Company Reports

ASMPT’s management guided on second-quarter revenue, implying an 18% decline year on year but a 2.3% increase quarter on quarter at the midpoint of the guidance range. The semiconductor segment, which usually leads the surface mount technology solutions segment, drove the expected sequential growth. First-quarter revenue declined by 20% year on year, with earnings per share down 44% year on year. ASMPT is experiencing strong demand from advanced packaging, is a higher-margin product set, and is leveraged to growth in high-performance computing, or HPC, and generative artificial intelligence.

ASMPT guided to first-quarter revenue implying a 20% decline year on year and 8% decline quarter on quarter at the midpoint of the guidance range. However, management expects first-quarter 2024 bookings to be around 20% higher than fourth-quarter 2023. It expects a revenue turnaround in 2024, but it is still too early for a clear vision on the rate of the recovery. One leading indicator could be fourth-quarter bookings in the semiconductor segment, up 10% year on year. This segment normally leads the surface mount technology solutions segment. Fourth-quarter revenue declined by 21% year on year with net profit down 28% year on year. Despite the industry volatility we have seen solid underlying revenue and earnings per share growth over the past 12 years from ASMPT, and we would expect this trend to continue in the foreseeable future, albeit with the extreme volatility of this industry. ASMPT remains leveraged to the global semiconductor and electronics market, and we expect both to grow in the long term. The firm discussed recent demand driven by high-performance computing and generative AI, with the firm’s advanced packaging solutions expected to play an increasing role in both, and we believe this potential leverage to AI is the likely reason for recent share price strength. We see no signs of ASMPT’s products losing their technological competitiveness, so we would expect the company to fully participate in a market rebound when it comes. The firm increased its research and development spending slightly in 2023 despite the revenue declines.

ASMPT provides investors with exposure to long-term high-growth themes such as the proliferation of semiconductors in autos and industrial “Internet of Things” as well as artificial intelligence, or AI, and high performance computing, or HPC, through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASMPT’s third quarter was hit by a number of largely one-off factors that negatively affected profitability. The industry also remains toward the bottom of a downcycle and there are few signs yet of a near-term recovery. Third-quarter revenue fell 24% year on year to HKD 3,474 million, with gross profit margin of 34.2% compared with 40.9% in the third quarter of 2022. Net profit of HKD 12.8 million was down 98% year on year. Restructuring costs of HKD 40.4 million, mainly relating to redundancies, were incurred in the quarter. The semiconductor solutions segment also saw gross margin fall to 31.9% (from over 40%) in every quarter for the past two years, due to unfavorable product mix and provision for aging inventories. Management is guiding to a return to gross profit margins of around 40% for the semiconductor solutions segment in the fourth quarter, despite forecasting broadly flat revenue from the segment, so we are comfortable that the gross margin issues are largely one-off.

ASMPT provides investors with exposure to long-term high-growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” as well as artificial intelligence, or AI, and high performance computing, or HPC, through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASMPT’s second-quarter result was slightly below our estimates, and guidance for third-quarter revenue, which is down 23% year on year at the midpoint, is also below our expectations. The industry is in a downcycle and there are few signs yet of a near-term recovery. Despite the industry volatility, we have seen solid underlying revenue and EPS growth over the past 12 years from ASMPT and we would expect this trend to continue in the foreseeable future. ASMPT remains leveraged to the global semiconductor and electronics market and we expect both to grow in the long term. The company highlighted recent demand driven by high performance computing, or HPC, and generative artificial intelligence with the company’s advanced packaging solutions expected to play an increasing role in both. We also see no signs of ASMPT’s products losing their technological competitiveness, so we would expect the company to fully participate in a market rebound when it comes.

ASMPT provides investors with exposure to long-term high-growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” as well as artificial intelligence, or AI, and high performance computing, or HPC, through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

Narrow-moat ASMPT’s first-quarter result highlighted the weakness in the communications, computer and consumer end markets, which account for about 45% of the end demand for its products. There are few signs yet of a recovery and even a second-half recovery might be difficult, in our view. ASMPT’s first-quarter revenue declined by 26% year on year, with net profit declining 62% year over year. Despite the volatility, we have seen solid underlying revenue and EPS growth over the past 12 years from ASMPT, and we would expect this trend to continue in the foreseeable future. ASMPT remains leveraged to the global semiconductor and electronics market and we expect both to grow in the long term. We also see no signs of ASMPT’s products losing their technological competitiveness, so we would expect it to fully participate in a market rebound if and when it comes. Management specifically highlighted a number of smaller orders that it had won based on its technical capability, that it expects to turn into volume orders once the market picks up.

ASMPT provides investors with exposure to long-term high-growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASMPT provides investors with exposure to long term high growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASMPT’s broader product portfolio and success with products addressing the growing automotive and industrial end user markets seem to be helping it in the broader electronics and semiconductor industry downturn. The extreme cyclicality of ASMPT's business is highlighted by the 49% like-for-like revenue growth in 2021, followed by around 12% decline in 2022—with fourth-quarter revenue declining 30% year on year and fourth-quarter net profit declining 71% year on year. Despite the volatility, we have seen solid underlying revenue and EPS growth over the past 12 years from ASMPT and we would expect this trend to continue in the foreseeable future. ASMPT remains leveraged to global semiconductor and electronics growth, and we expect both to grow in the long term. The fourth-quarter result was actually slightly ahead of our forecasts for both revenue and profit, and we keep our fair value estimate of HKD 95. Our narrow moat rating based on intangible assets and cost advantage is retained, as is our Exemplary Capital Allocation Rating. While the stock price has risen from its low of around HKD 43 in October 2022 to the current level of around HKD 73, it is still toward the low end of its trading range over the past 12 years.

