Orbotech Ltd. (ORBK) research, news, and more from GeoInvesting

Company description

Tue, 03 Aug 2010 04:00:00 GMT

Orbotech is principally engaged in the design, development, manufacture, marketing and service of yield-enhancing and production solutions for specialized applications in the supply chain of the electronics industry. The Company’s products include automated optical inspection (AOI), production and process control systems for printed circuit boards (PCBs) and AOI, test and repair systems for flat panel displays (FPDs). The Company also markets computer-aided manufacturing (CAM) and engineering solutions for PCB production. In addition, through its subsidiary, Orbograph Ltd., the Company develops and markets character recognition solutions to banks and other financial institutions, and has developed a proprietary technology for use, among other things, in web-based, location-independent data entry for check and forms processing; and, through its subsidiaries, Orbotech Medical Denmark A/S and Orbotech Medical Solutions Ltd., is engaged in the research and development, manufacture and sale of specialized products for application in medical nuclear imaging. Of Orbotech’s employees, more than one quarter are scientists and engineers, who integrate their multi-disciplinary knowledge, talents and skills to develop and provide sophisticated solutions and technologies designed to meet customers’ long-term needs. Orbotech maintains its corporate headquarters, executive and registered offices and principal research and development, engineering and manufacturing facilities in Israel. The Company’s extensive network of marketing, sales and customer support teams, located in over 35 offices throughout North America, Europe, the Pacific Rim, China and Japan, delivers its knowledge and expertise directly to customers the world over.

Research

Fri, 29 Jul 2016 14:02:52 GMT

Locked In Gains In ORBK ($28.82)

Yesterday, via premium tweet we stated we have locked in gains from our 6/30/2016 information arbitrage alert in ORBK. We initiated our position when the stock was trading at $25 on the heels of a recent secondary stock offering. Shares were trading roughly 10% below the offering price of $26, and we stated:

“We believe that ORBK’s pullback from around $28 when it announced its secondary offering is unwarranted. While we calculate the transaction to issue shares and pay down debt to be only slightly accretive to EPS ($0.01 to $0.02 per share) on annual basis, we believe that after looking closely at the deal other bullish factors exist that could help lift shares back to their 52 week high of around $29.00 or a P/E 11.7 on analyst 2016 EPS estimates of $2.47.”

Research

Thu, 30 Jun 2016 16:48:50 GMT

Further Due Diligence On ORBK; Initiated Long Position

As disclosed to you on March 14, 2016 we recently added ORBK to our big cap buy on pullback . Yesterday, via premium tweet we stated:

Taking a hard look at $ORBK from big cap pullback screen.

$ORBK shares selling below recent secondary price of $26. Deal may be accretive. Need to determine Brexit risk. Calling mgmt. today

$ORBK stock still down 10% since secondary was announced

We were able to have a quick call with the Company’s IR. After our preliminary due diligence we decided to add the stock to the “mock buy on pullback portfolio 2.0” that we created on May 31, 2016. Here is a look at our ORBK pullback note:

After a successful run with ORBK in May 2015, the stock crept its way back onto our radar. We bought ORBK in early May 2015 due to muted reaction to strong Q1 results. Shares quickly rose to $22 in mid June where we closed out our trade. ORBK ended up seeing its 2015 EPS more than double to $2.09. Analysts expect EPS to grow $2.47 and $2.82 over the next two years. While not huge growth, shares are trading at a P/E of around 10 on 2016 EPS estimates (although ORBK’s industry does not generally carry a hi P/E (diversified electronics). However, shares recently plummeted 7 % on June 10th, 2016 on the heels of a secondary offering that de-risks the balance sheet and leads to EPS accretion. Trigger price $25.50.

"We are very pleased to have successfully executed this series of financing transactions which, we believe, will immediately increase shareholder value. The significant reduction in interest expense, net of the shares issued, is expected to be accretive to earnings per share on both pro forma and prospective bases," stated Ran Bareket, the Company's Chief Financial Officer. "The reduction in both interest expense and leverage on our balance sheet is considerable. In addition, the new debt agreement is secured only by the assets of the Company's SPTS subsidiaries, whereas our previous Credit Agreement was secured by Company assets worldwide. As a result, we have substantially improved the strength of our balance sheet, seized upon current favorable conditions in the capital markets and enhanced operating flexibility for future growth opportunities."

