O2Micro International Limited (ADR) (NASDAQ:OIIM)

CAPS Rating: 5 out of 5

Designs, develops and markets integrated circuits for power management and security applications, as well as systems security solutions.


Player Avatar mypieceofpie (< 20) Submitted: 1/25/2011 12:01:56 PM : Outperform Start Price: $6.51 OIIM Score: -127.44

This stock looks cheap compared to most of its competitors with decent profitability ratios.

Member Avatar mypieceofpie (< 20) Submitted: 2/13/2011 12:39:17 PM
Recs: 1

After further review of O2 Micro I recommend a strong buy on this stock and will initiate a position in my RL portfolio monday morning.

It is always hard to initiate a position in a stock that has seen a significant move in recent days. I don't like to chase stocks, however, O2 micro looks to continue its recent upward trend. O2 micro has seen resisitence at $7.50 twice in the past year only to fall back to a $6.00 range. Since the beginning of 2011, O2 has made a run back to $7.50 and has pushed through this time pretty convincingly and I now see this $7.50 level as support. When looking at a 10 year chart of O2 you can see the potential of what some momentum can do to the PPS. On Jan 1, 07 the PPS was $8.37 and by Oct 1, 07 the stock exploded to $17.36. Currenly oiim is trading at $7.80 with inexpensive valuation ratios. P/E of 12.5. P/B of 1.5 and P/sales of 2. All well below the industry averages. Cash and short term investments account for $3.30 ads and a book value of $5.36 ads.

Now that I can put my mind to ease in concerns with O2's recent move upwards and it's ability to keep running, the next concern is the fundamentals of their business. O2 markets integrated circuits for power management of consumer electronics such as: smartphones, tablets, LCD screens and monitors. Not a bad business to be in these days, as their products help conserve energy and battery life to related consumer products. From what I read and see on TV we are in a very strong product cycle for which O2 supplies many parts. Just the recent events in Egypt should show us how powerful the internet is and the need for products to enable connectivity.

Further research into the internal dynamics of O2 Micro leads me to believe they are well positioned to take advantage of this cycle. The year to year and quarter to quarter comps are lower in the first half of this year because it has dicontinued its network security programs and is in transition to concentrate on its core products. In the Q4 conference call, Sterling Du, (Chairman and CEO) expains, "The year started off on high notes and slowed down as inventory correction ran its course... Supply chain looks much healthier and products are well positioned to core markets and new areas." A couple other things in the conference call that seemed interesting include a recent stock buyback of 100,000 shares for $576,000. Over 1/2 of the employees at O2 are engineers enabling them to stay ahead of product development. O2 has many US patents related to their core products as well.

I look forward to using O2 Micro International as a lucrative vehicle in this powerful consumer electronics product cycle.

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