Canaccord Genuity Global Growth Conference: Sustainability Part III (AIXG, VECO, CREE, GTAT, RBCN, UTEK, PANL, MXWL)
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Price: $17.43 +4.75%
Rating Summary:
7 Buy, 18 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 12 | New: 30
Rating Summary:
7 Buy, 18 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 12 | New: 30
Trade AIXG Now!
Summaries of presentations from Canaccord Genuity Global Growth Conference: Sustainability Part III
Analyst, John Quealy, said, "In sum, the Sustainability sector continues to offer compelling growth opportunities, even though the risk/reward for specific sub-sector and individual stocks varies significantly...Alternative Fuels remains a key area of focus, as investors await the deployment of natural gas refueling stations and the announcement of future OEM platform wins in H2/12. Smart Grid continues to show attractive value, as sentiment is troughed and earnings and cash flow resilience improves for certain names. Biofuels stays more variable near term, as high corn prices and regulatory uncertainty remain a headwind for that group."
Sell-rated AIXTRON (Nasdaq: AIXG): Maintained that things will show improvement in Q3 and Q4 this year, and is optimistic for a rebound in 2013 driven by lighting, but the company admits little firm visibility. The company expects to work down the inventory it built in anticipation of GCL’s cancelled shipment next year. They also maintained their 5-year WW prediction of 2500-3500 tools for lighting. As such they expect to maintain high R&D for this continued opportunity unless 2013 is as depressed as 2012 – then they would reassess near-term expenses.
Sell-rated Veeco Instruments (Nasdaq: VECO): Veeco has done a good job of managing through the downturn. This is the result of its cost structure, 90% of COGS is variable and 50% of OPEX is variable. As for the downturn, customers are still hesitant to place orders as backlighting is slowing. This is mostly macro related. Veeco is seeing increased quoting activity, but so far this is not translating to orders...The company is looking at all acquisition strategies but it does not seem like it has identified anything compelling enough for its requirements yet.
Buy-rated Cree (Nasdaq: CREE): We hosted Cree management for more of a visionary discussion on SSL adoption. We did not hear much incremental specific to Cree’s near-term fundamentals, with the exception that Cree expects to stay in the merchant component market for the foreseeable future. They claim to have plenty of innovation left, and selling components to third parties offers the best ROI on their R&D.
Buy-rated GT Advanced Technologies (Nasdaq: GTAT): As we wrote last week in our separate upgrade note, there was increased focus on cover glass opportunities in handsets for future sapphire growth beyond LED. Not surprisingly, this is where all investor focus was...Best in class manufacturers using their CVD reactors are at $14 cash cost per kilo and $18 all in. The company is coming out with a new reactor with an even lower cost, but after that poly is probably reaching its limit...GT is confident that the new HiCz tool will lead to growth once again in solar, but admits a new cycle is 2 or more years away.
Hold-rated Rubicon Technology (Nasdaq: RBCN): Rubicon has significant exposure to handsets, however it remains in the SoS RFIC substrate opportunity not in cover glass. We do not expect the cover glass opportunity to have much of an effect on Rubicon’s supply chain or the sapphire supply-demand imbalance.
Buy-rated Ultratech (Nasdaq: UTEK): Maintained its bullish tone. It maintains guidance and even thinks 2013 can be an up year. The company is still seeing LSA pull-ins, is booked through Q1 next year and adding capacity through another shift. While it does not seem like a cyclical correction is on the horizon, we are somewhat assuaged that the company’s break even run-rate next year is at ~$35M per quarter, providing some flexibility should the semicap slowdown extend towards the leading edge of technology. There are no near-term dividends or buybacks planned. The company is more open to M&A than they have been in a while...The bulk of Laser revenue was at 40nm, but growth is coming from 28nm this year with some 20nm next year...Leakage has been more important in Logic than memory...In LED Ultratech is qualified in 4 of 5 LED chip processing steps and working on getting qualified at the 5th.
Hold-rated Universal Display (Nasdaq: PANL): Our focus on UDC was largely IP and materials. Duksan has withdrawn 2 patent challenges in Korea, but is still challenging 5. The company is getting more comfortable with the Fujifilms IP. It includes emitters and other layers in the stack. We are still unclear how they will monetize it. They arrived at the $105M purchase price through a competitive bidding process, but wouldn't say who else was bidding...Looking forward, UDC is not expecting OLED TVs until the end of 2013 at the earliest and does not expect a printed OLED solution any time soon.
