ChipMOS Technologies Ltd. (IMOS)

HistoricalPEGuy (93.38) Submitted: 3/15/07 10:34 AM : Start Price: $7.19 IMOS Score: -53.81

More thanks to a good buddy of mine who turned me onto IMOS - its good to have friends who talk stocks.

So IMOS reports some odd things today and their stock gets hit by -10% but then rebounds to -%5 in after hours trading. I want to understand this more, but I'm not sure I get it yet.

For those who don't know, IMOS (ChipMOS Tech) is a Taiwan semiconductor testing and assembly company servicing mostly memory chips and some LCD and flat panel screens. Their customers include mostly Taiwanese memory and LCD producers - ProMOS Tech (Taiwan Memory) accounted for 28% of 2005 revenue. Flash memory seems to be one of their hot spots and have unnamed clients in the USA w/ long term contracts (through 2009). Revenue growth has been stellar for the past 5 years.

Some quick stats - and they are impressive:

ROE = 15%, Price/Book = 1.29, Price/Sales = 0.91, PEG = 0.15?!?!?, P/E = 11.0, Forward P/E = 6.4, Inside ownership = 36%, Debt/Equity = 0.75 Analyst Long Term Growth Rate = 46.5% - what!?!? Freaking analysts - what are you gonna do? Read Greshm's blog on the Bear Sterns analyst who UPGRADED 'NEW' right before the meltdown. Sketchy? Try totally f'd up. In any case, 20% growth would be still be great, so we'll move on.

So what happened? First, it looks like ChipMOS guided Q1 as 'not so good' due to an extended Chinese new year and seasonal slowness. Sounds weak to me - let's blame partying for our problems. They also reported a loss in the 4th quarter of last year, quite a shock to most. However, this was due to a non-operating expense involving company bonds. On the other hand, revenues rose 34% for the year and 38% for the quarter.

I don't think that ChipMOS is so screwed up that the underlying cost structure doesn't allow them to grow earnings along with revenue growth. But revenue growth is drying up due to 'an extended Chinese new year'. Hmmm. Are we getting a free 5% discount on a great stock? Is there something deeper in the water? With such a low PEG (even if we cut the analyst estimates in 1/2) and the stock starting to chart into book value territory, its hard to stay on the sidelines. There just doesn't seem to be much downside risk, but the upside potential looks huge. If they grow at 20% (not 46.5%), the P/E of 11 simply is too low compared to its peers, about 22. CAPS seems to love them as well, getting a full five stars.

Yup, I think I just convinced myself of what to do.

Report this Post Replies: 1 | Reply