The official logo for the ARM processor architecture (Photo credit: Wikipedia)
ARMH : NASDAQ : US$47.24
ARM : LSE
ARM is a leading semiconductor IP supplier to the diverse global semiconductor market. ARM’s revenues are driven through a licensing and royalty business model, with a majority of the royalty sales driven by the mobile market
including handsets, smartphones, and tablets. ARM also supplies semiconductor IP to the server, PC, and embedded markets and physical implementation libraries and IP to semiconductor foundries.
All amounts in US$ unless otherwise noted.
From ARM’s analyst day yesterday in London where ARM management highlighted strong longterm market and royalty growth opportunities in both high- and low-tier smartphones.
We believe ARM is well positioned to benefit from quickly increasing emerging market feature phone to smartphone upgrades, ramping low-tier tablets, and high-tier smartphone platform refreshes that should drive royalty TAM growth and rate expansion. Further, with a growing number of ARM partners moving toward multi-core Cortex-A, big.LITTLE, and ARMv8 designs at leading edge process nodes, we anticipate strong license sales in the near to medium term will drive strong royalty revenue growth and both operating and earnings leverage long term. We reiterate our BUY rating and raise our price target to $56.
Our Q1/13 monthly handset sales surveys and recent March quarter results and June quarter guidance for ARM mobile chipset partners are consistent with ARM’s estimates for very strong growth of the low- and mid-tier smartphone markets and also resilient growth of the high-tier market driven flagship launches and 4G/LTE upgrades.
At its analyst day, ARM shared its target of 15-25% smartphone royalty sales CAGR through 2017 and anticipates smartphone unit CAGR of 20% for the industry during the same period. In fact, this estimate includes growth in both the high- and lower-tier smartphone markets, and we believe ARM will generate significant royalty revenue growth from both tiers driven by a royalty rate expansion multiplier in the slower-growing high-tier market and upgrades
from lower royalty feature phones in lower tiers.
Due to increased royalty estimates from lower tier smartphones and tablets, we are increasing our 2013 earnings/ADS estimate from $1.01 to $1.02 and our 2014 estimate from $1.31 to $1.35.
Our $56 price target (from $52) is based on shares trading at
roughly 42x our 2014 normalized earnings/ADS estimate.
Posted by jackbassteam on May 23, 2013
VNET : NASDAQ : US$9.46
The largest carrier-neutral Internet data center service provider in China, 21Vianet hosts customers’ servers and networking equipment and provide interconnectivity services. The company also provides managed network services through its data transmission network
We maintain our BUY rating and $15.00 price target following 21Vianet’s Q1/13 report that demonstrates its ability to sustain its growth
momentum and overcome some of the temporary disruptions from capacity upgrades. We believe that the incremental investments in new
data centers, network capacity and cloud computing, while temporarily dampening margins, will result in higher growth and profitability in 2H13
and beyond. Priced at 5.7x 2014E adj. EBITDA, the shares of VNET offers compelling risk/reward for investors, in our view.
Solid revenue, slightly soft margin on investments – Q1/13 revenue came in stronger than expected (RMB 435.7M vs. 433.3M CGe) with
slightly lighter-than-expected EBITDA (RMB 80.1M vs. 82M). We note that higher-than-expected operating costs were attributed to higher
bandwidth costs with greater network capacity and continued investments ahead of revenue contribution from cloud computing.
Signs of hope from Q2/13 outlook – Although Q2/13 guidance is not as strong as we had hoped, it nonetheless confirms our view that the
disruption from recent capacity upgrade is now behind and that the company’s growth momentum is picking up again. Following two quarters of decelerating growth, we believe the change in trajectory marks an important inflection point for investors.
shift to higher MRR cabinets in large cities and revenue contribution from Microsoft cloud will likely improve both revenue and margins
Posted by jackbassteam on May 21, 2013
Image via CrunchBase
P : NYSE : US$16.57
Pandora radio is the market leader in personalized Internet-based radio listening in the US. The company uses its proprietary algorithms as part of the Music Genome Project to generate playlists for users that are personalized and cater to the tastes of individual users.
