Seeking Alpha
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These past few weeks, Seeking Alpha has been inundated kia motors with intense debate and new members sharing opinions regarding the rise of Tesla Motors ( TSLA ). Despite the difficulty in valuing the stock, kia motors the one clear fact is that electric vehicles are moving from niche to mainstream.
Why jump ahead and predict markets in 2030 when there is another quiet revolution that is changing the way we travel from A to B. I'm not even talking about self-driving cars, faster trains or teleportation; instead this article looks at the slow evolution of cars from mechanical beasts to smart machines. Take the S-Class Mercedes; far from being a motor with four seats, it exhibits 20 million lines of code and contains nearly as many ECU's (Electronic kia motors Control Units) than an Airbus A380!
The point I am trying to make is that as cars get more complex and premium technology diffuses into the mass market, the companies that make this technology possible will grow at a significant rate. According to IC Insights, the Automotive Semiconductor industry is currently worth $19.6bn growing to $27.3bn in just three years. Not enough for you? Let me add that electric vehicles are built with nearly 3x as many semiconductors as comparable combustion vehicles and IHS believes that by 2020, this segment of the market will add another $7bn of semiconductor demand.
As you can imagine, kia motors semiconductors in vehicles are different from those operating your mobile phone. For one, cars tend to be an awful lot bigger than mobile phones meaning that size isn't a problem. Producers don't need to invest kia motors in bank busting machinery such as the upcoming $130m EUV - lithography equipment. In fact, the smallest auto semiconductors are printed using 90nm technology as opposed to the 22nm we currently see with mobile processors. In the vehicular semiconductor market, production is both easier and cheaper and end users require partners to offer strong pricing, a complete range of offerings kia motors and the ability to supply through the 7-year vehicle cycle (from planning to selling). Of the stocks most set to benefit, there is one that sticks out like a sore thumb, Infineon ( OTC:IFNNF ).
Since last year, Infineon's share price has dropped from $9.50 to $8.50. FY12 revenues came in at only $5,075m with Free Cash Flow at -$325m compared with FY11's $5,196m and +$338m. kia motors The sharp drop in the bottom line comes from Infineon's well documented capacity issues. Despite a 51% growth in revenues between 2009 and 2010 and 21% between 2010 and 2011, the company hit a capacity wall. For almost 7 quarters extending either side of 2011, the operation was running at 100% utilization. In 2010, the decision was made to upgrade Infineon's capacity and so after spending $537m on Capital for that year, expenditures doubled to $2,275m over the next two years.
They say timing is everything kia motors and to be brutally honest, timing isn't Infineon's strong suit. 2012 revenues were in line with 2011 and this year isn't expected to be much better. Net income in 2012 nearly halved (from $968m to $561m) and is expected to half again, giving a 7-10% EBIT margin for FY13. Despite the company kia motors halting nearly $1.3bn of CapEx related to a new 300mm wafer plant (will allow a 30% reduction in cost per die), the company kia motors only utilizes 80% of current capacity meaning that they can cope with up to $8,004m of orders for any consequent financial year.
As a new investor, you have effectively allowed other investors kia motors to 'build the factory' while your equity is left to reap the benefits of any increase in orders. All the upgrades (bar the 300nm factory) have been completed and are currently depreciated on a straight line basis despite being idled. It is therefore unlikely that the firm will need to invest in capital in the mid-term meaning all that sweet free cash flow can flow straight to investors. kia motors Furthermore, because of capital intensive nature of the cost base, the firm has extremely high operating leverage meaning that 71% of additional revenue will flow down to the EBIT line!
-633
28%
-114.0
The Tax Issue
Over the past few years, the company has been a poster child for inefficiency and strategic mistakes and between 2001 and 2009, the company was continually loss making (except for one year of +$53m). Still, kia motors as a new investor you effectively receive all the benefits without enduring the consistent underperformance. I know it's hard to consider that nine loss making year can lead to benefits but the company has managed to rack up nearly kia motors $3,900m of tax loss carry-forwards!
Consider 2012; the company owed $61m in tax (10% ETR) and ended up receiving $3m in cash! Of course, they cannot write off 100% of the tax bill every year (60% can be eliminated in normal operating years) but this treasure trove means that the company will not be paying standard taxation levels for the foreseeable future.