Hold-rated Maxwell Technologies (Nasdaq: MXWL): There was not much incremental from the presentation, but we note that the body language was somewhat more positive than we have seen regarding China’s hybrid bus opportunity, and wind seems to have stabilized. Much investor focus was around future capital raises. There was not much color from management as they do not need capital right now. The company has not formally cancelled the 'at the market' capital raise overhang but has no intention of drawing it down. However the stock does not seem to have many NT catalysts.
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Analyst, John Quealy, said, "In sum, the Sustainability sector continues to offer compelling growth opportunities, even though the risk/reward for specific sub-sector and individual stocks varies significantly...Alternative Fuels remains a key area of focus, as investors await the deployment of natural gas refueling stations and the announcement of future OEM platform wins in H2/12. Smart Grid continues to show attractive value, as sentiment is troughed and earnings and cash flow resilience improves for certain names. Biofuels stays more variable near term, as high corn prices and regulatory uncertainty remain a headwind for that group."
Sell-rated AIXTRON (Nasdaq: AIXG): Maintained that things will show improvement in Q3 and Q4 this year, and is optimistic for a rebound in 2013 driven by lighting, but the company admits little firm visibility. The company expects to work down the inventory it built in anticipation of GCL’s cancelled shipment next year. They also maintained their 5-year WW prediction of 2500-3500 tools for lighting. As such they expect to maintain high R&D for this continued opportunity unless 2013 is as depressed as 2012 – then they would reassess near-term expenses.
Sell-rated Veeco Instruments (Nasdaq: VECO): Veeco has done a good job of managing through the downturn. This is the result of its cost structure, 90% of COGS is variable and 50% of OPEX is variable. As for the downturn, customers are still hesitant to place orders as backlighting is slowing. This is mostly macro related. Veeco is seeing increased quoting activity, but so far this is not translating to orders...The company is looking at all acquisition strategies but it does not seem like it has identified anything compelling enough for its requirements yet.
Buy-rated Cree (Nasdaq: CREE): We hosted Cree management for more of a visionary discussion on SSL adoption. We did not hear much incremental specific to Cree’s near-term fundamentals, with the exception that Cree expects to stay in the merchant component market for the foreseeable future. They claim to have plenty of innovation left, and selling components to third parties offers the best ROI on their R&D.
Buy-rated GT Advanced Technologies (Nasdaq: GTAT): As we wrote last week in our separate upgrade note, there was increased focus on cover glass opportunities in handsets for future sapphire growth beyond LED. Not surprisingly, this is where all investor focus was...Best in class manufacturers using their CVD reactors are at $14 cash cost per kilo and $18 all in. The company is coming out with a new reactor with an even lower cost, but after that poly is probably reaching its limit...GT is confident that the new HiCz tool will lead to growth once again in solar, but admits a new cycle is 2 or more years away.
Hold-rated Rubicon Technology (Nasdaq: RBCN): Rubicon has significant exposure to handsets, however it remains in the SoS RFIC substrate opportunity not in cover glass. We do not expect the cover glass opportunity to have much of an effect on Rubicon’s supply chain or the sapphire supply-demand imbalance.
Buy-rated Ultratech (Nasdaq: UTEK): Maintained its bullish tone. It maintains guidance and even thinks 2013 can be an up year. The company is still seeing LSA pull-ins, is booked through Q1 next year and adding capacity through another shift. While it does not seem like a cyclical correction is on the horizon, we are somewhat assuaged that the company’s break even run-rate next year is at ~$35M per quarter, providing some flexibility should the semicap slowdown extend towards the leading edge of technology. There are no near-term dividends or buybacks planned. The company is more open to M&A than they have been in a while...The bulk of Laser revenue was at 40nm, but growth is coming from 28nm this year with some 20nm next year...Leakage has been more important in Logic than memory...In LED Ultratech is qualified in 4 of 5 LED chip processing steps and working on getting qualified at the 5th.
Hold-rated Universal Display (Nasdaq: PANL): Our focus on UDC was largely IP and materials. Duksan has withdrawn 2 patent challenges in Korea, but is still challenging 5. The company is getting more comfortable with the Fujifilms IP. It includes emitters and other layers in the stack. We are still unclear how they will monetize it. They arrived at the $105M purchase price through a competitive bidding process, but wouldn't say who else was bidding...Looking forward, UDC is not expecting OLED TVs until the end of 2013 at the earliest and does not expect a printed OLED solution any time soon.
Hold-rated Maxwell Technologies (Nasdaq: MXWL): There was not much incremental from the presentation, but we note that the body language was somewhat more positive than we have seen regarding China’s hybrid bus opportunity, and wind seems to have stabilized. Much investor focus was around future capital raises. There was not much color from management as they do not need capital right now. The company has not formally cancelled the 'at the market' capital raise overhang but has no intention of drawing it down. However the stock does not seem to have many NT catalysts.
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