While competitive developments continue, we believe fundamentals at Pandora remain strong heading into Q1 earnings next week. Our proprietary analysis points to a growing audio ad load (driven by robust adoption of the STRATA integration) and higher quality of advertisers
(big national brands). In addition, the temporary 40-hour listener cap on mobile appears poised to dampen content costs. As such, several
positives are coming to a head at once. Given the timing, Q1 impact is hard to gauge but likely positive, while impact to Q2 and beyond should
be more positive. Our best estimate is that guidance should be somewhat bullish without being irresponsibly aggressive.
Our proprietary research (admittedly a small sample) indicates an audio ad load that has gone from 1.40 minutes per hour a month ago to 1.75 minutes currently. We believe this is being driven by sales force ramp, Triton measurement, and STRATA integration. This should drive higher RPMs.
We also believe subscription revenue and content costs could both show improvement in Q1 from the 40-hour mobile cap, with more impact in Q2 and beyond.
We believe Google’s newly announced $10/month “All Access” subscription service should have only a moderate competitive impact on Pandora’s listener base, which clearly likes free stuff.
Our $18 target is unchanged and is based on 32x our F2017 EPS estimate of $0.90, discounted to present at 12.1%.
Posted by jackbassteam on May 17, 2013
RDA : NASDAQ : US$9.98
RDA Microelectronics designs, distributes, and markets RFIC, connectivity, and baseband solutions primarily to Chinese handset OEMs and ODMs. While RDA’s sales are primarily into the 2G market, RDA has introduced 3G power amplifier products and has EDGE and 3G baseband products on its 2013 roadmap to address the growing smartphone market.
All amounts in US$ unless otherwise noted.
PRODUCTS SHOULD CONTINUE GM EXPANSION
RDA reported strong Q1/13 results and guided Q2/13 sales and gross margin slightly above our estimates.
Following the acquisition of Coolsand, we believe RDA’s baseband portfolio has significantly increased its addressable market as evidenced by strong recent sales results. Further, we believe RDA’s roadmap that integrates its connectivity and RFIC solutions with its baseband platform
is well positioned in low- and mid-tier handset markets, and this should expand RDA’s dollar content share per handset in the near 1B unit
Chinese OEM handset market. In addition, we believe RDA remains on track to achieve volume sales of both EDGE baseband and 3G PA solutions in 2H/13 that should drive sales growth and steadily improving gross margin.
We maintain our BUY rating and increase our PT to $17.
RDA reported Q1/13 sales of $97.2M and pro forma EPS of $0.28 versus our $96.6M/$0.25 estimates. RDA posted strong sales of the higher margin 8851 baseband solution, including record baseband sales during March post Chinese New Year. In fact, RDA management shared a 40% 2G baseband market share goal for 2013 within the Chinese OEM market, and we estimate RDA will ship roughly 200M baseband chips in 2013, up over 100% Y/Y.
With an improving mix of higher-margin baseband and connectivity products, including a new cost optimized solution to help offset
persistent pricing pressure in the 2G PA market, we anticipate modestly improving gross margin trends throughout 2013 with 35% remaining RDA’s medium-term target post the Coolsand acquisition.
Given RDA’s market exposure and strong product roadmap, we have increased our 2013/14 operating expense estimates we expect will remain roughly 16% of sales. However, strong sales trends still result in an increase to our 2013 pro forma EPS estimate from $1.50 to $1.56 and our 2014 estimate from $1.80 to $1.87.
Our $17 (was $16) price target is based on shares trading at roughly 9x our 2014 pro forma EPS estimate
Posted by jackbassteam on May 9, 2013
This logo is the stacked version of the Integrated Device Technology Inc. (Photo credit: Wikipedia)
IDTI : NASDAQ : US$6.93
IDT designs, develops, manufactures and markets a range of semiconductor products for the communications, computing and consumer industries.
Computing products are designed for use in desktops, notebooks, workstations and server applications while consumer products are optimized for gaming consoles, set-top boxes, digital TV and smartphones. Communications products are designed for use in networking and telecom applications.
All amounts in US$ unless otherwise noted.
