TTM Technologies (TTMI) makes printed circuit boards (PCBs) for the electronics industry. It is in the process of acquiring a rival, Viasystems. I first bought TTMI on February 19, 2018 for $11.03 per share. I bought more on March 30, 2010 for $8.98 per share, and a final, equal amount on December 17, 2013 for 2013.
I sold all my shares this morning for $9.075 per share, so I have a small loss overall.
When I bought TTMI my portfolio was almost all IT and semiconductor stocks. But I had begun my shift to biotechnology stocks. Now most of my portfolio is biotechnology, which is why the portfolio as a whole is up 5x what it was in 2008.
I will no longer take notes on TTMI analyst conferences. You can see my old notes, blogs, and Seeking Alpha articles at TTM Technologies notes by William P. Meyers.
I would note I think TTM is a good company with good management, but it is in a tough industry with low margins where customers like Apple really squeeze prices down. I wanted more cash in my portfolio, in case the market turns down or I find another biotech stock I want to acquire. No reason for anyone else to panic.
The remaining non-biotech stocks in my portfolio are Applied Materials (AMAT), AMD (AMD), Dot Hill (HILL), Microchip (MCHP), Marvell (MRVL), and Xilinx (XLNX). Of those all pay dividends except Dot Hill and AMD. Dot Hill has great prospects. AMD I am not so sure of. If I have a pet stock it is AMD. I am hoping Lisa Su will perform wonders there.
This post is not financial advice. Since I write about my investments and investment ideas, I like to keep readers informed of my decisions. Here is a full list of my current positions.
Showing posts with label PCBs. Show all posts
Showing posts with label PCBs. Show all posts
Monday, March 23, 2015
Wednesday, August 22, 2012
TTM Technologies Prepares for Future Mobile Device Demand
Almost every electronic device made contains at least one printed circuit board, or PCB. The leading U.S.-based manufacturer of PCBs is TTM Technologies (TTMI). Post the acquisition of a Hong Kong based PCB manufacturer, TTM is able to serve its customers with quick-turnaround, small quantity prototyping in the U.S. and low-cost mass production in China. Its five largest clients by revenue in Q2 were, in alphabetical order, Apple, Cisco, Ericson, Huawei, and IBM.
Revenues were disappointing in Q2 at $327.4 million, up 9% sequentially from $300.5 million but down 11% from $366.1 million in the year-earlier quarter. The y/y drop reflected a slowdown in the telecommunications sector. This was also reflected in Juniper and ZTE dropping out of the top-five customer list, though they remain major customers.
As one of the world's largest manufacturers of PCBs, TTM has trouble escaping fluctuations in global demand. Despite that, the industry is consolidating as smaller players, particularly in the U.S., are unable to make the capital investments necessary to create PCBs with ever-denser component layouts. In particular smartphones and tablet computers are built on PCBs with multiple layers and high-density interconnections (HDI). In 2011 and this year TTM has been investing significant cash in upgrading its Chinese factories to be able to handle more HDI work.
TTM management is expecting a surge in smartphone and tablet production for Q3 and Q4. Exactly how much of a surge depends on end consumer demand, particularly in Europe, the U.S., and China.
Even at Q2 levels of revenue TTM generated profits and cash. Non-GAAP net income was $13.6 million, down sequentially from $18.8 million and down from $32.9 million year-earlier. EPS was $0.17. EBITDA was $42.3 million, and cash flow from operations was $39 million. Capital expenditures in the quarter were $33 million.
Cash and equivalents balance ended at $248.5 million. TTM has $299.9 million net debt, reflecting the cost of acquiring and upgrading the Chinese factories.
During the quarter revenue from Chinese operations was $195.6 million, while U.S. factories generated $132.3 million.
I like TTMI partly because it is an unglamorous yet essential part of the electronics industry. While there is certainly competition in the PCB industry both in the U.S. and globally, TTMI has a strategic advantage thought it leading edge PCB manufacturing capabilities and volume production capabilities. Smartphone turnover at the consumer level is far quicker that most prior electronic devices, guaranteeing demand for HDI PCBS for the foreseeable future. I don't care who the smartphone, e-book reader, or tablet winners are, as long as they get their PCBs from TTMI.
I see TTMI finishing most of its capital buildout this year. In 2013 it should turn into a cash cow, capable of quickly paying down debt and returning cash to shareholders.
TTMI closed today at $10.20, up 1.39%. It has a 52-week high of $13.75 and low of $8.55. The trailing P/E is 15.94.
Disclaimer: I am long TTMI. I will not trade in the stock for 1 week after this is first published.
The usual risks and uncertainties apply, so keep diversified!
Revenues were disappointing in Q2 at $327.4 million, up 9% sequentially from $300.5 million but down 11% from $366.1 million in the year-earlier quarter. The y/y drop reflected a slowdown in the telecommunications sector. This was also reflected in Juniper and ZTE dropping out of the top-five customer list, though they remain major customers.
As one of the world's largest manufacturers of PCBs, TTM has trouble escaping fluctuations in global demand. Despite that, the industry is consolidating as smaller players, particularly in the U.S., are unable to make the capital investments necessary to create PCBs with ever-denser component layouts. In particular smartphones and tablet computers are built on PCBs with multiple layers and high-density interconnections (HDI). In 2011 and this year TTM has been investing significant cash in upgrading its Chinese factories to be able to handle more HDI work.
TTM management is expecting a surge in smartphone and tablet production for Q3 and Q4. Exactly how much of a surge depends on end consumer demand, particularly in Europe, the U.S., and China.
Even at Q2 levels of revenue TTM generated profits and cash. Non-GAAP net income was $13.6 million, down sequentially from $18.8 million and down from $32.9 million year-earlier. EPS was $0.17. EBITDA was $42.3 million, and cash flow from operations was $39 million. Capital expenditures in the quarter were $33 million.
Cash and equivalents balance ended at $248.5 million. TTM has $299.9 million net debt, reflecting the cost of acquiring and upgrading the Chinese factories.
During the quarter revenue from Chinese operations was $195.6 million, while U.S. factories generated $132.3 million.
I like TTMI partly because it is an unglamorous yet essential part of the electronics industry. While there is certainly competition in the PCB industry both in the U.S. and globally, TTMI has a strategic advantage thought it leading edge PCB manufacturing capabilities and volume production capabilities. Smartphone turnover at the consumer level is far quicker that most prior electronic devices, guaranteeing demand for HDI PCBS for the foreseeable future. I don't care who the smartphone, e-book reader, or tablet winners are, as long as they get their PCBs from TTMI.
I see TTMI finishing most of its capital buildout this year. In 2013 it should turn into a cash cow, capable of quickly paying down debt and returning cash to shareholders.
TTMI closed today at $10.20, up 1.39%. It has a 52-week high of $13.75 and low of $8.55. The trailing P/E is 15.94.
Disclaimer: I am long TTMI. I will not trade in the stock for 1 week after this is first published.
The usual risks and uncertainties apply, so keep diversified!
Monday, November 14, 2011
TTM Technologies (TTMI) Sees E-Reader PCB demand
TTM Technologies (TTMI) makes PCBs (printed circuit boards) for the communications, industrial, medical, and consumer electronics industries. It owns plants in the U.S. and in China. The U.S. facilities generally do small runs of PCBs for prototypes and specialized, low volume products. Chinese facilities do larger PCB runs for computer and communications equipment, cell phones including smartphones, and more recently tablet computers and e-readers.
