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Research Tree provides access to ongoing research coverage, media content and regulatory news on STMicroelectronics. We currently have 111 research reports from 4 professional analysts.
STM’s Q3 publication was reassuring, in line or slightly above expectations for the Q3 numbers, while STM was a bit more bullish for Q4. As a result, AMS has been the main growth contributor while Automotive’s recovery turned to be weaker. However, the company managed to protect is profitability well and guided to above consensus for Q4 19.
STM has reported solid figures during Q2 and growth is expected to accelerate over the second half of the year. Despite this, the company has trimmed its revenue guidance by 1.3% on the back of a softer than expected recovery. However, we continue to recommend STM as we believe the company is suited for long-term growth while offering a discount compared to its peers.
STM presented its CMD, the occasion for the company to share its strong confidence in its ability to fulfill all its guidance for 2019. As expected, this performance will be achieved thanks to good developments in Automotive, Industry, and new platform launches in Smartphone. The main surprise has been the ambitious mid-term targets which have been provided. STM is on its way to transforming a wobbly situation in 2015 to a much brighter financial performance.
STM missed the lowest top-line estimates but managed to protect its profitability. The key message of this presentation has been management’s view regarding the expected recovery in Q2 as well as the growth acceleration in H2.
STM delivered a solid performance over Q4, in which we witnessed an expansion of profitability and cash flow from operations. We see a little disappointment in the outlook as the company’s guidance for Q1 19 was worse than expected. However, the analysts conference call that followed gave a very bullish view for the year to come.
STM published its Q3 revenue which was globally in line with consensus, however, the market paid no attention to it. Q3 revenues were up 18.1% yoy to $2.52bn (above consensus), representing sequential growth of +11.2% qoq, mainly driven by strong growth in Imaging, Power Discrete and Automotive products. Year-on-year sales to OEMs and Distribution were up +21.6% and +11.2%, respectively. The gross margin has slightly lowered to 39.8%, below the 40% midpoint guidance, mainly due to the product mix. Gross profit is still strong, standing at $1bn, or an 18.6% increase. The Q3 operating margin is up by 270bp yoy to 15.8%. Cash generation is strong, with free cash flow at $114m, compared with $50m last year and an outflow of $40m in the previous quarter. Net income increased sharply by +56.7% yoy to $369m (well above the estimate; $326.8m for consensus). EPS ends up above consensus at $0.41 (vs $0.36). By division, the Analog, MEMS & Sensors (AMS) division is the best performer with 36.7% yoy revenue growth and a 17.5% operating margin (vs 10.9% in Q3 17). Automotive and Discrete Group (ADG) saw 16.3% revenue growth with a 12.8% (vs 10.9% in Q3 17) operating margin. Microcontrollers & Digital ICs (MDG) revenue growth stood at +2.5% with a reduced operating margin of 16.6% from 18% in the same quarter last year.
STM reported its Q2 results, with key figures broadly in line with consensus expectations and in line with the group’s guidance. Revenues grew by 18% yoy while the operating profit jumped by 60% yoy. The group’s performance was driven by each activity but more specifically by Microcontrollers and Digital ICs. For Q3, the group expects revenues to grow by 10% sequentially vs 2.2% between Q1 and Q2 while the gross margin is still expected to be close to 40%.
STM reported Q1 results slightly below expectations but strongly growing yoy with revenues up 22% while the gross margin reached 39.9% from 37.7%, and the net income more than doubled yoy. The group announced a cash dividend of $0.24/share for FY17. Despite weaker demand in smartphones, the group expects solid H1 yoy growth supported by strong sales trends in Automotive, Industrial and IoT applications. For H2, the group is relatively confident with a strong backlog and demand.
A strong set of results, boosted by the iPhone X and an accelerating momentum in Automotive, leads to a record operating margin. However, the iPhone X may suffer from production cuts in the coming quarters, while currency effects may negatively impact profitability.