-52
470
4.4%
Being a market lea
X Bookmark
These past few weeks, Seeking Alpha has been inundated kia motors with intense debate and new members sharing opinions regarding the rise of Tesla Motors ( TSLA ). Despite the difficulty in valuing the stock, kia motors the one clear fact is that electric vehicles are moving from niche to mainstream.
Why jump ahead and predict markets in 2030 when there is another quiet revolution that is changing the way we travel from A to B. I'm not even talking about self-driving cars, faster trains or teleportation; instead this article looks at the slow evolution of cars from mechanical beasts to smart machines. Take the S-Class Mercedes; far from being a motor with four seats, it exhibits 20 million lines of code and contains nearly as many ECU's (Electronic kia motors Control Units) than an Airbus A380!
The point I am trying to make is that as cars get more complex and premium technology diffuses into the mass market, the companies that make this technology possible will grow at a significant rate. According to IC Insights, the Automotive Semiconductor industry is currently worth $19.6bn growing to $27.3bn in just three years. Not enough for you? Let me add that electric vehicles are built with nearly 3x as many semiconductors as comparable combustion vehicles and IHS believes that by 2020, this segment of the market will add another $7bn of semiconductor demand.
As you can imagine, kia motors semiconductors in vehicles are different from those operating your mobile phone. For one, cars tend to be an awful lot bigger than mobile phones meaning that size isn't a problem. Producers don't need to invest kia motors in bank busting machinery such as the upcoming $130m EUV - lithography equipment. In fact, the smallest auto semiconductors are printed using 90nm technology as opposed to the 22nm we currently see with mobile processors. In the vehicular semiconductor market, production is both easier and cheaper and end users require partners to offer strong pricing, a complete range of offerings kia motors and the ability to supply through the 7-year vehicle cycle (from planning to selling). Of the stocks most set to benefit, there is one that sticks out like a sore thumb, Infineon ( OTC:IFNNF ).
Since last year, Infineon's share price has dropped from $9.50 to $8.50. FY12 revenues came in at only $5,075m with Free Cash Flow at -$325m compared with FY11's $5,196m and +$338m. kia motors The sharp drop in the bottom line comes from Infineon's well documented capacity issues. Despite a 51% growth in revenues between 2009 and 2010 and 21% between 2010 and 2011, the company hit a capacity wall. For almost 7 quarters extending either side of 2011, the operation was running at 100% utilization. In 2010, the decision was made to upgrade Infineon's capacity and so after spending $537m on Capital for that year, expenditures doubled to $2,275m over the next two years.
They say timing is everything kia motors and to be brutally honest, timing isn't Infineon's strong suit. 2012 revenues were in line with 2011 and this year isn't expected to be much better. Net income in 2012 nearly halved (from $968m to $561m) and is expected to half again, giving a 7-10% EBIT margin for FY13. Despite the company kia motors halting nearly $1.3bn of CapEx related to a new 300mm wafer plant (will allow a 30% reduction in cost per die), the company kia motors only utilizes 80% of current capacity meaning that they can cope with up to $8,004m of orders for any consequent financial year.
As a new investor, you have effectively allowed other investors kia motors to 'build the factory' while your equity is left to reap the benefits of any increase in orders. All the upgrades (bar the 300nm factory) have been completed and are currently depreciated on a straight line basis despite being idled. It is therefore unlikely that the firm will need to invest in capital in the mid-term meaning all that sweet free cash flow can flow straight to investors. kia motors Furthermore, because of capital intensive nature of the cost base, the firm has extremely high operating leverage meaning that 71% of additional revenue will flow down to the EBIT line!
-633
28%
-114.0
The Tax Issue
Over the past few years, the company has been a poster child for inefficiency and strategic mistakes and between 2001 and 2009, the company was continually loss making (except for one year of +$53m). Still, kia motors as a new investor you effectively receive all the benefits without enduring the consistent underperformance. I know it's hard to consider that nine loss making year can lead to benefits but the company has managed to rack up nearly kia motors $3,900m of tax loss carry-forwards!
Consider 2012; the company owed $61m in tax (10% ETR) and ended up receiving $3m in cash! Of course, they cannot write off 100% of the tax bill every year (60% can be eliminated in normal operating years) but this treasure trove means that the company will not be paying standard taxation levels for the foreseeable future.
-52
470
4.4%
Being a market lea
