Photon Control: Is The Sell-Off Overdone?
Design, manufacture and distribute a range of optical sensors and instruments that measure pressure, temperature, position and flow, such as probes, converters and sensors.
A few years ago, the company went through a whirlwind and started the board battle I discussed here, resulting in a brand new management team.
The company reported outstanding results in the second quarter of up to 2018 per quarter;
During the quarter, management warned in a conference call that due to supply constraints for semi-annual memory and wafer manufacturing, they expected H2 2018 to slow down
Photon has sales in several other industries, but WFE oem has become its leading customer base.
Shares of photon have been sold sharply.
Since then, I believe in this sale.
Off is clearly overdone, and there is some support for the current price level based on the photon\'s previous trading range.
Over the past few years, the company has taken many steps to strengthen its management team, governance, and business processes, all of which contribute to the good sign of photons after this cyclical weakness --
At half a point.
Off also discounted Photon\'s valuation metrics, making the investment here a more convincing proposal.
Since my last review of Photon, the new management team has taken a lot of steps to improve its operations.
A prominent problem for the company is that its R & D function is set up as an independent private company and then its technology is authorized to the photon company.
This has a lot of governance issues because the company is privately owned by former members of the photon management and founding group.
While I think it was set up to avoid private disclosure of information and control of the costs of listed companies, it could pose a real risk to the business that photon is doing and the ability to develop new technologies.
The new management of photon filed a lawsuit against the group, and then resolved the previous half of the commission rate at a fixed commission rate on April 2017, while also resolving all other proceedings, ended a very turbulent period for the company.
In July 2017, it completed the management change and appointed a new chief financial officer, Daniel Lee, who worked with web tech Wireless and his successor, BSM Technologies Inc. and Scott, before joining photon ·(OTC:BSMZF).
This employment ensures that finance is on the same page as the rest of the management team.
Michelle Klein was key to joining the board in October 2017 as she had extensive expertise in the semi-finals
In addition to taking the time to use application materials, the conductor industry, especially in the area of start-up and risk (AMAT).
With the increase of photon half focus
While developing your own R & D, Klein\'s support will be very helpful.
She can also provide good intelligence if photon wants to make any mergers and acquisitions.
Photon\'s chief operating officer left in November after joining the company in early 2017, noting that this was due to restructuring of its operations.
The company has been streamlining its business in an attempt to raise the gross margin level to a medium level
The performance of 50 and EbITDA reached the medium term30’s.
The first step it took was to hire Ace Instruments as a distributor of its Focus 2 in August 2017.
0 optical gas flowmeter.
By adopting a reseller model rather than using its own sales team, Photon may be able to re-adjust the use of the sales team on different products.
As we can see, pay more attention to half
Conductors, markets with smaller photons may be more suitable for dealers, who can sell multiple products more directly to some industries than photons, in which case the same is true for the oil industry.
Following this effort, the entire product line was fully sold in February 2018;
It is clear that it offers lower value to the company, which makes it better to serve the owners who are focused on the business.
Photon retains royalties on it, which ensures that some of the revenue will be earned with minimal effort, and releases efforts to focus on higher-margin products.
The company moved into a new plant in September 2017, providing it with a larger production space and flexibility to support its future growth.
The company currently has only one shift and has room to expand production if needed.
The company is clearly half-focused.
Due to its huge addressable market, the conductor industry estimates about $700 a year: source: company introduction, August 2018, the company clearly sees that, in addition to the current expertise, it can also pursue many different vertical fields.
It believes that after obtaining intellectual property rights through litigation solutions, it has a clear way to double its income by 2020: Source: Company Introduction in August 2020, photon has clearly stated, it needs to improve its R & D capabilities.
During the 2018 call in the second quarter, they highlighted that starting from August 2018, an employee of feimac Semiconductor will lead the company\'s new product development.
This is a radical goal that needs to expand the market.
To clarify this, photon released a press release on September 2018 detailing its rapid prototyping process and how the company launched it.
The company has established a distribution agreement with crontech Photonics in China
Based on the distributor\'s half
The company expects this to open the market for them, but it did not have any impact on the company until 2019.
This will clearly be a major pillar of the company\'s increased sales and operations.
As stocks fell more than 30% from their late July highs, photons will certainly become much cheaper due to the sell-offoff.
So far, the company\'s revenue in the past few quarters and EbITDA have both developed very strongly: Source: The company directed the third quarter\'s performance between $10 and $12, which is in-
Same as last year.
Assuming they are able to maintain a profit of 35% EbITDA, this will generate an EbITDA between $3. 5m and $4.
2 m, very close to the result of 2017, but in a softer environment.
It is not impossible for the company to do this, because it has performed more than half of its history.