STMicroelectronics reported Q3 revenues of $2,136m, up 11.1% sequentially and 18.9% yoy. Every business unit witnessed an acceleration in growth and broke the double-digit mark: AMG was once again the strongest contributor ($502m, +24.6%), followed by MDG ($701m, +19.4%) and ADG ($775m, +10.1%). The Others business remained once again on a strong ascending path ($158m, +113.5% sequentially and +53.4% yoy) thanks to the Imaging business. The gross margin reached 39.6%, a sequential increase of 130bp and 380bp yoy. Opex came in at $567m, a $9m increase vs. the previous quarter. This led to an operating profit of $278m, corresponding to a 13% operating margin, and to net income of $238m. Concerning the fourth quarter, the company forecasts a 10% increase sequentially at the mid-point, and a gross margin of 39.9%. This should lead to a FY17 growth of 18% vs. 14% previously.
STMicroelectronics reported Q2 revenues of $1,923m, up 5.6% sequentially and 12.9% yoy. Every business unit grew yoy, AMG being once again the strongest contributor ($482m, +28.1%), followed by MDG ($612m, +10.1%) and ADG ($755m, +4.7%). The Others business remains once again on a strong ascending path ($74m, -3.9% sequentially, +48% yoy) thanks to the Imaging business showing a strong momentum. The gross margin reached 38.3%, a sequential increase of 70bp and 440bp yoy. Opex came in at $558m, a $2m increase vs. the previous quarter. This led to an operating profit of $178m, corresponding to a 9.3% operating margin, and to net income of $178m. Concerning the third quarter, the company forecasts a 9% increase sequentially at the mid-point, and a gross margin of 39%. The H2 objectives have also been confirmed: the operating margin will cross the double-digit mark, and revenue growth in FY17 should grow by 14%.
STMicroelectronics reported Q1 revenues of $1,821m, down 2% sequentially and up 12.9% yoy. Every business unit grew yoy, AMG being the strongest contributor ($443m, +20.1%), followed by MDG ($716m, +11.5%) and ADG ($708m, +5.5%). The Others business remains once again on a strong ascending path ($77m, -20.6% sequentially, +87.8% yoy) thanks to the Imaging business doubling compared to a year ago. The gross margin reached 37.6%, a sequential increase of 10bp and 420bp yoy. Opex came in at $556m, a $13m decrease vs. the previous quarter. This led to an operating profit of $129m, corresponding to a 7.1% operating margin, and to net income of $108m. Concerning the first quarter of the year, the company forecasts a 5% increase sequentially at the mid-point, and a gross margin of 38.1%.
STMicroelectronics reported Q4 revenues of $1,859m, up 3.5% sequentially and 11.5% yoy. Every business unit grew sequentially, the strongest being AMG (+8.2%, $436m). In yoy figures, AMG is also the strongest contributor (+17.8%), followed by ADG (+12.4%, $716m), while MDG remains the laggard ($610m, -0.7%). The Others business remains on a strong ascending path ($97m, -5.9 sequentially, +106.4% yoy). The gross margin reached 37.5%, a sequential increase of 170bp including a negative impact of 20bp of unused capacity charges. Opex reached $569m, a $16m increase vs. the previous quarter. This led to an operating profit of $129m, corresponding to a 6.9% operating margin, and to a net income of $112m. Concerning the first quarter of the year, the company forecasts a 2.4% decrease sequentially at the midpoint, reflecting a better than normal seasonality, and a gross margin of 37%. The company also announced a 2017 capex target of $1-1.1bn.
STMicroemectronics reported Q3 revenues of $1,797m, up 5.5% sequentially and 1.9% yoy. Although every business apart from ADG (-2.4%) grew sequentially (7.2% for Analog & MEMS, 5.6% for Microcontrollers & Digital), in yoy figures the main business units displayed a slight decrease in revenues, most of the growth coming from the Other business unit ($103m, +106% sequentially and 80.1% yoy). The gross margin reached 35.8%, a sequential increase of 190bp despite a negative impact of 60bp of unused capacity charges. Opex reached $553m, a moderate increase vs. the previous quarter, while the opex net of grants, impairments and restructuring decreased by $23m. This led to an operating profit of $90m (corresponding to a 5% operating margin), and to a net income of $71m. Concerning the second quarter of the year, the company forecasts a 3.2% increase sequentially at the midpoint, and a gross margin of 37%.