Q3 2011 was a no-growth quarter. Revenues were $358.3 million, down 2% sequentially from $366.1 million, and about flat against $356.8 million in the year-earlier quarter. GAAP net income was $24.5 million, up sequentially from negative $20.3 million, but down 16% from $29.1 million year-earlier. Q2 profits were hit by a one-time non-cash accounting charge for writing off some obsolete factory equipment. So, switching to a non-GAAP view of net income, we have: Q3 2011 $31.0 million, Q2 2011 $32.9 million, Q3 2010 $35.0 million.
While growth has been stagnant this year, profits have remained healthy. Annualizing Q3 non-GAAP EPS gives a P/E ratio is about 7.2 at today's closing price of $11.01 per share.
Because TTM has a broad array of end customers and a global presense, to a large extent its fortunes reflect those of the electronics industry as a whole. For that industry Q3 was a slow quarter in a slow year. Everyone is worried about end demand because of the economy. I believe TTM's ability to make a profit in this environment means it is a reliable cash generator. If the electronics industry picks up again in 2012, there is upside potential.
In the Q3 conference call on November 2nd management noted that some orders were pushed out past the end of the quarter. Cash flow from operations was $42.6 million. The cash and equivalents balance ended at $207.7 million. Long term debt ended at $366.7 million. TTM made capital expenditures of $28.3 million, mostly for new high-end manufacturing equipment in China.
It is notable that debt still exceeds cash. The debt was used to build and expand plants in Asia. So far it has been a good use of debt, but it does create some risk if there is an extreme economic slowdown. Paying down debt has been a priority use for cash.
TTM tracks end markets into 5 segments. For the quarter aerospace and defense was below trend. Cell phones were strong, particularly smartphones. Computers and related were weak and are expected to continue to be weak in Q4. The medical and industrial segment was flat. Networking and communciations, which accounted for 38% of revenue, is expected to be soft in Q4. There is also an "other" category, which saw growth because they are producing the PCBs for a new e-reader for an unspecified customer.
The top five customers were: Apple, Cisco, Ericsson, Huawei and ZTE. Only one of them accounted for more than 10% of revenue.
I believe that as the global electronics industry recovers TTM will continue to pay off debt and eventually be better positioned to use cash for buy-backs and dividends.
Disclaimer: I am long TTMI. I have no plan to change my position this quarter.
Keep diversified!
Q3 2011 was a no-growth quarter. Revenues were $358.3 million, down 2% sequentially from $366.1 million, and about flat against $356.8 million in the year-earlier quarter. GAAP net income was $24.5 million, up sequentially from negative $20.3 million, but down 16% from $29.1 million year-earlier. Q2 profits were hit by a one-time non-cash accounting charge for writing off some obsolete factory equipment. So, switching to a non-GAAP view of net income, we have: Q3 2011 $31.0 million, Q2 2011 $32.9 million, Q3 2010 $35.0 million.
While growth has been stagnant this year, profits have remained healthy. Annualizing Q3 non-GAAP EPS gives a P/E ratio is about 7.2 at today's closing price of $11.01 per share.
Because TTM has a broad array of end customers and a global presense, to a large extent its fortunes reflect those of the electronics industry as a whole. For that industry Q3 was a slow quarter in a slow year. Everyone is worried about end demand because of the economy. I believe TTM's ability to make a profit in this environment means it is a reliable cash generator. If the electronics industry picks up again in 2012, there is upside potential.
In the Q3 conference call on November 2nd management noted that some orders were pushed out past the end of the quarter. Cash flow from operations was $42.6 million. The cash and equivalents balance ended at $207.7 million. Long term debt ended at $366.7 million. TTM made capital expenditures of $28.3 million, mostly for new high-end manufacturing equipment in China.
It is notable that debt still exceeds cash. The debt was used to build and expand plants in Asia. So far it has been a good use of debt, but it does create some risk if there is an extreme economic slowdown. Paying down debt has been a priority use for cash.
TTM tracks end markets into 5 segments. For the quarter aerospace and defense was below trend. Cell phones were strong, particularly smartphones. Computers and related were weak and are expected to continue to be weak in Q4. The medical and industrial segment was flat. Networking and communciations, which accounted for 38% of revenue, is expected to be soft in Q4. There is also an "other" category, which saw growth because they are producing the PCBs for a new e-reader for an unspecified customer.
The top five customers were: Apple, Cisco, Ericsson, Huawei and ZTE. Only one of them accounted for more than 10% of revenue.
I believe that as the global electronics industry recovers TTM will continue to pay off debt and eventually be better positioned to use cash for buy-backs and dividends.
Disclaimer: I am long TTMI. I have no plan to change my position this quarter.
Keep diversified!
Thursday, August 11, 2011
TTM Technologies (TTMI) Expands to Meet Demand
TTM Technologies (TTMI) makes PCBs (printed circuit boards) for the communications, industrial, medical, and consumer electronics industries. It is a U.S. corporation, but in 2010 bought a Chinese PCB manufacturer. The U.S. facilieis generally do small runs of PCBs for prototypes and specialized, low volume products. Chinese facilities largely do larger PCB runs for computer and communications equipment, cell phones including smartphones, and more recently tablet computers.
TTM is a value plus growth proposition, but let's start with the caveats. The Chinese segment, formerly Meadville, had borrowed substantial amounts of money to buy capital equipment to serve the rapidly expanding market. TTM took over those debts. As of the latest quarter reported, long term debt was $432.3 million. On the other hand the cash and equivalents balance was $235.9 million, giving net debt of about $196 million. Cash flow from operations was $67 million, but capital equipment is still being purchased to meet demand (and replace obsolete equipment). Capital expense was $44 million. So it will take some time to pay off the debt, which fortunately carries a low interest rate.
Given the debt, a serious slowdown in demand for PCBs would set back TTM, but with so much cash on hand they should be able to get through a slow period better than most businesses, including much of their PCB competitors.
On the positive side TTM has a great model within its industry. It is one of the largest players in the world. It also specializes in the very highest end PCB technologies, the ones needed to create ever-smaller, more powerful devices. This involves, for instance, drilling holes for component connections with lasers, from computer-generated designs. Increasingly prototypes will be engineered and tested in the U.S. When production runs are large, they can be done in China. Clients like this model, and TTM is likely to pick up more clients over time.
While there are a few big players at the global scale, much of the PCB competition in the U.S. consists of much smaller businesses that can't afford to buy the capital equipment necessary to make high tech PCBs. One notable competitor at the high end in the U.S. is DDi Corporation.
In the last year, one of little growth in the U.S. economy, TTM revenues for Q2 2011were $366.1 million, up 18% from $310.2 million in the year-earlier quarter. Non-GAAP EPS was $0.40 per share. When you analyse TTM be sure to note that revenues are somewhat seasonal.
Aside from the recent general stock market turmoil, TTM had a stock price drop based on a one-time non-cash charge of $48.1 million for obsolete equipment. Also, management honestly does not know what the effect of the current macroeconomic uncertainty will be on end demand. However, if demand slacks they can stop adding capital equipment, so they have plenty of a cash flow cushion in that scenario.
I have been observing TTM's management for years now. They appear to be honest, smart, and hard-working. I take notes on their analyst conference calls, which you can find at TTM Technologies analyst call summaries. If you go back to 2008 you can see how they managed their way through the last recession.
