mikazo Posted January 19, 2013 Share Posted January 19, 2013 I was researching this company today and thought I'd post some point form notes on my findings and see if anyone else has had their eye on the same company. This company makes wire bonding tools used to package integrated circuits and sells them to semiconductor manufacturers. The majority of their revenue comes from outside the US, mainly in Asia. They currently have a P/E of 5.94 Manages R&D costs and keeps them around 17% of gross profit annually Improving SG&A over the past three years (as percentage of gross profit) $440M in cash, eliminated all long-term debt in 2012 Return on assets around 20% in past three years, return on equity around 24% in past three years Uptrend in owner earnings ($171M for 2012) Doesn't pay a dividend, hasn't been buying back shares, so all owner earnings are being re-invested in the business "ROIC-centric organization driven towards ongoing operational efficieny" - KLIC investor presentation Large and increasing market share in the wire bonder equipment market Revenues are cyclical but still positive in down-turns CEO and directors have all been selling shares throughout 2008 to present, not sure why yet CEO hasn't been granted a base salary increase since starting in 2010, good performance was rewarded with performance-based compensation Company improved operating profits by 20% in 2012 with a new corporate-wide cost savings initiative Cash-based performance incentives are based on ROIC ROIC from 20% up to 107% in each quarter of 2012 CEO base salary equivalent of $615,000 USD Executive officers do not generally receive perquisites CEO cannot be Chairman of the Board at the same time - so that he can focus more on company operating matters Any thoughts or additional research? Link to comment Share on other sites More sharing options...
Palantir Posted January 20, 2013 Share Posted January 20, 2013 My opinion after a quick glance is "too good to be true". Almost half of their MCap is in cash. and they're generating ridiculous FCFE. What's the catch? Are revenues expected to implode? Link to comment Share on other sites More sharing options...
ECCO Posted January 20, 2013 Share Posted January 20, 2013 I was researching this company today and thought I'd post some point form notes on my findings and see if anyone else has had their eye on the same company. This company makes wire bonding tools used to package integrated circuits and sells them to semiconductor manufacturers. The majority of their revenue comes from outside the US, mainly in Asia. They currently have a P/E of 5.94 Manages R&D costs and keeps them around 17% of gross profit annually Improving SG&A over the past three years (as percentage of gross profit) $440M in cash, eliminated all long-term debt in 2012 Return on assets around 20% in past three years, return on equity around 24% in past three years Uptrend in owner earnings ($171M for 2012) Doesn't pay a dividend, hasn't been buying back shares, so all owner earnings are being re-invested in the business "ROIC-centric organization driven towards ongoing operational efficieny" - KLIC investor presentation Large and increasing market share in the wire bonder equipment market Revenues are cyclical but still positive in down-turns CEO and directors have all been selling shares throughout 2008 to present, not sure why yet CEO hasn't been granted a base salary increase since starting in 2010, good performance was rewarded with performance-based compensation Company improved operating profits by 20% in 2012 with a new corporate-wide cost savings initiative Cash-based performance incentives are based on ROIC ROIC from 20% up to 107% in each quarter of 2012 CEO base salary equivalent of $615,000 USD Executive officers do not generally receive perquisites CEO cannot be Chairman of the Board at the same time - so that he can focus more on company operating matters Any thoughts or additional research? Another chinese fraud? Yes it seems too good to be true. Even Caterpillar had to write off 580 millions $ for a chinese company they purchase last summer. How can we trust any of these company making business in China? Management selling stock of that "too good to be true company" mean a lot to me. Link to comment Share on other sites More sharing options...