We believe that ORBK’s pullback from around $28 when it announced its secondary offering is unwarranted. While we calculate the transaction to issue shares and pay down debt to be only slightly accretive to EPS ($0.01 to $0.02 per share) on annual basis, we believe that after looking closely at the deal other bullish factors exist that could help lift shares back to their 52 week high of around $29.00 or a P/E 11.7 on analyst 2016 EPS estimates of $2.47.

These factors include:

Significantly improves the risk profile of the Company which could eventually lead to expansion of its valuation multiples. Specifically, the new loans as part of the transaction are only secured by its U.K. subsidiary as opposed to the entire Company’s assets per the JP Morgan loan it paid off.
We believe part of the reason management consummated these financial transactions is to put the Company in better position to use its balance sheet to explore new growth opportunities through potential acquisitions. One of the reasons we were a little hesitant about buying ORBK in the past was although growth had been respectable, we did not see much room for outsized growth from its current businesses.

We also explored the Company’s “exposure risk” to Brexit because it has a subsidiary in the U.K. and close to 14% of overall sales originate in Europe. Actually, it appears that expenses from its U.K. operations are recorded in British Pounds, while its revenues are in U.S. dollars. This means that a weakening of the U.K. currency could actually benefit ORBK’s bottom line or at least offset some of the negative currency impacts from potentially lower demand for its products from the U.K market.

Caveat:

Investors need to keep in mind, even though we believe “Brexit” is a non-factor in the near term for ORBK; the fact that the Company does have exposure to Europe and the U.K. in general could make shares volatile due to headline risk.

Call to Action

Tue, 28 Jun 2016 16:11:13 GMT

ORBK ($23.99) – After a successful run with ORBK in May 2015, the stock crept its way back onto our radar. We bought ORBK in early May 2015 due to muted reaction to strong Q1 results. Shares quickly rose to $22 in mid June where we closed out our trade. ORBK ended up seeing its 2015 EPS more than double to $2.09. Analysts expect EPS to grow $2.47 and $2.82 over the next two years. While not huge growth, shares are trading at a P/E of around 10 on 2016 EPS estimates (although ORBK’s industry does not generally carry a hi P/E (diversified electronics). However, shares recently plummeted 7 % on June 10th, 2016 on the heels of a secondary offering that de-risks the balance sheet and leads to EPS accretion. Trigger price $25.50.

"We are very pleased to have successfully executed this series of financing transactions which, we believe, will immediately increase shareholder value. The significant reduction in interest expense, net of the shares issued, is expected to be accretive to earnings per share on both pro forma and prospective bases," stated Ran Bareket, the Company's Chief Financial Officer. "The reduction in both interest expense and leverage on our balance sheet is considerable. In addition, the new debt agreement is secured only by the assets of the Company's SPTS subsidiaries, whereas our previous Credit Agreement was secured by Company assets worldwide. As a result, we have substantially improved the strength of our balance sheet, seized upon current favorable conditions in the capital markets and enhanced operating flexibility for future growth opportunities."

Research

Tue, 19 May 2015 04:00:00 GMT

Looking to sell 10% of our $ORBK long position

On May 1, 2015 we listed ourreasons for tracking ORBK and initiated a long position at $19.38. On May 5th 2015, we stated:

“after further due diligence, we have learned that there is an additional caveat to the story in that the company has limited visibility beyond one quarter out. We are still long this name, but we are keeping a cautious eye on the company.”

Shares are up over 9% since our May 1 call to action. We will look to sell roughly 10% of our long position.

Research

Fri, 01 May 2015 04:00:00 GMT

Initiated Position in $ORBK

Yesterday via premium tweet we stated:

“We see muted reaction to strong Q1 2015 earnings for $ORBK as buying opportunity. Starting to build long position. #GeoCallToAction”

We have initiated a small position . We plan to interview managment next week and listen to the Q1 2015 conference call to determine if we will need to make any changes to our bullish assumptions. Here are our reasons for tracking:

ORBK ($17.79) - provides yield-enhancing and production solutions for printed circuit boards (PCBs), liquid crystal displays (LCDs), and semiconductor devices. Our reasons for tracking are:

Just reported strong Q1 2015 results
- Q1 2015 revenues of $185 million vs $105 million in the prior year and ahead of analyst estimates of $181.2
- Q1 2015 non-GAAP EPS of $0.48 vs $0.19 in the prior year and ahead of analyst estimates of $0.43
- The company provided Q2 2015 revenue guidance of $185 to $193 million, ahead of analyst Q2 2015 revenue estimates of $184.8 million.
We like companies that provide products/services to help their customers run a more efficient ship, especially in competitive environments. This often can lead itself to a highly recurring revenue business model.

