the most spectacular turnarounds and the case is very compelling. I expet this company to be worth 1B in less than 3 years now.

This is due to the fact that they are in a sweet spot where they recently achieved economies of scale as they will be quadrupling revenue in two years 52M 2009 to over 210M this year. This has allowed them to dilute fixed costs better and turn around the income statement. They went from loosing some money to making decent margins last year. However what lies ahead shows still a lot of growth potential.

To illustrate some key fact:

1. Rev for Q1 FY 2011 45M estimate vs. 52M actuals (recently disclosed)

2. Last earning Q4 FY2010 EPS 0.34 estimate vs 0.58 actual on 45M rev (previous Q 0.14 est vs. 0,42 actual).

3. Q1 FY 2011 EPS 0.37 (was estimated on 45M rev but it is actually 52M rev, this would account in my mind for a suprise of some 10% at least)

4. Growing order book. Orders inventory is getting higher every quearter this generally allows for higher pricing and thus higher margins. Total order book over 170M (this plus 52M of rev for Q1 already has all the revenue estimated by analysts for the year covered)

5. 32M in orders for Jan (even more in dec2010). If keeping this pace total orders FY 2011 around 400M

6. Growth of 7M in rev Q1 2011 over Q4 2010. Extrapolating this increase Q by Q to the full year total revFy 2011 250M vs 213M current analysts estimate (15% more than estimates)

7. PEG ay only 0.37 using analyst astimates which in my opinion are very conservative. This is among the lowest for an american stock

The key reason for all this is that there is a ramp up in production of solar panels has increased demand for Asys products (solar industry provider through tempress systems). It will likely remain like this for the next several years. This is a major point as providers to growing insudtries have proven to do better than the growing industry itself (solar panel producers). This is very common as for example fertilizer companies and drilling companies who provide services and raw materials to the agriculture and oil sectors are good examples of that. In times of high demand these types of industries profit more as there is increased demand for their services which allows them to price at higher prices and still get demand. This results in very high margins and generates lots of cash.

I see this company as the most undervalued non distressed american stock. !B dollars is definitely achievable

Comments?

6 Comments – Post Your Own

#1) On February 07, 2011 at 2:40 PM, soycapital (60.16) wrote:

Wish I'd have bought me some before, a big run now and have to wait for dip or shop elsewhere.

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#2) On February 07, 2011 at 4:36 PM, griderX (98.16) wrote:

One keep metric I will be keeping an eye on is the Book to Bill ratios. Most recent 4Q10 Ratios are as follows Solar 1.0:1 Semi 1.3:1 Total 1.0:1

Guaging from the recet solar bookings we can assume that the solar BtB ratio will increse greatly...should keep the pipeline full for the rest of 2011 and beyond.

As stated a double by year end could be HIGHLY probable based on recent bookings...so a $50-60 stock is not out of the question.

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#3) On February 07, 2011 at 7:07 PM, colagolosa (< 20) wrote:

Yes, totally agree. $50-60 is definitely possible this year.

They are at 100% capacity utilization which tends to be a great situation to increase prices and thus EPS fly.

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#4) On February 08, 2011 at 4:48 PM, griderX (98.16) wrote:

Nice outlook $230 Million in Revenue for 2011. Rough calculations $2.00-2.25 EPS @ current PE of 27 gives us a $54-60 price range near my expectations. If Mr. Market gives us a higher PE I'll take it ;-)

First quarter book-to-bill of 2.3:1 (Solar 2.5:1, Semi 1.2:1)

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#5) On February 08, 2011 at 9:28 PM, ferrariedgardo (< 20) wrote:

Great results.

Would like to hear what analysts will say tomorrow.

In the near term the EPS may go a little down for FY2011 to around $2 with revenue probably of 230-245M. Which should effectively be translated at a price of 55 to 60 or 2X sales and 27X earnings.

The slight decrease in earnings will be driven by higher COGS (1 or 2%), deffered revenue reflected at COGS in the AR line (which as the revenue grows fast may impact 1 to 2% in margin) and higher R&D costs due to the new acquisition (the only indication is that this will be in the millions a year). This last item will pose the largest impact in the P&L (I estimate around 4M FY2011 and 5M FY2012). This item will be diluted as revenue grows at a much faster rate 30 to 40% FY2012.

But the increased revenue and the decrease in taxes FY2012 will create huge value. Unfortunately in the Conf call they did not disclose the expected tax relief by creating the new structuer but if it were a reduction of the effective tax rate from 40% to 30% would mean an increase incompany value of 16%. Typically a well structured company can easily get to 20%effectivetax which would result in a 33% increase incompany earnings and thus market cap.

Overall the news are great and the value of the company is defintely increased.

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#6) On February 08, 2011 at 10:07 PM, ferrariedgardo (< 20) wrote:

One important addition to my previous comment as per the conference call they have 16M of deffered profit for March 2011 quarter which should impact positively. Would like to understand how this work.

Anyone read the notes of the financial statements?

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