Packer16 Posted January 20, 2013 Share Posted January 20, 2013 The company is in a cyclical business (semi cap equipment) and is taking advantage of a transition to copper interconnects versus gold. The competitors are behind in this generation of equipment but at some point they will catch up. This transition will take a few more years with about 33% penetration rates at this point. I think the question is what is next? KLIC has no advantage in the next gen flip chip technology but how much of an advantage do you need when you are selling at 2.5x EBITDA and 3.1x FCF? I think the price more than offsets the technology future issues. Similar to WDC and Seagate. This is a well known US based firm so I think the risk of fraud is low. Packer Link to comment Share on other sites More sharing options...
mikazo Posted January 20, 2013 Author Share Posted January 20, 2013 This is a well known US based firm so I think the risk of fraud is low. This was my thinking as well. I thought about looking into their competitors, but would rather buy a company that is listed on the NASDAQ and is subjected to SEC rules. Their headquarters are in Singapore though. It makes sense that most of their revenue comes from the Asia region, since a lot of semiconductor manufacturing happens there. I sent an email to KLIC investor relations asking about the insider selling, not sure what kind of response I'll get though. What other sort of red flags should be looked for if you're trying to prove or disprove a fraud company? Link to comment Share on other sites More sharing options...
LC Posted January 20, 2013 Share Posted January 20, 2013 This is a well known US based firm so I think the risk of fraud is low. This was my thinking as well. I thought about looking into their competitors, but would rather buy a company that is listed on the NASDAQ and is subjected to SEC rules. Their headquarters are in Singapore though. It makes sense that most of their revenue comes from the Asia region, since a lot of semiconductor manufacturing happens there. I sent an email to KLIC investor relations asking about the insider selling, not sure what kind of response I'll get though. What other sort of red flags should be looked for if you're trying to prove or disprove a fraud company? Accounting changes/oddities, any lawsuits they may be involved in, past history of management & major shareholders. Link to comment Share on other sites More sharing options...
mcliu Posted January 20, 2013 Share Posted January 20, 2013 Audited by PWC which is a good sign.. (Although after Sino-Forest, who knows..) Link to comment Share on other sites More sharing options...
siddharth18 Posted January 20, 2013 Share Posted January 20, 2013 Employee reviews http://www.glassdoor.com/Reviews/Kulicke-and-Soffa-Company-Reviews-E1573_P2.htm http://www.careerbliss.com/kulicke-soffa/reviews/ Turns out they have a book too: http://www.amazon.com/50-Years-Innovation-Kulicke-Soffa/dp/094590374X Revenues chart http://static.cdn-seekingalpha.com/uploads/2012/12/10664_13564713603946_3.png P/E of 3, excluding cash? Link to comment Share on other sites More sharing options...
onyx1 Posted January 20, 2013 Share Posted January 20, 2013 I spent a little time on this last week. Some negatives for me were Singapore domicile, dependent somewhat on the price of gold, lack of meaningful insider ownership and no history (or announcement) of return of cash to shareholders. In fact despite holding a boat load of cash, sharecount in up 8% since 2009. Bull case VIC writeup is here: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/82907 Link to comment Share on other sites More sharing options...
mikazo Posted January 20, 2013 Author Share Posted January 20, 2013 Thanks for the additional insights. Found a video of Bruno Guilmart on CNBC: http://video.cnbc.com/gallery/?video=3000090268 Link to comment Share on other sites More sharing options...
mikazo Posted January 23, 2013 Author Share Posted January 23, 2013 I was doing a little more research on wedge bonding, ball bonding, and the materials used to make wire connections on PCBs. I found an interesting article that describes some of the problems of using copper wire, and describes a research effort by a company called RED Micro Wire, where a new type of wire consisting of glass-coated copper offers significant advantages over other palladium-coated copper wires. http://www.electronicsnews.com.au/news/challenging-the-limits-of-bonding-wire From the article: The major problem with copper is oxidation and corrosion. Copper wire cannot be exposed to the free air without having a coating. Secondly, the wire itself is very hard and the companies that produce the wires need to find a way to solve it, because the hardness can damage the pad on the wafer. According to Hacohen, the RED Micro Wire product solves the problems of scaling down, corrosion and hardness due to the manufacturing process. A side-effect of a glass-coated copper wire is the insulation afforded by the coating. Currently, wire bonding schemes are subject to restrictions in the distances between wires to prevent shorting faults.“This is a big opportunity for the design people to relax their rules on the design,” Hacohen said. “Theoretically, a wire can touch another wire without shorting out due to the insulation of the glass. I couldn't find any mention of what type of wiring KLIC bonding tools work with: http://www.kns.com/Pages/Copper%20Wire%20Bonding.aspx?kns=PXq%2fP99ocYzE60GSJgLlB%2bqYC%2bh%2bru9C I realize KLIC manufactures bonding tools and not wiring, but I'm curious how a possible shift in the direction of glass-coated copper wiring would affect them. As a side note, KLIC's Q1 2013 quarterly earnings are coming up in less than a week. I plan on delaying any decision to buy until after that. Link to comment Share on other sites More sharing options...