Keep diversified!
TTM is a value plus growth proposition, but let's start with the caveats. The Chinese segment, formerly Meadville, had borrowed substantial amounts of money to buy capital equipment to serve the rapidly expanding market. TTM took over those debts. As of the latest quarter reported, long term debt was $432.3 million. On the other hand the cash and equivalents balance was $235.9 million, giving net debt of about $196 million. Cash flow from operations was $67 million, but capital equipment is still being purchased to meet demand (and replace obsolete equipment). Capital expense was $44 million. So it will take some time to pay off the debt, which fortunately carries a low interest rate.
Given the debt, a serious slowdown in demand for PCBs would set back TTM, but with so much cash on hand they should be able to get through a slow period better than most businesses, including much of their PCB competitors.
On the positive side TTM has a great model within its industry. It is one of the largest players in the world. It also specializes in the very highest end PCB technologies, the ones needed to create ever-smaller, more powerful devices. This involves, for instance, drilling holes for component connections with lasers, from computer-generated designs. Increasingly prototypes will be engineered and tested in the U.S. When production runs are large, they can be done in China. Clients like this model, and TTM is likely to pick up more clients over time.
While there are a few big players at the global scale, much of the PCB competition in the U.S. consists of much smaller businesses that can't afford to buy the capital equipment necessary to make high tech PCBs. One notable competitor at the high end in the U.S. is DDi Corporation.
In the last year, one of little growth in the U.S. economy, TTM revenues for Q2 2011were $366.1 million, up 18% from $310.2 million in the year-earlier quarter. Non-GAAP EPS was $0.40 per share. When you analyse TTM be sure to note that revenues are somewhat seasonal.
Aside from the recent general stock market turmoil, TTM had a stock price drop based on a one-time non-cash charge of $48.1 million for obsolete equipment. Also, management honestly does not know what the effect of the current macroeconomic uncertainty will be on end demand. However, if demand slacks they can stop adding capital equipment, so they have plenty of a cash flow cushion in that scenario.
I have been observing TTM's management for years now. They appear to be honest, smart, and hard-working. I take notes on their analyst conference calls, which you can find at TTM Technologies analyst call summaries. If you go back to 2008 you can see how they managed their way through the last recession.
Keep diversified!
Wednesday, May 11, 2011
TTM Technologies (TTMI) Grows with Smartphones, Tablets
TTM Technologies (TTMI) makes the printed circuit boards (PCBs) that are the backbones of electronic devices; it is the largest PCB manufacturer based in the United States. Last year it acquired a Hong Kong based company with multiple manufacturing facilities in China. Most U.S. PCB manufacturing is now for prototypes and relatively small runs for low-volume end products. By designing and prototyping in the U.S. and doing full-scale runs in China, TTM has created a lot of utility for U.S. based technology companies. It has been running at near capacity, while continuing to expand capacity.
One of the main drivers of increased capacity is tablet computing devices, following the leading edge created by smartphones. This is not just a matter of increased volume. All the electronics have been shrunk, meaning the PCBs themselves involve a higher level of technology than they did a decade ago. This has been good for TTM since many smaller players have been unable to invest in the newest technologies, and TTM gets better profit margins on the higher-technology boards.
With the Chinese acquisition TTM's business has become somewhat more seasonal. The U.S. business was (and still will be) affected by summer vacations and December holidays. Since it is mainly about prototyping and low volume runs for medical, industrial, and aerospace devices, it was not much affected by the Q3 bulge seen in many consumer oriented electronics companies. In China, however, there is a slowdown during the Lunar New Year, and since much of the work is for consumer smartphones, computers, and tablets, there will by Q3 bulges.
Last Thursday, reporting for Q1 2011 ending March 31, 2011, results were solid once seasonality is accounted for. Revenues were $342.8 million, down 8% sequentially from $373.4 million, but up 148% from $138.2 million year-earlier. GAAP Net income was $29.1 million, down 20% sequentially from $36.5 million, but up by a factor of 6 from $4.5 million year-earlier. GAAP EPS (earnings per share) were $0.33, down 20% sequentially from $0.41, but up 230% from $0.10 year-earlier.
Guidance was for Q2 revenue between $350 and $370 million. GAAP EPS $0.28 to $0.37; non-GAAP EPS $0.36 to $0.45.
TTM has a strong cash position at $202 million, and is rapidly paying off its $321 million debt. It is also investing in more equipment in China to keep up with the pace of producing PCBs for iPhones, iPads, and other smartphones and
I own TTM stock, and believe it was a good strategic acquisition for my portfolio (I bought it cheap during the recession). I did not want to try to pick a winner among Apple, Google & partners, etc., for the smartphone/tablet computer revolution. But companies like Applied Materials (AMAD) and TTM provide the infrastructure for the revolution, no matter who wins what market share. There are some exceptions, of course, and plenty of competition in the PCB and semiconductor capital equipment spaces, but so far the strategy has worked pretty well.
For more details on TTM's recent performance, see my TTM Technologies Q1 2011 analyst call summary. One notable fact from management answering analyst questions was that labor costs, per hour, have increased 18% recently. This does not put much pressure on TTM margins, since the factories are highly automated. It does indicate that China is moving to a internal-consumption economy. The rich there are buying all the iPhones Apple can supply, and for middle management and the the working class there are now OPhone type smartphones available at a far lower cost.
See also TTM Technologies
One of the main drivers of increased capacity is tablet computing devices, following the leading edge created by smartphones. This is not just a matter of increased volume. All the electronics have been shrunk, meaning the PCBs themselves involve a higher level of technology than they did a decade ago. This has been good for TTM since many smaller players have been unable to invest in the newest technologies, and TTM gets better profit margins on the higher-technology boards.
With the Chinese acquisition TTM's business has become somewhat more seasonal. The U.S. business was (and still will be) affected by summer vacations and December holidays. Since it is mainly about prototyping and low volume runs for medical, industrial, and aerospace devices, it was not much affected by the Q3 bulge seen in many consumer oriented electronics companies. In China, however, there is a slowdown during the Lunar New Year, and since much of the work is for consumer smartphones, computers, and tablets, there will by Q3 bulges.
Last Thursday, reporting for Q1 2011 ending March 31, 2011, results were solid once seasonality is accounted for. Revenues were $342.8 million, down 8% sequentially from $373.4 million, but up 148% from $138.2 million year-earlier. GAAP Net income was $29.1 million, down 20% sequentially from $36.5 million, but up by a factor of 6 from $4.5 million year-earlier. GAAP EPS (earnings per share) were $0.33, down 20% sequentially from $0.41, but up 230% from $0.10 year-earlier.
Guidance was for Q2 revenue between $350 and $370 million. GAAP EPS $0.28 to $0.37; non-GAAP EPS $0.36 to $0.45.
TTM has a strong cash position at $202 million, and is rapidly paying off its $321 million debt. It is also investing in more equipment in China to keep up with the pace of producing PCBs for iPhones, iPads, and other smartphones and
I own TTM stock, and believe it was a good strategic acquisition for my portfolio (I bought it cheap during the recession). I did not want to try to pick a winner among Apple, Google & partners, etc., for the smartphone/tablet computer revolution. But companies like Applied Materials (AMAD) and TTM provide the infrastructure for the revolution, no matter who wins what market share. There are some exceptions, of course, and plenty of competition in the PCB and semiconductor capital equipment spaces, but so far the strategy has worked pretty well.