STMicroemectronics reported Q1 revenues of $1,703m, up 5.6% sequentially but down 3.2% yoy. Every business grew sequentially (1.9% for Analog & MEMS, 4.5% for Microcontrollers & Digital and 7.5% for Automotive & Discrete), but Analog & MEMS witnessed a 15.5% drop yoy, while the other businesses were relatively flat. The gross margin reached 33.9%, a sequential increase of 50bp despite a negative impact of 45bp of unused capacity charges. Opex reached $549m, a net decrease vs. the previous quarter, while the opex net of grants, impairment and restructuring decreased by $6m. This led to an operating profit of $28m, and a net income of $23m. Concerning the second quarter of the year, the company forecasts a 5.5% increase sequentially at the midpoint, and a gross margin of 35.5%.
Research Tree provides access to ongoing research coverage, media content and regulatory news on STMicroelectronics. We currently have 111 research reports from 4 professional analysts.
Sopheon’s trading update confirms that some of its customers are delaying decisions on contracts because of uncertainty prevailing in their own markets and businesses. At the time of the interim results, Sopheon’s management expected a return to a stronger second half weighting for the full year numbers. That is still the case and the Group continues to highlight the strength of the new business pipeline and a higher proportion of SaaS (Software as a Service) opportunities. Nevertheless, the anticipated signings of a number of opportunities have now slipped into 2020. With revenue visibility currently at $28 million, we conservatively move our current year revenue estimate down 13% to $29 million with a knock-on effect on EBITDA (down 29%). We also assume that buying cycles remain extended during FY 2020E and therefore take a prudent view on our numbers for that year as well with revenue and Adj. EBITDA estimates reducing by 10% and 40% respectively.
The Character Group plc* (CCT.L, 360p/£80.2m) | Blackbird plc* (BIRD.L, 15p/£42.8m) |Gfinity plc* (GFIN.L, 3.90p/£18.5m)
Companies: CCT BIRD GFIN
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
Companies: ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP ESRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
Bigblu’s trading statement confirmed an H2 performance in line with expectations. Actions to cleanse the customer base should yield operational benefits over time and the above consensus year-end net debt figure (£14m vs £9m) primarily reflected a Brexit-driven inventory build that should reverse in the next few months. Bigblu remains confident in FY20 consensus (see below), which implies an acceleration in revenue growth.
Companies: Bigblu Broadband
PTY is a brand leader in specialist consulting and strategic recruitment linked to data services. As a leading player in its field, the company is now seizing the opportunity to grow profits by lifting its high-value data service activities as a share of the mix. Recent H1 results reflected the significant transition that PTY is going through, while also heralding better numbers further down the line as the mix moves towards higher value services (also helped by success in removing a net £1.2m costs). Complementary activities directly linked to the core data focus are being developed. So far in this process, the company has seen a bigger reorganisation programme than originally anticipated – but has also highlighted the extra potential that this is generating. The company’s target market of data services is estimated at $10bn-plus and growing rapidly, while early signs from PTY’s change programme indicate the potential for meaningful client acquisition, with new clients such as Compass reflecting the opportunity for the business to scale up substantially. The recent announcement of Heads of Terms reached with a partner, Integumen plc, in delivering intelligent data management systems, is potentially a major step forward (to be finalised by 18/12).
Companies: Parity Group
Disney+ hits 22m mobile users, SoftBank backed firm downsizes IPO, German mobile carrier selects Huawei
Companies: ENET 7DIG EVRH ZOO ZOO AMO BOOM MIRA MWE
CentralNic has announced the acquisition of Team Internet for a total consideration of $48m. The acquisition will be financed in part by a further €40m bond issue under identical terms to the €50m issue announced on 23 May 2019. Team Internet operates a ‘domain monetisation’ platform, allowing domain name owners to monetise dormant domains to generate recurring income to offset renewal fees and earn a profit. This provides a complimentary service to existing CNIC services: clients currently pay CentralNic subscription fees to register and renew domain names. Team Internet had revenues of $66.7m in the 12 months to June 2019, with EBITDA of $10.6m. We expect this transaction to have an immaterial impact to 2019E due to timing and be 43.8% accretive to 2020E earnings. Post completion, we estimate net debt:EBITDA will be 2.1x in 2020E falling to 1.6x in 2021E.