mikazo Posted January 23, 2013 Author Share Posted January 23, 2013 Blog post mentioning a chart from the KLIC proxy statement: http://www.barelkarsan.com/2013/01/extremely-deceptive-chart.html Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 23, 2013 Share Posted January 23, 2013 I definitely think the risk of fraud is very low. Their HQ have only recently been relocated to Singapore, I think this is a fair decision given that 88% of their sales happen in Asia. (98% if you include pacific region). In terms of copper and gold bonding, I haven't read your pasted article yet (but will tonight) but already some comments which I took from a report I wrote on KLIC: Gold to Copper Wire Bonding The main force driving the strengthening competitive position, and the related increase in market share, is KNS ability to have been the first company that developed a commercially viable high-yielding production process, which uses copper wire instead of gold wire, and thus significantly reduces the assembly cost. Historically, gold wire was preferred to copper wire, not because it has better conductivity properties (it is actually a worse conductor) but because it doesn’t tarnish. Copper oxidizes when exposed to air, leading to decreased conductivity and reduced performance. The speed at which it tarnishes, depends on where one lives. The Throwaway Culture Another effect that reinforces the gold to copper trend is the throwaway culture that so strongly characterizes our society nowadays. - Popular models of cell phones, tablets, televisions and similar products are released yearly and they face a consumer who will not be considered “cool” if he/she does not have the latest model - When these products break down, it is most often cheaper to replace instead of repair - An Iphone has a battery lifespan of around 400 charges. Given you charge almost daily it takes less than 3 years for your battery to deteriorate (It’s a quick and dirty calculation but it is purely for illustration purposes) With an increased turnover in these type of products I belief that demand for semiconductors, and the equipment to manufacture, will keep rising in the future. As the average holding period of the these devices is much lower than the period it takes for the copper to properly tarnish and lose its properties, I therefore expect that companies will keep switching towards copper for those products that are typical in the throwaway culture. In addition, there is also an increased use of this type of chips in day-to-day user appliances such as refrigerators, Solid State Disks (which wear out more rapidly than standard Hard Disk Drives) and the automotive industry. We therefore see that the advantage of gold over copper is marginal at best, and due to the rising and volatile price of gold the industry starts to acknowledge that copper provides a much better price/quality ratio. I believe it is a matter of time before the industry fully starts adopting copper wire instead of gold wire. Also long KLIC btw. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 29, 2013 Share Posted January 29, 2013 Stock got slammed by 10% even before opening, 10Q not yet available, some excerpts: First Quarter Fiscal 2013 Key Product Trends Ball bonder equipment net revenue decreased 64.5% over the September quarter. 74.8% of ball bonder equipment was sold as copper capable bonders. Wedge bonder equipment net revenue decreased 23% from the September quarter. First Quarter Fiscal 2013 Financial Highlights Net revenue of $114.0 million. Gross margin of 45.2%. Net income was $3.6 million or $0.05 per share. Net income was reduced by $1.8 million of adjustments related to the Company’s RISC (Research Incentive Scheme for Companies) grant. Without this item net income would have been $5.4 million or $0.07 per share. Total cash and short-term investments were $494.2 million on December 29, 2012, a $53.9 million increase from the prior quarter ended September 29, 2012. Link to comment Share on other sites More sharing options...
