Actions Semiconductor Co., Ltd. (ADR) (NASDAQ:ACTS)

CAPS Rating: 2 out of 5

The Company is a fabless semiconductor company that designs, develops and markets integrated platform solutions, including SoCs, firmware, software development tools and reference designs, for manufacturers of portable media players.

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Player Avatar rhallbick (99.56) Submitted: 2/20/2011 5:01:00 PM : Outperform Start Price: $2.40 ACTS Score: +16.98

This ten-year-old, Zhuhai, China-based company is a fablesss designer of the electronics used in hand-held consumer products, historically MP3 players.
They compete on the cutting edge of design and functionality for their products, up against companies such as ALi, Anyka, Broadcom, NXP Semiconductor, PortalPlayer, Rockchips, Samsung, SigmaTel, Silicon Motion, Sunplus, Telechips and Texas Instruments.
They IPO’d on the Nasdaq in Nov 2005, underwritten by Credit Suisse First Boston. They initially had very good success with their electronics, which peaked for them in 2006. After that, competitive pricing pressure and lower volume drove their revenue down from $170M/annum to $38M today.
As revenues declined, profits finally went into the red in 2009, entirely due to the necessity of continuing the expenditures for new product development. They stabilized in 2010, generating a small profit. Gross margins, once over 50%, are now relatively stable at about 40%.
Their R&D program has generated new products for the MP4 market, including applications in the automotive audio and boom box industries. Late in 2010 saw their first sales into the hand-held advanced-video game-player market with their Series G1000 product line. If these product launches are ultimately successful, Actions will start to see their revenue grow once again by mid-2011.
For the first quarter, ending March 31, 2011, Actions Semiconductor estimates revenue in the range of $7.5 to $8.5 million, gross margin will be approximately 40% and operating expenses higher on a sequential basis.
Analysts have largely abandoned the company. Rick Fearon of Accretive was the only questioner on the year-end conference call.
There are 430.6M shares outstanding and each American Depository Receipt (ADR) represents six shares. They have $233M in cash and marketable securities and no debt, which comes to $3.25/ADR. They have bought back 85.4M shares in the last three years. They do not pay a dividend and will not in the foreseeable future.
Disclosure: I have taken a small position, based on the value aspect. It would be a bit larger position if I had more evidence of how successful their new product lines will be.

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