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28.09.2016 19:45
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Breithorn Urges Kulicke & Soffa to Explore Strategic Alternatives to Address Persistent Undervaluation of Stock
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PR Newswire
NEW YORK, Sept. 28, 2016
NEW YORK, Sept. 28, 2016 /PRNewswire/ -- Breithorn Capital Management ("Breithorn"), a private investment manager and long term shareholder of Kulicke & Soffa Industries ("K&S" or the "Company") (Nasdaq: KLIC) with beneficial ownership of approximately 1.1% of the Company's outstanding common stock, announced that it has delivered a letter to the Company's Board of Directors.
In the letter, Breithorn highlights the Company's favorable fundamental prospects, low valuation and substantial excess cash balance, and expresses concerns with the Board's lack of urgency in addressing poor historical stock performance. Breithorn believes the Company should immediately hire advisors to evaluate strategic alternatives for the business.
The full text of the letter follows:
28 September 2016
Garrett E. Pierce, Chairman
Kulicke and Soffa Industries, Inc.
23A Serangoon North Avenue 5, #01-01
K&S Corporate Headquarters
Singapore 554369
Dear Members of the Board:
As you know, Breithorn Capital Management ("Breithorn") beneficially owns approximately 1.1% of the outstanding shares of Kulicke & Soffa Industries, Inc. ("K&S" or the "Company"). Breithorn is a value-oriented investment manager with a long-term investment horizon, and has been a shareholder of K&S since April 2013.
As we outlined in our letter to you dated December 1, 2015 and in our presentation dated October 27, 2015 (www.breithorn.com), we believe that K&S is a very attractive business. Our view has not changed. The Company maintains a dominant share of the market for wire bonding equipment and continues to generate strong free cash flow. This has enabled K&S to accumulate a net cash balance of $499 million, or $7.09 per share, as of the second quarter. Excluding $75 million of cash required for operations, K&S currently has excess cash of $424 million, or $6.02 per share. The Company has reported consecutive quarters of strong top and bottom line growth that has exceeded consensus estimates. Moreover, we believe future prospects for the business remain strong, with growing demand for both wire bonding and advanced packaging equipment.
Despite positive fundamentals, the Company's stock continues to trade at a deep discount to intrinsic value, in our opinion. We estimate medium-term earnings power to be roughly $1.00 per share excluding any potential upside from the nascent thermo-compression opportunity. After subtracting $6.02 per share of excess cash from the stock price of $12.59, K&S trades at only 6.6x our normalized core earnings power estimate. Given the high quality of the business, we believe fair value for K&S stock is significantly higher than the current price.
K&S shares have also materially underperformed the Company's "Stock Performance Peer Group" listed in the annual report. This underperformance is even more dramatic when compared to BE Semiconductor Industries N.V., which we believe to be the Company's closest competitor.
| | | | | | | | |
| | K&S Stock Performance vs. Management's Selected Peer Group | | | | |||
| | | | Market Cap | Total Return (%) (1) | |||
| | Company Name | Ticker | ($mm) | YTD | 1 YR | 3 YR | 5 YR |
| | Kulicke & Soffa Industries, Inc. | KLIC | 885 | 7.9 | 37.6 | 10.0 | 52.8 |
| | | | | | | | |
| | ASM Pacific Technology Limited | 522-HK | 25,646 | 5.3 | 22.7 | -15.2 | -9.0 |
| | BE Semiconductor Industries N.V. | BESI-NL | 1,193 | 66.9 | 121.5 | 285.4 | 726.5 |
| | Brooks Automation, Inc. | BRKS | 923 | 29.2 | 29.5 | 60.1 | 104.0 |
| | Cohu, Inc. | COHU | 303 | -2.0 | 23.6 | 13.0 | 27.3 |
| | KLA-Tencor Corporation | KLAC | 10,764 | 3.3 | 48.6 | 56.7 | 155.7 |
| | Lam Research Corporation | LRCX | 14,649 | 17.8 | 48.8 | 85.1 | 149.7 |
| | Xcerra Corporation | XCRA | 316 | -1.8 | -1.2 | -11.1 | 9.0 |
| | Shinkawa Ltd. | 6274-JP | 11,540 | 5.9 | 2.3 | -5.0 | 65.9 |
| | Teradyne, Inc. | TER | 4,261 | 3.4 | 23.7 | 32.7 | 91.7 |
| | Ultratech, Inc. | UTEK | 623 | 17.3 | 44.9 | -24.4 | 29.2 Werbung Mehr Nachrichten zur Kulicke & Soffa Industries Inc Aktie kostenlos abonnieren
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