mikazo Posted January 30, 2013 Author Share Posted January 30, 2013 Is this quarter not the typical low point in the cyclical nature of the business? I see this as a great time to initiate a position. Although I do wonder why the CEO doesn't seem to stay at any one company longer than a few years... Another cool thing I noticed is that some of their bonding machines are field upgradeable, meaning that existing customers would probably rather just upgrade their existing equipment, rather than switch to a different provider. Link to comment Share on other sites More sharing options...
mcliu Posted January 30, 2013 Share Posted January 30, 2013 I think outlook was $100 million vs. $140 million in Q2 last year? So they're forecasting -40% on the top line. Just a quick glance. Am I missing something? Tough thing about this business is forecasting what a normalized year looks like. Not much visibility given the cyclical+seasonal business. Link to comment Share on other sites More sharing options...
mikazo Posted May 21, 2013 Author Share Posted May 21, 2013 Anyone know why KLIC is up 6% today? Google Finance doesn't have any news stories on the chart.. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted July 23, 2013 Share Posted July 23, 2013 Up 5% yesterday, SA article influence? No material news. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted July 23, 2013 Share Posted July 23, 2013 http://seekingalpha.com/article/1555652-kulicke-soffa-buying-dollars-for-dimes Link to comment Share on other sites More sharing options...
Phaceliacapital Posted July 23, 2013 Share Posted July 23, 2013 And did you ever get the response for the insider selling? (sorry for multiple posts) Link to comment Share on other sites More sharing options...
mikazo Posted July 23, 2013 Author Share Posted July 23, 2013 And did you ever get the response for the insider selling? (sorry for multiple posts) I thought I had seen a news article about revised EPS estimates for the next quarterly report or something, so that could be the cause of being up 5% yesterday. As for the insider selling question, I did get an email reply from investor relations in January of this year, with an invitation to follow up on the phone. After a few exchanged emails about no convenient times for either of us to chat, it seems we both forgot about the issue and never did connect via telephone. :P Here was my question via email: Hello, I am considering initiating a long position in shares of Kulicke and Soffa, and I was just wondering if you'd be able to comment on a question regarding insider transactions. Would any of the directors, executives and/or the CEO in particular be willing to comment on why all have sold shares in the company throughout 2008 to the present, and none have purchased shares (on top of awarded performance shares) in the company for the same time period? Can these actions be considered an opinion of the directors' and executives' on the future prospects of the company? Thank you for any information you can provide. Here was the initial email reply from investor relations: I can provide some perspective but it might be easier to have a quick call to discuss. In short we have a lot of blackout periods, so there are generally a good amount of sells when the period opens. Also of note, although execs may reduce their “vested” portion of stock, most still have significant “unvested” long positions. So still a lot of motivation to improve our valuation through mostly fundamental improvements. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted July 30, 2013 Share Posted July 30, 2013 Kulicke & Soffa beats by $0.07, beats on revenue Kulicke & Soffa (KLIC): FQ3 EPS of $0.25 beats by $0.07.Revenue of $141.2M (-44.7% Y/Y) beats by $13.7M. (PR) This Market Current was sent to 718 people who get email alerts on KLIC. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted July 30, 2013 Share Posted July 30, 2013 Third Quarter Fiscal 2013 Financial Highlights Net revenue of $141.2 million. Gross margin of 46.7%. Net income was $18.9 million or $0.25 per share. Cash and cash equivalents were $508.5 million as at June 29, 2013. - MCAP of 857M - No debt ......... Link to comment Share on other sites More sharing options...
Phaceliacapital Posted October 14, 2013 Share Posted October 14, 2013 Up 5-6% pre market due to Barrons & SA article I assume Link to comment Share on other sites More sharing options...
polangevin Posted October 14, 2013 Share Posted October 14, 2013 Here's the article: http://online.barrons.com/article/SB50001424053111903891504579125512737104166.html?mod=BOL_twm_fs#articleTabs_article%3D0 Link to comment Share on other sites More sharing options...
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