We have upped our estimates following the stronger-than-expected 1Q results in the front-end and the back-end, and we lift our target to € 39 from € 35. Our Buy rating is maintained.
For the FE we have lifted our sales forecast to € 446m (52% y/y growth) from € 395m, while our EBIT forecast goes to € 69m (15% margin) from € 53m. We value the business at € 450m (1x sales), or € 7 per share (on a fully diluted basis).
In the BE, we have mainly upped our forecasts for the recently acquired SEAS business, as both sales and profits were above our expectations. As a result, our BE sales forecast goes to € 1,346m (45% growth, entirely driven by the consolidation of SEAS) from € 1,261m. Our operating profit forecast is upped to € 327m (24% margin) from € 294m. We value the business at 14x PE11E implying a € 2,024m value for ASMI’s stake, or € 32 per share.
On a group level, this means that our sales forecast goes to € 1,792m from € 1,656m while our EBIT estimate is upped to € 396m from € 347m. Our FY11 EPS forecast is upped to € 2.95 from € 2.57. Our FY12 EPS goes to € 3.17 from € 2.95.
We will issue a company note on Wednesday as part of our publication at the occasion of the KBCS Benelux conference in London. Our conclusions are:
- Having struggled to make a profit for 10 years, ASMI’s Front End activities returned to profitability in 2Q10, after several restructuring programs. Moreover, with its ALD products, the company has a clear growth engine as well.
- Despite these favourable evolutions, the implied FE valuation remains sharply negative, at around € 400m. Confirmation of the growth potential and the structural return to profitability should trigger a rerating, and we value the business at € 450m or € 7 p.s.
- While in the Back End (52% stake in HK-listed ASMPT) bookings might have peaked in 2010, there are no signs of an upcoming industry downturn. Moreover, with its diversification into the LED equipment market and the recently-acquired SEAS activities, the business has sufficient trump cards to weather a possible slowdown in the semi equipment market.
- We value ASMI’s stake in ASMPT at around € 2bn, or € 32 per ASMI share, based on 14x 2011 earnings, in line with the historical valuation.
- ASMI has a solid balance sheet and the strong cash flows we forecast should allow for attractive dividends in the coming years.
Our FE and BE valuations yield a € 2.5bn total equity value for ASMI, or € 39 p.s., and we have a BUY rating on the stock.