For more details on TTM's recent performance, see my TTM Technologies Q1 2011 analyst call summary. One notable fact from management answering analyst questions was that labor costs, per hour, have increased 18% recently. This does not put much pressure on TTM margins, since the factories are highly automated. It does indicate that China is moving to a internal-consumption economy. The rich there are buying all the iPhones Apple can supply, and for middle management and the the working class there are now OPhone type smartphones available at a far lower cost.
See also TTM Technologies
Sunday, November 7, 2010
TTM Technologies Validates New Model
If you owned TTMI (TTM Technologies), America's largest manufacturer of printed circuit boards (PCBs), at the beginning of the week and held it until the market closed on Friday, you saw your shares go from $10.52 to $13.63, or up 29.6%, with most of the advance made on Friday.
Why the sudden excitement? On Thursday TTM announced third quarter (Q3) results and held its analyst conference call. Essentially TTM's acquisition of Meadville, a Hong Kong based PCB manufacturer with facilities in mainland China, turned out to be a smart move. This was the first full quarter after the Meadville acquisition, so you can begin to see why TTM has set itself on track to be a global powerhouse in the coming decade.
But why was the stock price low to begin with? It is not that TTM had been doing badly, though it had its setbacks during the late recession. The background is that the PCB industry in the U.S. has been shrinking for over a decade, even as global PCB demand rose. Manufacturing moved to other nations, most notably China. This was especially true for volume production, like consumer items that have runs of 100,000 units or more.
To keep itself profitable TTM, and some competitors like DDi (DDIC) has specialized in making boards in smaller batches, and in particular when newer technologies are required. Small batches can be prototypes for larger production runs, or can be for industrial or medical instruments where only a few, or a few hundred, boards are needed. TTM provides a level of expertise in designing and manufacturing boards for the new, micro-sized electronic components that few PCB companies in the world can match. They are able to charge for that expertise and maintain a good profit margin. Even in the first quarter of 2009, TTM squeezed out a profit on lower revenues.
Meadville does do large scale PCB manufacturing in China, but mostly at the high end, for instance for Apple products. So their profit margins were also good. For years TTM looked to acquire an Asian PCB manufacturing so they could help their customers on large production runs. In theory the new model is: prototype the PCB in American facilities of TTM, then do large runs in TTM's China facilities.
However, so far mostly we are just seeing that Meadville was a well-run, profitable business, that TTM paid a fair price for it, and that the resulting combination is about as profitable as it looked like it would be.
For Q3 2010, revenues were $357.8 million, up 15% sequentially from $310.2 million and up 157% from $139.1 million in the year-earlier quarter. GAAOP net income was $32.1 million, up by a factor of 4.8 sequentially from $6.7 million and up from negative $4.9 million year-earlier. Resulting in GAAP EPS (earnings per share) of $0.36, up 6x sequentially from $0.06 and up from negative $0.11 year-earlier.
If you use $0.35/share as the new run rate, TTM is generating $1.40 in earnings per year. So even at Friday's closing price the rate of return is very attractive.
One thing to watch, however, is debt. Meadville had acquired a lot of debt in expanding its facilities, and now TTM has taken on that debt. Interest rates are favorable and plenty of cash is being generated to pay off the debt over time, but it is still a negative.
For more detail you can read my Q3 2010 TTM Technologies (TTMI) analyst call summary
And of course the TTM web page.
Why the sudden excitement? On Thursday TTM announced third quarter (Q3) results and held its analyst conference call. Essentially TTM's acquisition of Meadville, a Hong Kong based PCB manufacturer with facilities in mainland China, turned out to be a smart move. This was the first full quarter after the Meadville acquisition, so you can begin to see why TTM has set itself on track to be a global powerhouse in the coming decade.
But why was the stock price low to begin with? It is not that TTM had been doing badly, though it had its setbacks during the late recession. The background is that the PCB industry in the U.S. has been shrinking for over a decade, even as global PCB demand rose. Manufacturing moved to other nations, most notably China. This was especially true for volume production, like consumer items that have runs of 100,000 units or more.
To keep itself profitable TTM, and some competitors like DDi (DDIC) has specialized in making boards in smaller batches, and in particular when newer technologies are required. Small batches can be prototypes for larger production runs, or can be for industrial or medical instruments where only a few, or a few hundred, boards are needed. TTM provides a level of expertise in designing and manufacturing boards for the new, micro-sized electronic components that few PCB companies in the world can match. They are able to charge for that expertise and maintain a good profit margin. Even in the first quarter of 2009, TTM squeezed out a profit on lower revenues.
Meadville does do large scale PCB manufacturing in China, but mostly at the high end, for instance for Apple products. So their profit margins were also good. For years TTM looked to acquire an Asian PCB manufacturing so they could help their customers on large production runs. In theory the new model is: prototype the PCB in American facilities of TTM, then do large runs in TTM's China facilities.
However, so far mostly we are just seeing that Meadville was a well-run, profitable business, that TTM paid a fair price for it, and that the resulting combination is about as profitable as it looked like it would be.
For Q3 2010, revenues were $357.8 million, up 15% sequentially from $310.2 million and up 157% from $139.1 million in the year-earlier quarter. GAAOP net income was $32.1 million, up by a factor of 4.8 sequentially from $6.7 million and up from negative $4.9 million year-earlier. Resulting in GAAP EPS (earnings per share) of $0.36, up 6x sequentially from $0.06 and up from negative $0.11 year-earlier.
If you use $0.35/share as the new run rate, TTM is generating $1.40 in earnings per year. So even at Friday's closing price the rate of return is very attractive.
One thing to watch, however, is debt. Meadville had acquired a lot of debt in expanding its facilities, and now TTM has taken on that debt. Interest rates are favorable and plenty of cash is being generated to pay off the debt over time, but it is still a negative.
For more detail you can read my Q3 2010 TTM Technologies (TTMI) analyst call summary
And of course the TTM web page.
Friday, August 13, 2010
TTM Technologies (TTMI) New China Model
On August 5, 2010 TTM Technologies (TTMI) reported its second quarter results. TTM is the American leader in printed circuit board (PCB) manufacturing. And for the quarter, because of its acquisition of (or merger with) Meadville, its revenues more than doubled since Q1.
For the actual numbers and management's comments see my TTM Technologies Q2 analyst call summary.
Like many technologies, the making of PCBs is rapidly changing. Components are becoming smaller. The number of interconnections has been increasing geometrically, requiring multiple layers of conductors to get the job done. Manufacturing has changed too. For instance, mechanical drills are being replaced by lasers. Just a couple of decades ago engineers designed a system around its electronic components, with the PCB that held them almost an afterthought. Now PCB engineering is critical to the success of high frequency, low voltage devices.
Global manufacturing of electronics is also changing. You may be surprised to learn that many electronic devices are still made in the United States. The change is that these are made in relatively low volumes; they are typically specialty devices for the industrial market. Most high-volume consumer devices are made in lower cost nations like China, where the creation of PCBs and loading them with components are crucial steps.
For years TTM's management has talked about buying an Asian company to complement their business. Typically TTM, like other companies, did prototype PCBs. If a company was making only 1000 or maybe 10,000 devices (say a medical laboratory device), it would probably have the actual production runs done by TTM in addition to the prototypes. But at some scale it made sense to take a PCB board proofed by TTM to China to do a large production run. Of course TTM wanted to capture this missed profit opportunity, but it made no economic sense to build large production run PCB plants in the U.S.