BOOKINGS STRENGTH IN CORE BUSINESS
We reiterate a BUY rating as healthy top-line guidance is offset by incremental spending for wireless chargers and NVMe. New products remain on track for strong Y/Y growth, while communications, memory interface and even PC clocks see improving demand. We expect opex to decline Q/Q from the Sept Q onward with the resulting leverage driving the shares higher.
IDTI reported CQ1/13A (Mar) after the close. Revenues and EPS were $108.5 million and $0.01, compared to consensus estimates of $107M/$0.01 and our estimates of $108M/$0.01. Revenue of $108.5 million came in at the mid-point of the guided range driven by weakness in core products partially offset by strength in new products and EPS of $0.01 was in line with guidance driven by flat operating expenses and better gross margins.
Management guided revenue and EPS of $116 million (+7% Q/Q) and $0.04 at the mid-point, compared to consensus expectations of $113 million and $0.05. Management expects operating margin expansion through F2014 driven by opex reductions.
IDTI’s price target of $9 is 16x our C2014 EPS estimate of $0.45
plus net cash of $2.01/share.
Posted by jackbassteam on May 1, 2013
Roper Industries (Photo credit: Wikipedia)
ROP : NYSE : US$118.68
Roper is a diversified growth company focused on the design, manufacturing and distribution of products and software for segments of multiple specialty end markets including energy, radio frequency (RF) technology, water, security, research/medical and education, among others.
Management execution is impressive, as margin expansion and cash generation continue to outperform. Recent investments (Sunquest, MHA)
look to drive even stronger returns, even as ’13 growth stays more H2 weighted. While we find a premium warranted given a track record of
value creation, we find nearer-term risk/reward more balanced.
Record order flow (particular strength in RF) drives good visibility (b2b 1.07, backlog >$1B), while comps get much easier in H2/13.
The accretive MHA acquisition is expected to close May 1, as next major M&A investment likely materializes in ’14.
Margin expansion continues (across all segments), with consolidated GM +240bps y/y to 57.4%. FCF also stays impressive ($160M, 128%
NI conversion), with full-year OCF expected >$800M. Guidance gets adjusted for MHA (organic growth unchanged), though more backend
loaded vs. the Street.
Our revenue/adjusted EPS estimates update to account for the addition of MHA as follows: F2013E to $$3.31B/$5.83 (from $3.29B/$5.72); F2014E to $3.58B/$6.45 (from $3.46B/$6.30).
Our 12-month target of $128 equates to ~11.5x our 2014 adjusted EBITDA estimate of $1.26B.
M&A integration, competition, macro conditions, FX fluctuations,
commodity costs, and leadership succession.
Posted by jackbassteam on May 1, 2013
DLR : NYSE : US$69.86
The largest data center operator in the US that primarily focuses in the wholesale market with presence in key markets in the US and in Europe, Digital Realty Trust offers customers large data center space at key aggregation points where major enterprises and telecommunications service providers exchange traffic. The company operates as a REIT for federal income tax purposes and has its headquarter in San Francisco, California
Q1/13: SOLID WITH SOME STRATEGIC HEADWINDS
With a quarterly report that was slightly above our expectations but largely in line with the Street, Digital Realty Trust’s results caused the stock to trade 2% lower for the day. We believe the fears on the stock were focused on notable pricing pressure in some key markets and on the company’s announcement it would become a more significant competitor in the interconnection business. Unfortunately, given that this business is currently managed in part by its partner Telx and it puts the company in direct competition with one of its largest customers, Equinix, we feel investors are rightfully concerned. Even so, with a 4.2% dividend yield along with strong secular tailwinds of the industry, we find the stock to be a safe defensive investment in this market.
Pricing pressure in key market – With the rental rates of lease renewals in NJ down 18% (12% overall) and comments about three aggressive price competitors, investors are increasingly concerned over the state of the wholesale data center market.
In-line quarter with no change to guidance – With revenue, adj. EBITDA and AFFO metrics all slightly above our estimates, we believe the company delivered a solid quarter. However, we note that both TKD and PBB revenues came in lighter than expected, largely a reflection of softer than expected rates at renewals.
