ASM Pacific Technology (ASMPT) Summary
Core Content
ASM Pacific Technology (ASMPT) is a leading supplier of semiconductor packaging equipment and also offers equipment and process solutions for photonics and optoelectronics. It is listed on the Hong Kong Stock Exchange and is 40% owned by ASM International. The company has operations in Shenzhen, Singapore, and Malaysia.
Key Financials
- Target Price: HKD52.20 (3x 2014E P/BV, down from prior 3.6x)
- Close Price: HKD62.20
- Upside/Downside: -16.1%
- Prior Target Price: HKD65.00
- Change in Target Price: -19.7%
Market Performance
- Share Price Performance (1 Month): -20.1%
- Share Price Performance (3 Months): -27.1%
- Share Price Performance (12 Months): -30.1%
- Market Cap (USD m): 3,203
- 3m Avg Daily Turnover (USD m): 6.5
- Free Float (%): 60
- Major Shareholder: ASM International (40%)
Revenue and Profit Projections
| Year |
Revenue (HKD m) |
Recurring Net Profit (HKD m) |
Recurring EPS (HKD) |
| 2012A |
10,461 |
689 |
1.73 |
| 2013E |
10,869 |
759 |
1.90 |
| 2014E |
12,126 |
1,452 |
3.64 |
| 2015E |
13,468 |
2,052 |
5.14 |
Profit Margins
| Metric |
2012A |
2013E |
2014E |
2015E |
| Gross Margin (%) |
30.2 |
30.4 |
34.5 |
37.0 |
| EBIT Margin (%) |
8.3 |
8.5 |
14.0 |
17.9 |
| Net Margin (%) |
6.6 |
7.0 |
12.0 |
15.2 |
| ROE (%) |
11.1 |
11.5 |
20.9 |
27.7 |
Risks and Challenges
- Yantian Site Relocation Backlash: Unexpected staff protest (1,000 staff) and potential impact on production and operating costs.
- Shift from WB to FC: ASMPT is reducing its WB-centric model, but FC bonder sales growth may not offset WB decline.
- TCB Challenges: High ASP, low throughput, and limited customer diversification due to exclusive supply terms with its sole US IDM client.
- Parent Sell-Down Risk: Potential further selling by parent ASM International could lead to share price de-rating.
- Operating Costs: Staff retention and new hire training may increase medium-term costs.
Investment Thesis
- The industry is shifting from wire-bonding (WB) to flip-chip (FC) interconnect, which may affect ASMPT's traditional WB business.
- While FC bonder sales are expected to grow, the decline in WB sales may not be offset, leading to challenges in maintaining profitability.
- ASMPT's TCB product, despite being a first-mover, has not yet made a significant impact due to high costs and low adoption.
- The company's profit growth is expected to be robust, but not enough to return to 2010 levels.
Catalysts
- Booking Strength and BtB: Expected decline in booking strength and BtB could negatively impact share price.
- TCB Launch: A successful TCB launch may drive inroads into tier-1 clients and improve growth prospects.
- Market Rivalry: Increased competition from peers like BESI, KnS, and Shinkawa may intensify as the market matures.
Valuation Metrics
| Metric |
2012A |
2013E |
2014E |
2015E |
| Recurring P/E (x) |
36.0 |
32.7 |
17.1 |
12.1 |
| EV/EBITDA (x) |
19.1 |
17.9 |
11.1 |
8.2 |
| Price/Book (x) |
3.9 |
3.7 |
3.5 |
3.2 |
| Net Debt/Equity (%) |
-12.3 |
-16.4 |
-13.3 |
-10.1 |
Key Assumptions
- Backend GPM (%): 30 (2012), 31 (2013E), 35 (2014E), 36 (2015E)
- SMT GPM (%): 30 (2012), 31 (2013E), 35 (2014E), 37 (2015E)
Earnings Sensitivity
| Metric |
2013E |
2014E |
2013E (Best) |
2014E (Best) |
2013E (Worst) |
2014E (Worst) |
| Equipment Revenue (%) |
5 |
7 |
10 |
12 |
0 |
2 |
| Revenue (%) |
-19.0 |
3.9 |
11.6 |
11.1 |
- |
- |
| Gross Profit (%) |
-2.8 |
-1.2 |
29.1 |
33.8 |
- |
- |
| Operating EBITDA (%) |
-52.3 |
7.6 |
61.3 |
36.4 |
- |
- |
| Operating EBIT (%) |
-61.6 |
6.5 |
84.0 |
41.6 |
- |
- |
| Recurring EPS (%) |
-62.3 |
10.0 |
91.2 |
41.4 |
- |
- |
Key Takeaways
- ASMPT's target price has been reduced to HKD52.20 due to concerns about its valuation premium and potential challenges from the Yantian site relocation.
- The shift from WB to FC interconnect is reshaping the PAE market, but ASMPT's FC presence is still limited, and TCB adoption is slow due to high costs and low throughput.
- The company's financial performance shows a positive trend, but its profit levels remain below the 2010 peak.
- There is a risk of further parent sell-down, which could affect the share price.
- The key upside risk to the target price is a successful TCB launch and increased adoption in the market.