Meadville, meanwhile, had a very successful business, headquartered in Hong Kong but with factories in mainland China, doing large scale production runs. Meadville borrowed large sums of money to build its production capacity over the past decade. For the most part this was not low-end stuff. For instance, one of Meadville's largest clients was Apple.
The combination makes a lot of sense. The most advanced technologies quickly become consumer technologies because consumer devices are migrating to being mobile and handheld, requiring shrinking the entire system. TTM, with its experience with high-end technology prototypes, can take a global manufacturer through the entire process now. They help design and debug prototype PCBs, can do small production runs in the U.S. If a company needs a million devices per month, there will be a smooth transition to Asian manufacturing.
It will probably take about a year for this model to show its stuff. Rapid as technological change is, it can take a year or two for a specific device to go from the design stage to the production stage. Also TTM's China facilities are already running at near capacity. They need even more high end PCB production equipment to keep up with demand. Capital expenses can easily be paid out of cash flow, which is very healthy. TTM has gone from being almost debt free to having substantial debt, but the financing terms from Hong Kong banks are liberal. I believe TTM will be able to rapidly pay down the debt.
Of course this is a competitive area, and things could go wrong, but it looks like the right strategy for the PCB industry. In the U.S., in particular, the industry is consolidating because many of the smaller companies can't afford to invest in new equipment like automated laser drilling machines. TTM is likely to pick up market share both in the U.S. and China.
See also: TTM Technologies and Meadville
For the actual numbers and management's comments see my TTM Technologies Q2 analyst call summary.
Like many technologies, the making of PCBs is rapidly changing. Components are becoming smaller. The number of interconnections has been increasing geometrically, requiring multiple layers of conductors to get the job done. Manufacturing has changed too. For instance, mechanical drills are being replaced by lasers. Just a couple of decades ago engineers designed a system around its electronic components, with the PCB that held them almost an afterthought. Now PCB engineering is critical to the success of high frequency, low voltage devices.
Global manufacturing of electronics is also changing. You may be surprised to learn that many electronic devices are still made in the United States. The change is that these are made in relatively low volumes; they are typically specialty devices for the industrial market. Most high-volume consumer devices are made in lower cost nations like China, where the creation of PCBs and loading them with components are crucial steps.
For years TTM's management has talked about buying an Asian company to complement their business. Typically TTM, like other companies, did prototype PCBs. If a company was making only 1000 or maybe 10,000 devices (say a medical laboratory device), it would probably have the actual production runs done by TTM in addition to the prototypes. But at some scale it made sense to take a PCB board proofed by TTM to China to do a large production run. Of course TTM wanted to capture this missed profit opportunity, but it made no economic sense to build large production run PCB plants in the U.S.
Meadville, meanwhile, had a very successful business, headquartered in Hong Kong but with factories in mainland China, doing large scale production runs. Meadville borrowed large sums of money to build its production capacity over the past decade. For the most part this was not low-end stuff. For instance, one of Meadville's largest clients was Apple.
The combination makes a lot of sense. The most advanced technologies quickly become consumer technologies because consumer devices are migrating to being mobile and handheld, requiring shrinking the entire system. TTM, with its experience with high-end technology prototypes, can take a global manufacturer through the entire process now. They help design and debug prototype PCBs, can do small production runs in the U.S. If a company needs a million devices per month, there will be a smooth transition to Asian manufacturing.
It will probably take about a year for this model to show its stuff. Rapid as technological change is, it can take a year or two for a specific device to go from the design stage to the production stage. Also TTM's China facilities are already running at near capacity. They need even more high end PCB production equipment to keep up with demand. Capital expenses can easily be paid out of cash flow, which is very healthy. TTM has gone from being almost debt free to having substantial debt, but the financing terms from Hong Kong banks are liberal. I believe TTM will be able to rapidly pay down the debt.
Of course this is a competitive area, and things could go wrong, but it looks like the right strategy for the PCB industry. In the U.S., in particular, the industry is consolidating because many of the smaller companies can't afford to invest in new equipment like automated laser drilling machines. TTM is likely to pick up market share both in the U.S. and China.
See also: TTM Technologies and Meadville
Monday, May 10, 2010
TTM Technologies (TTMI) Sees PCB Demand
A sequential (and annual) revenue decrease at TTM Technologies (TTMI) for the first quarter of 2010 masks some very positive trends for the company. Despite the revenue decrease, profits were up. In addition TTM has combined with Meadville Holdings to create a formidable world-class PCB (printed circuit board) operation.
For detailed results and discussion from the May 6 conference, see my TTM Technologies Q1 2010 analyst conference summary.
The PCB industry in the U.S. has been contracting, so why should investors be there at all? The key here is that in many cases today's PCB is not your father's PCB. As the size of semiconductor chips has shrunk, PCB technology has changed. More interconnections between components need to be crammed into shrinking surface areas. This means high-end PCBs have multiple layers. The myriad tiny connections on a board must be rock-solid reliable or the finished product won't work. Holes must be drilled precisely by laser.
So PCB work that used to be done in the U.S. has gone in two directions. One direction is overseas, where volume work can be done more cheaply. Much of the work that remains in the U.S. involves high technology, which in turn requires capital investments that mom & pop PCB makers can't afford anymore. Most of the shakeout in 2008 and 2009 has been among the smaller players.
Even so, TTM management decided they needed to run a tighter operation. Between Q1 2009 and Q1 2010 revenues decreased 7%. But net income increased 221% (of course, the high percentage is partly a reflection of the minimal profits in Q1 2009). Even the $0.10 a share of GAAP EPS of Q1 2010 reflects the costs of closing plants in the U.S. Non-GAAP EPS was a healthier $0.19.
When TTM closed some plants, it tried to keep the profitable customers and drop the low-margin customers, with some evident success.
Demand is now expanding. The March book-to-bill ratio jumped to 1.12. So the plants that remain in operation in the U.S. should run closer to capacity, which means better profit margins ahead.
By revenue, the acquired Meadville is actually the larger company. Based in Hong Kong with plants in China, it has benefitted from the booming Chinese economy in 2009. But the important thing is how the two parts fit together.
U.S. companies, during the design stage, like to have their PCBs made near at hand, in the U.S. They like to have engineering support from PCB specialists. But if they are making a high volume product, in particular consumer product, they want to do their production for sale in a lower cost facility, typically in Asia. So a company might do its prototypes and low volume production (which happens with many defense and industrial products) with TTM, but then need to transition to an Asian supplier.
Now TTM can assist customers from start to finish. From the first prototype to the last board created for sale before a new model changeover, companies can work with the trusted team at TTM. According to management, most suitable customers are ready to make this transition. Of course the Asian plants should retain the customers they already have as well. TTM will also be able to bring high level engineering skills and production processes to the plants in China.
The transition will take some time, partly because it must wait for customers to bring in new designs, and partly because the Asian plants need more capacity. Plans are underway to fit more production machinery into the current plants, so we could see capacity begin to expand in Q3, and more fully in the beginning of 2011.