Ticket seller market: Source: This assertion by the company introducing management seems to prove this because they still maintain strong order traffic despite insufficient order quantity
Hiccups in half a semester
It\'s worth reviewing their recent revenue, backlog and order entry levels: Source: Company FilingsIt is a very upward trajectory for the company, after moving into a new plant at the end of 2017, the backlog has been continuously upgraded and all of it has been reached.
High quarterly revenue.
It\'s only $9, but we can see the decline in 2018.
The new order quantity is 4 m when the company processes the backlog order
Conductor deceleration is achieved.
Even so, its backlog is still at the second highest level in history.
The company said revenue is still expected to grow by 2018 over the industry.
This could be anywhere from 2. 3% (per Gartner)to 9-
20% depends on the business.
The photon cost $43.
Revenue was $8 m in 2017 and $28 m. 5m in H1 2018.
The guidance income level for the third quarter is between $10 and $12, and we can guess that the fourth quarter will be between $8 and $10 to meet management guidance.
This makes the potential income range of 2018 between $46 and $50.
At the level of 35% EbITDA, this figure reached $16. 1m to $17. 5m.
The company currently has a market capitalization of $115. 48 = $170. 2m.
If we get $40 back
Photon\'s businesses are worth $129 and $8 m in cash. 4m.
Judging from its expected results, the range of its EV to EbITDA is between 7. 4x and 8. 0x.
If we compare it to companies that I have used in my history due to similar industries and scales, and other companies that are larger but use the same industry as photons (IPGP)
The relative value of Photon is very good: in terms of the acquisition multiple, Oclaro (OCLR)
$1 in March 2018. 8B.
This is a very powerful multiple for Oclaro.
This is done at 3.
Despite a year-on-year decline of about 10%, sales have tripled.
Gross profit margin of Oclaro (37%)
And EbITDA level (18%)
Also far below photons.
Photon\'s fundamentals remain very good compared to Oclaro, whose business is clearly stagnant, while Photon continues to overtake the market while maintaining a cheaper relative valuation. This sell-
Off creates a good opportunity to enter photon control from a value perspective.
Compared to companies of a similar type or size and recent acquisitions.
The sales price of Photon is high but comparable to the recent growth rate (including lower year guidance.
The price of electric vehicles for EbITDA has also dropped sharply.
If we look at the mean reply of 11x EV/EbITDA, similar to the take-out multiple of Oclaro, in the middle of the photon history range, we can see the price bouncing back to $1. 89 to $2.
02, 27 to 35% higher than the current level.
Shares of photon were bought in a major sell-off
First, driven by a half-month cyclical weakness.
As we can see, this is not unusual. to-
Source of annual growth across the industry: StatistaPhoton has been positioning itself as more focused on the business for the past year;
The margins are better and the scale is better, but it also makes it possible for them to be the wagging tail of the industry dog.
Stocks have also been caught up in broad market sales --off;
At the time of writing, the main index was over 3% and Photon was no exception.
The question is whether the photon is currently a falling knife.
There won\'t be many positive operating catalysts for the next six months, as the company has led to lower growth rates than in history.
It should continue to achieve positive results, but the growth rate is lower than before, most of which is driven by its strong H1 2018.
The company has the potential to be surprised by the rise, especially if the industry is faster than expected, but at this point, I don\'t think it is likely.
If the company is able to add some new products, it may turn this around, but given that we are already in October, in order to gain market share for successful commercial products, coupled with a seasonal slowdown in Christmas, I don\'t see any new products that go beyond the regular development cycle going public in 2018.
Fortunately, I think that as the company prepares for the next market, the current forecast of 2018 of the performance should be greatly improved.
According to the current industry expectations, the cycle of 2019.
The vast cash balance and robust capital structure of photons could provide a catalyst for the company.
Now, photon\'s cash balance accounts for nearly 24% of its market value, reminiscent of the time I first invested in the company.
As the market goes down, this makes the potential acquisition target for photons cheaper.
I don\'t think the company is doing \"games\"
Change \"types of transactions, but more to complement private companies that can take advantage of the multiple benefits of their public companies through private company acquisitions.
The company does not have a history of this, but the current board of directors and management team have had M & A experience in the past, which seems to be the company taking advantage of the cash balance and below it
Leverage balance sheet to take advantage of the decline
Time on the market
In the case of current market fluctuations, I will make a relatively drastic stop loss for $1.
32, slightly below the current price level of 11%.
Not much support was below that level until $0.
70. The risk is too great in this environment.
I had been a long light until recently, but stopped for $1. 65.
I want to come back in person, but I am in a \"cooling\" period before I start over
Start a position here.
When I first looked at the company in 2015, the valuation of photons was returning to the level.
The difference is that it has a strong operational structure and management team with a much larger runway than at the time.
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