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Amtech Systems (ASYS) – Where Investors Can Buy Much Cheaper Than Its Insiders' Cluster Buys

December 28, 2011 | About:
There have been several situations in which insiders have kept buying shares and the stock price kept dropping significantly. These are great opportunities where investors can buy the shares cheaper than its insiders. That was the case with Amtech Systems (ASYS). Whereas between the period of February - August 2011, the company’s chairman, CFO and directors bought in ASYS for $22 down to more than $11, now the share is trading at $8.5 per share.

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ASYS is the global provider of thermal processing systems, including related automation, parts and services for solar/photovoltaic, semiconductor, silicon wafer and micro-electromechanical systems industries. For the fiscal year of 2011, the company had recognized 86% of the total revenue going for solar revenue. The company relied much on revenue sources from customers outside North America, totaling 94% of total net sales. The majority of revenue came from Asia (88%, whereas China is 69%); two customers individually accounted for 15% and 14% of net revenue.

We can clearly see that ASYS has improved its top line with the booming of solar panels production in China, with which could be described by First Solar’s (FSLR) CEO in my recent article. The trend might not continue forever and it couldn’t be very sustainable.

In terms of financial strength, ASYS is quite conservatively financed. With no debt in its balance sheet, along with $67 million cash on hand, the $80 million market capitalization turned into only $13 million of enterprise value. On the other hand, ASYS since 2009 has generated growing positive operating cash flow as well as the free cash flow. Currently, it has $15 million in operating cash flow and $10 million of free cash flow on its books.

ASYS seemed to be cheap when it was trading at around one times the cash position of the company; it is very conservatively financed and now investors can buy the stock much cheaper than company’s insiders' cluster buys. It is an asset play, not an earnings play, as the trend of solar power globally is not in very good shape at the moment. ASYS might be considered as a value position in the diversified portfolio baskets of value investors, and the shorting price would totally depend on the fundamental development of the company itself.

Concerning valuation, the five-year average P/E stays at 9.9x, and now it is trading at 3.7x, so I would expect investors might sell out when the current P/E reaches the average P/E of 9.9x.

This is the subjective viewpoint of the author, and it is not the recommendation to buy, hold or sell the stocks mentioned in this analysis. Anyone who wishes to buy, hold or sell the stocks has to do his/her own analysis at his/her own risk.

About the author:

Anh Hoang
Money manager into global equities, especially with US and Vietnam markets. CFA level 3 candidate. Lecturer for Stalla - CFA course in Vietnam

Visit Anh Hoang's Website


Rating: 3.0/5 (10 votes)

Comments

eurotrader
Eurotrader - 2 years ago
why even bother to figure out why its down so much,

I'm adding it to my watch list for next year,

great analysis

Euro Trader_¥
ken_hoang
Ken_hoang - 2 years ago
Thanks eurotrader, in terms of asset play, it definitely the good candidate, but need to be in the diversified portfolio of 30 stocks or so.
eurotrader
Eurotrader - 2 years ago
interesting, I was looking over some of the ratio's and

there doesn't seem to be much risk for any more downside

in ASYS, I could do a Feb 18 2012 $10 married put and only

have at risk 3.6%, but option activity is non existing right now

suggesting there is no need to worry, but jmo...thanks again

EuroTrader,,,,,¥

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