In addition to the usual risks, I would see the main risk for investors as the level of debt in the new TTM. Meadville brought debt with it. It was at a level that Meadville was paying down out of profits, so it should not be a problem to continue to pay down. However, if there were to be a second macroeconomic dip too soon, it is possible the debt could become a problem.
I am a long term investor in TTMI, so do further research before making your investment decision.
And keep diversified!
See also the TTM Technologies site
For detailed results and discussion from the May 6 conference, see my TTM Technologies Q1 2010 analyst conference summary.
The PCB industry in the U.S. has been contracting, so why should investors be there at all? The key here is that in many cases today's PCB is not your father's PCB. As the size of semiconductor chips has shrunk, PCB technology has changed. More interconnections between components need to be crammed into shrinking surface areas. This means high-end PCBs have multiple layers. The myriad tiny connections on a board must be rock-solid reliable or the finished product won't work. Holes must be drilled precisely by laser.
So PCB work that used to be done in the U.S. has gone in two directions. One direction is overseas, where volume work can be done more cheaply. Much of the work that remains in the U.S. involves high technology, which in turn requires capital investments that mom & pop PCB makers can't afford anymore. Most of the shakeout in 2008 and 2009 has been among the smaller players.
Even so, TTM management decided they needed to run a tighter operation. Between Q1 2009 and Q1 2010 revenues decreased 7%. But net income increased 221% (of course, the high percentage is partly a reflection of the minimal profits in Q1 2009). Even the $0.10 a share of GAAP EPS of Q1 2010 reflects the costs of closing plants in the U.S. Non-GAAP EPS was a healthier $0.19.
When TTM closed some plants, it tried to keep the profitable customers and drop the low-margin customers, with some evident success.
Demand is now expanding. The March book-to-bill ratio jumped to 1.12. So the plants that remain in operation in the U.S. should run closer to capacity, which means better profit margins ahead.
By revenue, the acquired Meadville is actually the larger company. Based in Hong Kong with plants in China, it has benefitted from the booming Chinese economy in 2009. But the important thing is how the two parts fit together.
U.S. companies, during the design stage, like to have their PCBs made near at hand, in the U.S. They like to have engineering support from PCB specialists. But if they are making a high volume product, in particular consumer product, they want to do their production for sale in a lower cost facility, typically in Asia. So a company might do its prototypes and low volume production (which happens with many defense and industrial products) with TTM, but then need to transition to an Asian supplier.
Now TTM can assist customers from start to finish. From the first prototype to the last board created for sale before a new model changeover, companies can work with the trusted team at TTM. According to management, most suitable customers are ready to make this transition. Of course the Asian plants should retain the customers they already have as well. TTM will also be able to bring high level engineering skills and production processes to the plants in China.
The transition will take some time, partly because it must wait for customers to bring in new designs, and partly because the Asian plants need more capacity. Plans are underway to fit more production machinery into the current plants, so we could see capacity begin to expand in Q3, and more fully in the beginning of 2011.
In addition to the usual risks, I would see the main risk for investors as the level of debt in the new TTM. Meadville brought debt with it. It was at a level that Meadville was paying down out of profits, so it should not be a problem to continue to pay down. However, if there were to be a second macroeconomic dip too soon, it is possible the debt could become a problem.
I am a long term investor in TTMI, so do further research before making your investment decision.
And keep diversified!
See also the TTM Technologies site
Tuesday, November 24, 2009
TTM Technologies (TTMI) Merges with Meadville
On November 16, 2009 TTM Technologies (Nasdaq: TTMI) announced that it would be merging with Meadville Holdings Limited. Both companies are in the printed circuit board (PCB) manufacturing business. TTM is the largest PCB manufacturer by revenue in the United States, but was not in the top 10 such companies worldwide. Meadville is listed on the Hong Kong exchange and is somewhat larger than TTM.
TTM has been looking for a Asian acquisition for as long as I can remember. The U.S. PCB industry has been on the ropes for over a decade because of competition from overseas, especially from Asian companies. TTM, and some of its American rivals, have survived and even prospered by specializing in a few areas. One is low volume production where the savings from going overseas are outweighed by the logistics of it. While we tend to think of electronics as high-volume items, in fact outside of the consumer sector often industrial kit is made in low volume.
Another area where some American companies have retained an advantage is high-technology. These are not your Dad's PCBs. They have multiple layers of conductors and insulators and tiny thru-holes drilled with lasers. TTM specializes in high-end boards and provides engineering support to customers.
Quick turn-around time, aka the quick-turn segment, is also quite profitable. This is often for prototypes during the development phase of a project. A company might want ten prototype boards, and it wants them ASAP. TTM does quick turn.
Still, TTM has wanted to be a one-shop solution for its customers. Typically for high volume products, where cost per board is an issue, TTM's customers have gone elsewhere.
Meadville is just what TTM has been looking for, although it is much larger than I expected the acquisition would be. Meadville has good standard technology capabilities, so it will benefit from TTM's cutting edge ability. Meadville has the high-volume capacity that will allow TTM to become a one-stop shop. Meadville has a variety of factories in various locations in China.
Merged into TTM, the companies will form the third largest PCB company in the world. Meadville will be spinning off its PCB laminate manufacturing division as part of the deal.
Meadville has a lot of debt that enabled it to acquire the capital equipment and smaller companies it needed to expand rapidly. New credit facilities of $582 million are being provided by Hong Kong banks. However, both TTM and Meadville have been generating cash, even during the recession, so on first impression it seems they should be able to pay down the debt over time without too much difficulty.
TTM is buying Meadville with cash and common stock. As a result Meadville investors will own about 45% of the merged company.
Due to the large number of PCB companies in the U.S., this merger is not likely to be seen as anti-competitive by U.S. regulatory agencies. However, issues arise because a significant proportion of TTM's business is from defense contracting. The Department of Defense and the Committee on Foreign Investment in the U.S. (CFIUS) must approve the deal before it goes through. Management did not think that would be a problem once protocols were established to keep Defense information secure. But one analyst at the conference claimed the largest Meadville stockholder is "close to" the Chinese Communist government, and rather than asking management a question seemed to be saying she (or whoever was using her, possibly Taiwanese interests) thought the merger should be disallowed by CFIUS.
Mergers are always tricky, but I believe TTM has been very cautious in looking for this acquisition and has done its due diligence. It will probably take a good year or so after the merger, however, before we see any result of its synergies.
For a report on TTM's latest financial results, see my TTMI Q3 2009 analyst conference summary. Also see TTM Technology press release on Meadville Holdings merger.
And of course Meadville Holdings Limited.
TTM has been looking for a Asian acquisition for as long as I can remember. The U.S. PCB industry has been on the ropes for over a decade because of competition from overseas, especially from Asian companies. TTM, and some of its American rivals, have survived and even prospered by specializing in a few areas. One is low volume production where the savings from going overseas are outweighed by the logistics of it. While we tend to think of electronics as high-volume items, in fact outside of the consumer sector often industrial kit is made in low volume.
Another area where some American companies have retained an advantage is high-technology. These are not your Dad's PCBs. They have multiple layers of conductors and insulators and tiny thru-holes drilled with lasers. TTM specializes in high-end boards and provides engineering support to customers.
Quick turn-around time, aka the quick-turn segment, is also quite profitable. This is often for prototypes during the development phase of a project. A company might want ten prototype boards, and it wants them ASAP. TTM does quick turn.
Still, TTM has wanted to be a one-shop solution for its customers. Typically for high volume products, where cost per board is an issue, TTM's customers have gone elsewhere.
