2013 | 2014 | ||||||
Price: | 15.85 | EPS | $0.93 | $1.28 | |||
Shares Out. (in M): | 48 | P/E | 14.8x | 10.7x | |||
Market Cap (in $M): | 764 | P/FCF | 0.0x | 0.0x | |||
Net Debt (in $M): | -106 | EBIT | 62 | 87 | |||
TEV (in $M): | 658 | TEV/EBIT | 10.5x | 7.6x |
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# | AUTHOR DATE SUBJECT |
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9 | |
MTSI is getting hammered today on NXPI bearish forecast. The companies have very little product overlap and MTSI is in much better markets today. Radar is just getting going fo them and optical share gains at Huawei and ZTE are beginning to kick in. I think the stock is going higher here. | |
8 | |
To add on to this MTSI is looking more and more like a short to me. The Barron's article weekend before last touched upon their suspicious conversion from sell-through to sell-in accounting but in my opinion Barron's went light on them- from what I can tell they didn't warn analysts in advance, used the accounting change to book $15M in high GM revenue that barely put them over the top end of guidance for calendar Q4 (and would have missed without it), and did a large equity offering which included selling a big chunk of Ocampo's shares at $30. If you back out the accounting change and the MSPD acquisition, I see little to no organic growth over the last 12 months. Their free cash flow is also vastly lower than what it should be if their non-GAAP results were reflective of reality, even giving allowance for the cash charges such as severance that were added back to non-GAAP. The stock is up because of semi industry consolidation, being in the IBD 50 and some very promotional articles in Seeking Alpha about the BinOptics acquisition. No other optical player seems to be talking about shortages of lasers. At over 4x a forward sales number I don't think they can hit unless organic growth gets a lot better, it already trades well above the median EV/sales multiple of takeouts of mid 50% GM semi companies. I guess the risk is that they can buy other crappy non-growing semi companies at 2x sales and wave their non-GAAP wand so they keep trading at 4x sales. | |
6 | |
Infineon's purchase of IRF yesterday for a 50% premium has stirred up some speculative juices in the analog semi space. A bunch of peers were bid up as it wasn't clear from rumors who Infienon was buying. Eventully was IRF for a nice premium. I think MTSI could be next. Great analog assets, leader in GaN on Silicon for RF, growing optical and video businesses, etc. John Ocampo who owns 45% of the stock sold his last company for a nice premium in 2007, and this would be a good way for him to cash out his (enormous) profits on MTSI. | |
5 | |
MTSI reported a solid Q2 last night with both revenue and EPS above consensus. As many stocks have reacted this month, the shares are trading down 2% today. Growth was driven by 100G optical which doubled quarter over quarter, radar, and microwave backhaul. The company was bullish about Q3 guiding to 5% - 9% sequential growth in the quarter. Overall I believe this report supports our thesis of an unloved company positioned well in high growth markets at a low valuation. | |
4 | |
Assuming that the end markets don't come back in the near term, the main revenue growth drivers are market share gains and new large program wins like the ones with Northrop Grumman and ELTA. I think a 10% - 15% top line growth rate is reasonable and at a 60% drop through rate can get you to 30% operating margins in a few years. | |
3 | |
sounds like you think they could reach the 30% op margin goal in a few years, correct?
what sort of top-line growth do you expect over this time period? mostly driven by capturing market share from Hittite, since the end markets are mostly sluggish?
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2 | |
Charles Bland has been the primary seller and he is the ex-CEO so would expect him to sell stock. GAAS Labs is affiliated with John Ocampo so the selling there has been very small compared with his overall stock ownership. From my many conversations with management I know they are extremely bullish about the business and about the stock opportunity from these levels.
Jeff |
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