Q1 press release quote:

"Our flat panel display business and semiconductor device division continued to perform strongly, reflecting healthy demand trends across product lines and customer segments. Consumer electronics is becoming an increasingly indispensable part of modern life, requiring ever smaller, thinner, faster, more flexible and even wearable devices. This inevitably gives rise to escalating manufacturing challenges, which Orbotech's solutions are designed to solve, supporting both our customers and leading consumer electronics designers. The breadth and depth of our product offering, especially after the SPTS acquisition, enables us to benefit from the continually evolving and complex world of electronics."

The company has logged in 3 quarters of strong sales and non-GAAP EPS growth.
Sales and EPS are expected to grow 26% and 131% respectably in 2015.
Analyst just increased price target to $24.

Caveat:

While strong top and bottom line growth are expected to continue for Q2 2105, growth is expected to slow in the second half of the year. Furthermore, growth is expected to moderate in 2016. However, the company’s recent performance of exceeding analyst estimates and its acquisition strategy may be enough to provide shares with support.

Reasons For Tracking

Fri, 01 May 2015 04:00:00 GMT

Initiated Position in $ORBK

Yesterday via premium tweet we stated:

“We see muted reaction to strong Q1 2015 earnings for $ORBK as buying opportunity. Starting to build long position. #GeoCallToAction”

ORBK ($17.79) - provides yield-enhancing and production solutions for printed circuit boards (PCBs), liquid crystal displays (LCDs), and semiconductor devices. Our reasons for tracking are:

Just reported strong Q1 2015 results
- Q1 2015 revenues of $185 million vs $105 million in the prior year and ahead of analyst estimates of $181.2
- Q1 2015 non-GAAP EPS of $0.48 vs $0.19 in the prior year and ahead of analyst estimates of $0.43
- The company provided Q2 2015 revenue guidance of $185 to $193 million, ahead of analyst Q2 2015 revenue estimates of $184.8 million.
We like companies that provide products/services to help their customers run a more efficient ship, especially in competitive environments. This often can lead itself to a highly recurring revenue business model.

Q1 press release quote:

The company has logged in 3 quarters of strong sales and non-GAAP EPS growth.
Sales and EPS are expected to grow 26% and 131% respectably in 2015.
Analyst just increased price target to $24.

Caveat:

While strong top and bottom line growth are expected to continue for Q2 2105, growth is expected to slow in the second half of the year. Furthermore, growth is expected to moderate in 2016. However, the company’s recent performance of exceeding analyst estimates and its acquisition strategy may be enough to provide shares with support.

Comments & Business Outlook

Tue, 03 Aug 2010 04:00:00 GMT

The continued strong demand for sophisticated consumer electronic devices has resulted in increased orders for the Company’s printed circuit board (“PCB”) and flat panel display (“FPD”) inspection and production solutions. In the Company’s FPD business, this continued strong demand has translated into increased bookings for FPD equipment and expedited deliveries of products for new and existing fabrication plants. As previously announced, during the second quarter the Company received customer acceptances for its new Generation 8 FPD Array Checker electrical test systems and recognized revenues totaling $47 million from sales of these systems that were delivered by June 30, 2010. In the Company’s PCB business, the Company’s Paragon Xpress and Paragon Ultra direct imaging systems are increasingly becoming a “must have” solution for high density interconnect (HDI) PCB production.

As a result of these recent trends, the Company is today announcing that it is updating its revenue guidance for the full year of 2010 from a range of $460 - $470 million to a new range of $500 - $510 million.

Commenting on the results, Rani Cohen, President and Chief Executive Officer, said: “We are pleased with the Company’s financial results for the quarter. Our record quarterly revenues, although certainly a function of the prevailing strong business environment, also reflect the quality of Orbotech’s solutions and customer support; while our improved net income speaks to our operating efficiencies. The operational challenges posed by the current high level of bookings will be considerable; however, we are confident that our careful resource utilization and the specific steps we are taking during this ramp-up period will mean that our customers can continue in the future to rely on Orbotech’s superior and innovative product solutions and support.”