Meadville is just what TTM has been looking for, although it is much larger than I expected the acquisition would be. Meadville has good standard technology capabilities, so it will benefit from TTM's cutting edge ability. Meadville has the high-volume capacity that will allow TTM to become a one-stop shop. Meadville has a variety of factories in various locations in China.
Merged into TTM, the companies will form the third largest PCB company in the world. Meadville will be spinning off its PCB laminate manufacturing division as part of the deal.
Meadville has a lot of debt that enabled it to acquire the capital equipment and smaller companies it needed to expand rapidly. New credit facilities of $582 million are being provided by Hong Kong banks. However, both TTM and Meadville have been generating cash, even during the recession, so on first impression it seems they should be able to pay down the debt over time without too much difficulty.
TTM is buying Meadville with cash and common stock. As a result Meadville investors will own about 45% of the merged company.
Due to the large number of PCB companies in the U.S., this merger is not likely to be seen as anti-competitive by U.S. regulatory agencies. However, issues arise because a significant proportion of TTM's business is from defense contracting. The Department of Defense and the Committee on Foreign Investment in the U.S. (CFIUS) must approve the deal before it goes through. Management did not think that would be a problem once protocols were established to keep Defense information secure. But one analyst at the conference claimed the largest Meadville stockholder is "close to" the Chinese Communist government, and rather than asking management a question seemed to be saying she (or whoever was using her, possibly Taiwanese interests) thought the merger should be disallowed by CFIUS.
Mergers are always tricky, but I believe TTM has been very cautious in looking for this acquisition and has done its due diligence. It will probably take a good year or so after the merger, however, before we see any result of its synergies.
For a report on TTM's latest financial results, see my TTMI Q3 2009 analyst conference summary. Also see TTM Technology press release on Meadville Holdings merger.
And of course Meadville Holdings Limited.
Sunday, February 15, 2009
TTM Technologies (TTMI) Holds Up
TTM Technologies (TTMI) released its fourth quarter results and held its analyst conference on February 10th. Somewhat to my surprise, revenues are holding up pretty well in the face of what has been a disaster for many technology companies. NVIDIA, for instance, reporting at the same time as TTMI, had revenues for its quarter ending January 25, 2009 down 46% sequentially and down 60% from year earlier [see my Nvidia Q4 fiscal 2009 analyst conference summary for details].
TTM had revenues for its fourth quarter ending December 31, 2008 of $164.9 million, down 2.5% sequentially from $169.0 million and down 1.5% from $167.5 million year-earlier.
TTM's stock price is way down despite its ability to maintain revenue and profit, so it had to write off a bunch of goodwill. This $117 million non-cash charge resulted contributed to a GAAP net loss of $68.5 million.
Normally I like to use GAAP numbers, which are more conservative and realistic than non-GAAP numbers. However, lately a lot of companies have been taking big charges (mostly goodwill impairments) based solely on changes in their stock prices. I think these charges obscure the real picture.
So for TTM it is important to note that excluding the charge and tax benefits from it, non-GAAP net income was $14.5 million. Cash balances at the end of December were $17.1 million higher than at the end of Q3.
Why is TTM doing so much better than NVIDIA and many other technology companies? Both companies have excellent management teams. The main difference is the markets they serve.
TTM makes printed circuit boards, and they are not your grandfather's PCBs. The boards that hold the chips now are technological marvels in themselves, with multiple layers, tiny connecting lines, and holes that are drilled by lasers. You might think that with consumer electronics goods selling poorly, which hurt NVIDIA, a maker high-end graphics chips, PCB manufacturing would be down sharply too. And it is in Asia, where most volume production is done.
TTMs customers tend to need smaller quantitites of PCBs, they often want engineering assistance, and their PCB's are among the hardest to make. They also are constantly engaged in research, which requires prototype PCBs in small numbers with quick turnaround. Cisco is an example of a company that is a top 5 customer for TTM. Cisco is continuing its pace for new product production despite a slump in demand for end products.
TTM also serves military contractors like Northrup and Raytheon. Barack Obama's administration has shown no inclination to back off the military spend that was beefed up for the "war on terror." Military end market revenue is actually growing for TTM and has been for a couple of years.
Could a worsening of this depression hurt TTM? Sure. There is always risk from the economy in any investment.
Might I buy more TTM stock? It is on the short list. It appears to be a reliable source of cash profits. The main risk, it appears, is stock price fluctuation based on fear. With today's market capitalization of $245 million (at $5.73 per share), and $14 million in earnings in a soft quarter, the return on investment is about 23%. You are not going to get that in a corporate bond or treasury. Earnings may go down in the first half of 2009, but they should recover nicely when the economy recovers.
See also my summary of the TTM Technologies analyst conference for Q4 2008.
It is an amazing time to be an investor. TTM is not the only stock that is underpriced. So...
Keep diversifying!
TTM Technologies web site
NVIDIA web site
stock list, analyst conference summaries
TTM had revenues for its fourth quarter ending December 31, 2008 of $164.9 million, down 2.5% sequentially from $169.0 million and down 1.5% from $167.5 million year-earlier.
TTM's stock price is way down despite its ability to maintain revenue and profit, so it had to write off a bunch of goodwill. This $117 million non-cash charge resulted contributed to a GAAP net loss of $68.5 million.
Normally I like to use GAAP numbers, which are more conservative and realistic than non-GAAP numbers. However, lately a lot of companies have been taking big charges (mostly goodwill impairments) based solely on changes in their stock prices. I think these charges obscure the real picture.
So for TTM it is important to note that excluding the charge and tax benefits from it, non-GAAP net income was $14.5 million. Cash balances at the end of December were $17.1 million higher than at the end of Q3.
Why is TTM doing so much better than NVIDIA and many other technology companies? Both companies have excellent management teams. The main difference is the markets they serve.
TTM makes printed circuit boards, and they are not your grandfather's PCBs. The boards that hold the chips now are technological marvels in themselves, with multiple layers, tiny connecting lines, and holes that are drilled by lasers. You might think that with consumer electronics goods selling poorly, which hurt NVIDIA, a maker high-end graphics chips, PCB manufacturing would be down sharply too. And it is in Asia, where most volume production is done.
TTMs customers tend to need smaller quantitites of PCBs, they often want engineering assistance, and their PCB's are among the hardest to make. They also are constantly engaged in research, which requires prototype PCBs in small numbers with quick turnaround. Cisco is an example of a company that is a top 5 customer for TTM. Cisco is continuing its pace for new product production despite a slump in demand for end products.
TTM also serves military contractors like Northrup and Raytheon. Barack Obama's administration has shown no inclination to back off the military spend that was beefed up for the "war on terror." Military end market revenue is actually growing for TTM and has been for a couple of years.
Could a worsening of this depression hurt TTM? Sure. There is always risk from the economy in any investment.
Might I buy more TTM stock? It is on the short list. It appears to be a reliable source of cash profits. The main risk, it appears, is stock price fluctuation based on fear. With today's market capitalization of $245 million (at $5.73 per share), and $14 million in earnings in a soft quarter, the return on investment is about 23%. You are not going to get that in a corporate bond or treasury. Earnings may go down in the first half of 2009, but they should recover nicely when the economy recovers.
See also my summary of the TTM Technologies analyst conference for Q4 2008.
