AMKR - Sector: Technology --- Industry: Semiconductor - Integrated Circuits

[la-onda]

additional information regarding AMKR & IMOS review 

[David Randolph]

Hi La-onda, thanks for the info but I think it isn't updated, for example, it says AMKR's operating margin is 13.9%, but on Q3 it was 23.7%.

AMKR didn't release any news over the past couple of weeks and the stock continues to trade within the $9.45 - $10.5 range.

I'll continue holding this way undervalued (as you can see on the rest of this thread) Semiconductor company.

[David Randolph]

AMKR is doing its best to shake all weak hands out of it before resuming its bullish trend. Today was symptomatic, with the stock breaking the $9.45 support on an intraday basis and then clawing back up to close 1.6% higher on the session.

Volume ticked up to more than 3 million shares. There was this positive press release out, but at first sight it doesn't look all that much significant:

• Amkor Licenses Lead-Free Wafer Bumping Technology to AMD
Business Wire (Tue 7:30am)

What is significant is the recent turnaround in fundamentals, from big losses to big profits. The company already made an EPS of $0.59 this year and analysts expect $0.95 for the full 2006. If this materializes it will put the stock trading with an earnings multiple of 10.3, and the Semiconductor - Integrated Circuits average is 29.

There are some discrepancies on estimates, for example, 4th quarter estimates are for $0.22 EPS only, and that would put fiscal 2006 EPS at $0.81, instead of $0.95. Yet, even if the company only makes $0.81, the earnings multiple would then be 12, still way below the industry average of 29.

This company is making all the right steps, moving operations to China and Singapore:

«During the quarter we commenced operations in our new Singapore wafer bump factory and our new factory in Shanghai. Fixed costs associated with these new factories should be absorbed as we build revenue over the next several quarters.»

More from their latest 10-Q form:

«Our third quarter net income was $52.8 million, or $0.27 per diluted share, versus a net loss in the third quarter of 2005 of $(19.5) million, or ($0.11) per share. In the three months ended September 30, 2006, sales increased $164.2 million or 29.9% to $713.8 million from $549.6 million in the three months ended September 30, 2005. The sales growth was driven by strong demand for high performance applications, cell phones and other portable devices. During the third quarter of 2006, we experienced strong growth in flip chip and 3D packaging services and test services which is consistent with the investments we made in these areas over the past two years.»

This is an undervalued company benefiting from strong world economic growth. I think it is worth $30 a share with the current fundamentals, as you can see on the rest of this thread.

I'll keep on studying and holding AMKR.

[David Randolph]

Nothing happened today on AMKR. Low volume and small intraday range. No news out. I'll continue holding. When stocks mark time I do the same.

[David Randolph]

AMKR closed a touch below the $9.45 support level. You know how I think the stock is undervalued, so I believe the current correction is just a normal consolidation phase.

I compare this consolidation with the previous one, as you can see on the chart below. They're pretty similar (even more if I use semi-log scale, but I prefer normal scale). My fundamental assessment of the stock, as you can read on the initial analysis, is bullish, so I continue to expect a similar outcome as the one that happened after zone 1 on the chart.

Despite the recent share price weakness, the chart is still bullish and there wasn't any change in the fundamentals. The current correction is healthy and to be expected. I'll continue holding AMKR.

[David Randolph]

Here's a presentation from AMKR's website that may help us understand their business a bit better:

http://www.amkor.com/about/06Q3_Corporate_Presentation.pdf

Fundamentally the stock is very attractive. Technically it is still in consolidation mode after running 100% in just two months.

I'll continue holding AMKR.

[David Randolph]

Nice positive reaction to the $9.29 short term support level, bringing the stock back above $9.45. I'll continue holding AMKR.

[David Randolph]

AMKR had a small day, both in terms of intraday range and volume. But still, a 1.06% rise on the day, which I welcome. We have the 10 days SMA providing a bit of a short term resistance, perhaps waiting for the 50 days SMA to catch up.

Fundamental analysis (please read the initial analysis) tells me the stock will make a move above $12 when this consolidation phase is over.

I'll continue holding AMKR.

[David Randolph]

AMKR continues to spend some time around $9.50 as it waits for the 50 days SMA to catch up. I expect a white marubozu anytime soon, I need to sit tight and keep on holding the stock.

Not as easy as it looks to find attractive long term stocks as AMKR. 

[David Randolph]

The graph below partially explains why AMKR is undervalued and bound to go higher after the current consolidation phase ends:



You can see how revenues have been growing on a quarterly basis (3Q was the best quarter in the company's history) and gross margin has been kept stable around 35%. This means growth has been well handled by AMKR's management.

Comparing AMKR's growth with its industry (Semiconductor - Integrated Circuits) average, it's hard, if not impossible, to explain the discount the stock is trading, when considering the Price to Sales Ratio differential.

The stock doubled over the last three months. So, given the fundamentals, I believe the current share price weakness is just due to short term profit taking. When this consolidation is over, perhaps when the stock touches its ascending 50 days simple moving average, I see it running to $12 or more.

I'll continue holding AMKR.

[David Randolph]

Finally, the long awaited AMKR's bull phase seems to have started. If the stock is able to close above $10.50 the sky will be clear for a run to $12 - $13 over the short/medium term.

I believe, given the fundamentals, this will be outcome.

[David Randolph]

Nothing new on AMKR today, the stock was up 0.91% and I'll continue holding.

[David Randolph]

AMKR came down a bit to touch the 10 days SMA (green on the chart below). No news out since December 19th. I'll continue holding the stock.

[la-onda]

this chart looks very promising, even if I am generally bearish, I have bought AMKR
last week.

cheers
O.

[David Randolph]

this chart looks very promising, even if I am generally bearish, I have bought AMKR
last week.

cheers
O.

You did well La-Onda, congrats

I think the time to be bearish is when the market starts heading down on good news for the US economy, not when, as it has been happening, the market is going up in the face of negative expectations for consumer spending.

Economist's expectations are for a soft landing as the best case scenario. I believe people will be positively surprised going forward. The market has been telling that since the July lows.

Of course, corrections, small and big, may occur, but we're in a bull market as any long term chart of the S&P 500 shows. I guess Americans are a little puzzled to see the rest of the world (mainly China), coming up as a very relevant player in the global economy. They feel they will lose their leadership role. But the global economy isn't an industry, everybody gains when another country joins the development road.

In short, the bull case is: there are 3 billion new consumers and investors showing up in the global economy. This is the first time this happens in the world history, until now, the Chinese, the Indians, the Russians and the South Americans were relatively incipient in economic terms. Not anymore. This is a huge breakthrough in the world economic history, and every country in the world will benefit (some more than others, but the sum of parts is bigger than the parts). I believe the US economy, especially US businesses which have this natural capitalistic tendency to go global, will be big gainers of the current global development process.

I wouldn't want to miss what can be an even bigger bull market than the last one, that lasted from 1982 to 2000, by being "somewhat" bearish. But of course I respect and like to listen to other's views.

AMKR chart looks great. Fundamentals too. Analysts are expecting EPS of $0.95 for 2006, so the trailing earnings multiple is something like 10.7. The Semiconductor - Integrated Circuits industry earnings multiple average is 30. It couldn't be easier, I guess, AMKR stock should triple to be valued at average.

I'll continue holding AMKR.