Companies: Centralnic Group
We continue to take a selective stance on stocks within the small cap Technology space. The sector’s equity performance was lacklustre over 2019, rising 4% and keeping pace with the All-Share index (relative to multi-year periods of outperformance) as investors took a cautious stance on geopolitical and macro risk. We believe cautious sentiment is likely to dominate trade during the first half of 2020 and maintain our preference for consumeroriented players, consistent with our Arden Thematic Technology framework. Our top picks for 2020 are CDM, EVRH*, SUMO and VNET.
Companies: CALL CDM FDEV KWS SUMO TM17
Pelatro has won a landmark contract with one of the biggest telcos in the world; a major global operator and household name – an outstanding achievement for a small newcomer in the market. After careful deliberation, it has been taken as another recurring revenue/gain-share deal (a fourth this year) rather than a large upfront licence. As Pelatro matures and feels more established, management can afford to take a longer-term view, sacrificing short-term growth and profit for the stability of recurring, incremental revenue streams. A likely $7m of upfront licence has now been foregone in these deals this year and thus FY 2019 revenue guidance is cut to $6.5m (still up 6% YoY). The impact of this pivot to much higher quality revenue should not hide remarkable performance this year. For comparison, had these been taken as licences, FY 2019 sales would have been $13.5m; 28% ahead of our $10.5m forecast set mid-2018, and 121% YoY growth on a comparable basis. That follows 161% and 95% YoY growth in FY 2017 and 2018 respectively. This breakthrough win comes on top of consistently strong sales growth and the increasing quality of earnings, and we reiterate our 125p TP.
Prelims reveal continued progress, particularly within Vicon, where sales grew an impressive 16% y/y, in turn driven by success within both new and existing verticals and so consistent with strategic objectives. Relative to forecasts, sales of £35.4m (+12% y/y) are in line and so too is adj. PBT of £5.5m, following continued investment and also IFRS 15 adoption. We leave forecasts essentially unchanged, believing the drivers for both divisions remain firmly intact and indeed reaffirmed, following an excellent FY’19, particularly in Engineering and ‘Adjacent Verticals’ within Vicon. On valuation, we continue to apply a SOTP methodology, reflecting both Vicon’s industry leading position and cash generative qualities and further, Yotta’s growing ARR in our fair value calculation. This arrives at 108p, implying some 20% upside.
Companies: Oxford Metrics
Interims are in line with the October trading update and unchanged forecasts, with revenue growth +5% to £4.4m, and £5.2m gross cash. The reduction in opex continues to improve profitability, delivering a 1H operating profit for the first time since September 2013, even as contract wins continue from new and existing customers and the customer profile reiterates the quality of the software. Eighteen months after the arrival of CEO Klaas van der Leest, the improved performance has clearly become a trend, and the group’s confidence is expressed in targeted investment to accommodate channel sales and co-ordinate centralised R&D to a clear road map. The horizon for Intercede brightened dramatically at prelims in June when the two-year recovery plan was delivered in a year – now the sun appears to be coming up. 80p target reiterated.
Companies: Intercede Group
With FY19 in line with its targets, Idox is ready to continue the process of shifting to a recurring or SaaS revenue model over the coming years. Today’s trading update points to end Oct run-rate ARR of £38.9m, up 16% organic yoy, with a contracted order book of £12.1m up 29% underpinning the outlook for continued growth. We expect the shift to a cloud-first, SaaS revenue model will both accelerate growth and reduce costs. This makes the forward FCF yield of some 7% noteworthy.
As noted in the trading update, H1 was in line with expectations. It highlighted that this year will be particularly H2-weighted, with £8.8m sales in H1 delivering a small Adj. PBT. The expectation of a record H2 is underpinned by substantial annual contract renewals from licences signed in H2 LY; strong visibility on new contracts due to initiate in H2; and a significant pipeline of new business in negotiation with existing clients who continue to derive substantial benefits from D4t4’s data management solutions. We reiterate our FY forecasts and TP.
Companies: D4T4 Solutions