Melexis’ Investor Day yesterday brought little news, but confirmed the company’s bright outlook; we reiterate our BUY rating and € 16 price target.
Our View:
The presentations during the Investor Day focussed on the company’s current products and on new developments, as we expected. Very little or no financial information was disclosed.
The company’s growth opportunities were again highlighted however, and these are mainly driven by the growing semiconductor content per car –Strategy Analytics expects a 7-8% growth in the average value of semiconductors per vehicle over the coming years. Combined with some growth in the number of cars sold, this should trigger 9.8% CAGR in worldwide automotive semiconductor demand over the 2009-2017 period (source: , Strategy Analytics, Natixis). Based on its innovative product portfolio and focus on high-growth segments such as greener cars, Melexis even aims to outgrow the market on average over the coming years.
Regarding the impact from the Japanese disaster, the Melexis management indicated that there will probably some impact in 2Q and 3Q but this will only be a timing effect (i.e. only postponements and not cancellations). The exactimpact remains very hard to quantify however, and will most likely not be material enough to make Melexis change the FY11 sales guidance (high single digit sales growth).
In terms of M&A, management repeated that it still focuses on organic growth, although smaller acquisitions (mainly in an effort to get access to additional Intellectual Property) can not be excluded. Large acquisitions are highly unlikely however. The CFO also indicated that this will probably mean that the company’s treasury shares (Melexis has an active share buy back programme running and now has around 2.4m own shares or 5.5% of the capital in portfolio) will be cancelled. A formal decision on this matter has not been taken however.
Conclusion:
The Investor Day brought little news but confirmed Melexis’ bright outlook. The Japanese disaster might lead to postponement of some orders and affect 2Q and/or 3Q revenues, but the impact will probably remain limited and will probably not make Melexis change its FY outlook. It also does not make us change our BUY rating on the stock. Melexis is trading at only 10.5x PE11E and 10x PE12E (vs a 14x historical average) which is a bargain we believe given the company’s bright outlook, strong sales growth and high margins. We expect a € 0.60 gross dividend to be paid towards the end of this year, translating into around a 5% gross yield. Melexis is also buying back its own shares.