Jefferies Comments, Lowers Numbers for SemiLEDS (LEDS) on Q4 Results; Says Shift to 35-MM Chip Increased Volume, Squeezed Margins

November 9, 2011 11:25 AM EST
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Price: $19.82 -0.9%

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Jefferies issued comments on SemiLEDS (Nasdaq: LEDS) following fourth-quarter results. The firm maintained a Hold rating, and lowered it's price target about 20 percent from $5 to $4 per share.

SemiLEDS reported a pro forma loss of 49 cents per share and revenue of $5.3 million, compared with Jefferies view for a loss of 20 cents per share and revenue of $5.9 million. Gross margin, ex items, was 7.9 percent.

In the quarter, SemiLEDS reported an increase in volume while gross margins collapsed 93 percent. Jefferies notes that, "part of the reason for volume pick up and pricing decline was due to Semileds’ strategy shift to produce a small size (35mil) chip in order to target the indoor lighting market. The 35 mil chip has lower ASP and lower margin but can increase volume and absorb fixed cost." Jefferies also expects minimal volume contribution from high-brightness i-Do product ahead of any meaningful outdoor lighting demand increase.

Though SemiLEDS said that the outlook for its first-quarter 2012 improved, Jefferies notes that two key projects -- the Foshan government’s plan to upgrade 220,000 street lights and the Guangdong province EMC (Energy Management Company) contract -- are currently on hold while waiting for the central government's subsidy to kick in. Jefferies believes the subsidy is likely to be announced this week, but no assurances can be made.

Finally, on chip sales, Jefferies commented, "Semileds chip sales were 54 percent of total revenue and component sales were 29%. [Sequential] changes of chip/component sales were (11) percent / 2 percent vs. (31) percent / (63) percent in Q311 and (47) percent/12 percent in Q211."

On results, Jefferies increased some loss estimates. Fiscal 2011 moves from (32) cents per share to (79) cents per share, and 2012 from earnings of 10 cents per share to a loss of 76 cents per share. For 2012, first- through fourth-quarter per share eatimates were lowered from (8), (2), 7, and 4 cents per share to (28), (18), (16), and (13) cents per share, respectively.
For an analyst ratings summary and ratings history on SemiLEDs Corporation click here. For more ratings news on SemiLEDs Corporation click here.

Shares of SemiLEDs Corporation closed at $3.82 yesterday.


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