Global interconnectivity could be harbinger for M&A – With cap-rate guidance down it is clear that M&A activity has become increasingly difficult to move the needle for the company. Should Digital be interested in acquiring meet-me-room partner Telx, the announcement would be in line with such a strategy.
Posted by jackbassteam on April 30, 2013
Flip Chip, flipped, attached to the carrier, underfilled, illustration made for Flip Chip (Photo credit: Wikipedia)
BESI : ENXT : €6.83
BESIY : OTC
BE Semiconductor Industries N.V. (Besi) develops, manufactures, and sells semiconductor assembly equipment designed to increase productivity, improve yields of defect-free devices and reduce cost of ownership. The company’s products are designed for use in two manufacturing echnologies: leadframe assembly and wafer level packaging.
ADVANCED PACKAGING DRIVES UPSIDE
We reiterate a BUY rating on shares of BESI following strong results and
guidance. We believe BESI will benefit from continued strong demand
for flip chip die bonding advanced packaging systems from new Asian
subcontractors in the smartphone and tablet supply chain. We expect
EPS to benefit from expanding gross margins and tighter opex controls.
We are increasing our estimates and raising our price target to €8.00.
BESI reported Q1/13A (Mar. Revenues and EPS were €64 million and €0.10, compared to our estimates of €59 million and €0.03. Revenue was up 14% Q/Q (+15% Y/Y), and came in above guidance of 5% sequential growth, driven by strong demand for advanced packaging systems. EPS benefited from better-thanexpected gross margins (39.6% vs. guide of 37%-39%).
Management guided Q2 revenue to be up 10% Q/Q, based on the 23% sequential order increase in Q1 and continued strong demand for advanced packaging systems.
BESI’s price target of €8.00 (was €7.00), is 8x our C2014 EPS estimate of €0.78 plus net cash of €1.72/share.
Posted by jackbassteam on April 26, 2013
Hong Kong Confidential (Photo credit: Wikipedia)
AYA : TSX-V : C$5.32
Amaya Gaming Group Inc. designs, develops and distributes a host of technology-based solutions targeted at the regulated gaming industry. Amaya’s solutions cater to a wide range of industry participants, including land based and online casino operators, hotel and hospitality operators and government regulators.
We are initiating coverage of Amaya Gaming with a SPECULATIVE BUY rating and a C$8.50 target price. We believe that Amaya is well positioned to benefit from strength in the gaming technology market and more specifically, the physical/online convergence. Attitudes towards gambling are liberalizing as debt-laden governments are looking for new sources of tax revenue. With the US becoming more open to regulated online gambling, a large new market may open. While this is an attractive source of upside, we believe that Amaya is on the cusp of a transformation after a flurry of acquisitions supporting strong growth in 2013 and 2014 whether the US opens or not.
Amaya Gaming is a developer of innovative technology and content for the regulated online, interactive and land-based gaming industry.
Recent acquisitions transform Amaya into a global player with a platform to offer content across multiple gaming mediums including land-based, online and mobile. Amaya’s position in the market is protected from new entrants by onerous government regulation.
The market for gaming services is very large with gaming gross yield expected to grow to over $400 billion in 2013 with online growing to over $37 billion. We believe that the gaming vendor space is over $27 billion with annual growth closer to 5%. For a firm the size of Amaya, we believe there is ample room for growth. In 2014, after the model has stabilized, we expect 25% revenue growth and 43% EBITDA growth.
Amaya’s technology products attract a share of gambling revenue which is scalable, high margin and recurring in nature. We believe that
EBITDA margins of ~35% are within reach as the model matures.
Given strong product positioning with an end-to-end product suite more common to companies much larger than Amaya and our strong growth
expectations, we believe Amaya shares warrant a premium valuation. At current levels, Amaya trades at 6.6x EV/C2014E EBITDA versus gaming
technology vendors at 8.4x (range is 6.0x to12.3x). Our C$8.50 share price is based upon 10x C2014E EV/EBITDA and 18x C2014E cash adjusted P/E supported by comparables, recent transaction pricing and our DCF analysis.
Posted by jackbassteam on April 9, 2013