It is an amazing time to be an investor. TTM is not the only stock that is underpriced. So...
Keep diversifying!
TTM Technologies web site
NVIDIA web site
stock list, analyst conference summaries
Tuesday, November 4, 2008
TTM Technologies (TTMI) Okay Despite Economy
TTM Technologies (TTMI) reported $169.0 in revenues for the third quarter of 2008. It is interesting to see which companies are being impacted by the economic turmoil. Many technology company management teams, earlier in the year, took the line that they enabled their customers to save money, and so could grow even during a recession. Q3 earnings reports tests that theory, and in some cases it has turned out to be right, as with Akamai, and in others wrong, as with Rackable Systems.
TTM Technologies makes printed circuit boards (PCBs). These used to be pretty mundane, essentially pieces of plastic with holes drilled in it to receive component wires, with copper foil lines running between the electronics. But today's high-end components are so small and require so many connections that PCBs themselves have become high technology. Holes must be precision drilled with lasers, and the boards tend to many alternating conductive and non-conductive layers.
Usually truly mass production of PCBs is done in Taiwan, China, or some other low-cost Asian nation. TTM Technologies can do prototyping of boards before the mass production run, and runs of boards that are at the cutting edge of technology. Examples are networking equipment, electronic testing equipment, medical devices, and aerospace devices.
TTM's revenues were down 3% from Q2, but up 4% from Q3 2007. Probably they were impacted by the economy and would have shown sequential growth in a normal environment. GAAP net income was $9.5 million, just above flat compared to Q2 but up 15% from the year-earlier quarter.
TTM gets better profit margins on its high-end products than on lower-end and mass production products. During the quarter the mix of products shifted to the high-end, so they were able to do pretty well.
Despite that guidance for Q4 was down to $156 million to $164 million in revenues, with EPS between $0.14 and $0.19. If there is a drastic reduction in economic activity, TTM will feel it.
For a full report on TTMI's Q3 see my TTM analyst conference summary for Q3 2008.
On a cash basis results were even better, with EBITDA (earnings before interest, taxes, depreciation and amortization) of $22.2 million.
TTM Technologies ended the quarter with $135 million in cash, enough to get through a downturn. It also has been looking to acquire an Asian PCB manufacturer to do high-volume, low cost runs, so cash could go to that if the right match is found.
TTMI stock is trading today at around $6.80 per share, giving it a market capitalization of about $290 million. Using GAAP net income for the quarter, it has a current P/E ratio of under 8. In any stock market but today's that would be a tremendous buy.
I own TTMI stock, which I picked up earlier this year. You can find more information at my main TTMI page.
Like all stocks TTMI carries risks and uncertainties, so keep diversified!
More data:
TTM Technologies
PCBs (printed circuit boards) at Wikipedia
TTM Technologies makes printed circuit boards (PCBs). These used to be pretty mundane, essentially pieces of plastic with holes drilled in it to receive component wires, with copper foil lines running between the electronics. But today's high-end components are so small and require so many connections that PCBs themselves have become high technology. Holes must be precision drilled with lasers, and the boards tend to many alternating conductive and non-conductive layers.
Usually truly mass production of PCBs is done in Taiwan, China, or some other low-cost Asian nation. TTM Technologies can do prototyping of boards before the mass production run, and runs of boards that are at the cutting edge of technology. Examples are networking equipment, electronic testing equipment, medical devices, and aerospace devices.
TTM's revenues were down 3% from Q2, but up 4% from Q3 2007. Probably they were impacted by the economy and would have shown sequential growth in a normal environment. GAAP net income was $9.5 million, just above flat compared to Q2 but up 15% from the year-earlier quarter.
TTM gets better profit margins on its high-end products than on lower-end and mass production products. During the quarter the mix of products shifted to the high-end, so they were able to do pretty well.
Despite that guidance for Q4 was down to $156 million to $164 million in revenues, with EPS between $0.14 and $0.19. If there is a drastic reduction in economic activity, TTM will feel it.
For a full report on TTMI's Q3 see my TTM analyst conference summary for Q3 2008.
On a cash basis results were even better, with EBITDA (earnings before interest, taxes, depreciation and amortization) of $22.2 million.
TTM Technologies ended the quarter with $135 million in cash, enough to get through a downturn. It also has been looking to acquire an Asian PCB manufacturer to do high-volume, low cost runs, so cash could go to that if the right match is found.
TTMI stock is trading today at around $6.80 per share, giving it a market capitalization of about $290 million. Using GAAP net income for the quarter, it has a current P/E ratio of under 8. In any stock market but today's that would be a tremendous buy.
I own TTMI stock, which I picked up earlier this year. You can find more information at my main TTMI page.
Like all stocks TTMI carries risks and uncertainties, so keep diversified!
More data:
TTM Technologies
PCBs (printed circuit boards) at Wikipedia
Thursday, July 31, 2008
TTM Technologies (TTMI) Analyst Conference Summaries Initiated
I have begun providing analyst conference summaries for TTM Technologies (symbol: TTMI). See my main TTM Technologies page and the July 29, 2008 TTM Technologies analyst conference summary.
I did some research on companies that manufacture PCBs (printed circuit boards) in 2007 and liked TTM because of its profitability and growth potential. I bought the stock in February 2008 as part of an effort to diversify and buy stocks cheap during this liquidity squeeze.
TTM Technologies is a relatively high-end PCB maker with clients like Cisco. It does not make the raw boards. Rather it prepares boards for population with electronics parts by drilling the necessary holes and providing the copper tracks that connect the elements. In most cases it produces boards with multiple planes of copper and insulator.
Much of this business has moved to Taiwan and mainland China. However, there are a couple of reasons TTM and other companies are still able to operate in the United States. One is the need to make prototype boards prior to large production runs. The other is the need for high quality engineering and manufacturing that cannot be easily matched.
TTMI's 2nd quarter showed an ability to hold up well in a tricky economic environment. TTM generates cash very nicely. It is looking to acquire an Asian PCB manufacturer so that it can serve its customers need for low-cost, large scale runs, in addition to the low and medium volume work that it makes sense to do in the United States.
TTM has the usual risk of competitive pressures from both domestic and foreign PCB manufacturers.
So ... keep diversified!
TTM Technologies web site
I did some research on companies that manufacture PCBs (printed circuit boards) in 2007 and liked TTM because of its profitability and growth potential. I bought the stock in February 2008 as part of an effort to diversify and buy stocks cheap during this liquidity squeeze.
TTM Technologies is a relatively high-end PCB maker with clients like Cisco. It does not make the raw boards. Rather it prepares boards for population with electronics parts by drilling the necessary holes and providing the copper tracks that connect the elements. In most cases it produces boards with multiple planes of copper and insulator.
Much of this business has moved to Taiwan and mainland China. However, there are a couple of reasons TTM and other companies are still able to operate in the United States. One is the need to make prototype boards prior to large production runs. The other is the need for high quality engineering and manufacturing that cannot be easily matched.
TTMI's 2nd quarter showed an ability to hold up well in a tricky economic environment. TTM generates cash very nicely. It is looking to acquire an Asian PCB manufacturer so that it can serve its customers need for low-cost, large scale runs, in addition to the low and medium volume work that it makes sense to do in the United States.
TTM has the usual risk of competitive pressures from both domestic and foreign PCB manufacturers.
So ... keep diversified!
TTM Technologies web site
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