ASMPT provides investors with exposure to long term high growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

Following a record-breaking 2021, ASM Pacific Technology, or ASMPT, is now in a cyclical downturn, exacerbated by poor global economic conditions. The extreme cyclicality of the business is highlighted by the 49% like-for-like revenue growth in 2021 likely to be followed by around 26% decline in 2022 on our estimates. The third-quarter result was slightly below our forecasts for both revenue and profit but the fourth quarter revenue guidance was well below our expectations as the speed of the cyclical downturn surprised us.

ASMPT provides investors with exposure to long term high growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASM Pacific Technology, or ASMPT, reported a worse-than-expected second-quarter result with revenue of USD 663.5 million coming in below the guidance range of USD 670 million to USD 740 million and second-quarter bookings of USD 593.1 million, down 36.5% year on year and 34% quarter on quarter. We note that the comparable year of 2021 was a record year with operating income 22% higher than the previous peak in 2017, so year-on-year comparisons are very difficult. The second-quarter numbers were mostly due to factors outside the company’s control including coronavirus lockdowns in China, Russia’s ongoing invasion of Ukraine, and rising inflation. ASMPT remains leveraged to global semiconductor and electronics growth with the company estimating the percentage contribution to first-half revenue by consumer (TV wearables, gaming consoles, and so on) at 22%, auto at 20%, communication (smartphones and network infrastructure) at 18%, and industrial (electric-vehicle charging, smart factories, and so on) at 14%, being the main end-market drivers. Geographically, it generated 44% of its revenue from China in first-half 2022, implying first-half revenue from China declined 8.6% while revenue from the rest of the world was up 31%. While GDP forecasts and some consumer electronics forecasts such as smartphones and PCs seem to be coming down, semiconductor forecasts remain. Global semiconductor fab equipment spending for front-end facilities is expected to rise 14.7% year on year in 2022 after 42% growth in 2021, according to industry forecaster Semi. We would expect such front-end demand to spill over to back-end equipment provided by the likes of ASMPT. Growth for ASMPT is coming from autos, which grew 60% in the first half and advanced packaging, which contributed 18% of first-half revenue.

ASM Pacific Technology, or ASMPT, provides investors with exposure to long term high growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASM Pacific Technology, or ASMPT, provides investors with exposure to long term high growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.

ASM Pacific Technology, or ASMPT, reported another record result, with first-quarter 2022 revenue up 22% and earnings per share up 59% year on year. Revenue guidance for the second quarter of 2022 of USD 670 million to USD 740 million implies revenue growth of 5.8% at the midpoint, with first-quarter bookings of USD 903 million down 10% year on year compared with the record bookings in first-quarter 2021 – but still very strong when compared with previous years. Encouragingly, 35% of the group bookings are for higher-margin advanced packaging, with bookings for solutions for the auto market also up 49% quarter on quarter. While second-quarter bookings may not be as strong as second-quarter 2021, ASMPT expects them to be strong compared with second quarters prior to 2021. ASMPT remains leveraged to global semiconductor and electronics growth. While GDP forecasts and some consumer electronics forecasts such as for smartphones and PCs seem to be coming down, the semiconductor forecasts remain robust and ASMPT is still seeing a strong pipeline. Global semiconductor fab equipment spending for front-end facilities is expected to rise 18% year on year in 2022 following 42% growth in 2021, according to industry forecaster SEMI. We would expect such front-end demand to spill over to the back-end equipment provided by the likes of ASMPT.

ASM Pacific Technology, or ASMPT, reported a record 2021 result, with revenue up 44% and earnings per share up 94% year on year. Revenue guidance for the first quarter of 2022 implies revenue growth of between 14% and 24%, with fourth quarter bookings up 25% year on year, and management indicated that bookings in the first month were promising. ASMPT remains leveraged to global semiconductor and electronics growth, in particular from 5G infrastructure and handset growth, increasing electrification and electronics usage in automobiles and growth in Big Data and high-end computing. The drive for self-sufficiency in semiconductor supply from a number of countries, is also helping equipment suppliers like ASMPT. Mainland China’s drive for semiconductor self-sufficiency seems to be a particular driver for ASMPT, with China’s percentage of ASMPT’s revenues climbing to 47.8% in 2021 from 40.4% in 2019. IC Insights estimated that China sourced only 16% of its semiconductors domestically in 2020 and so would need a large acceleration to reach its 70% target by 2025, which bodes well for ASMPT’s growth. ASMPT has a broad portfolio of equipment catering for the faster growing advanced packaging requirements as well as for the older technologies such as wire bonding and die bonding, which are still selling well.

ASM Pacific Technology, or ASMPT, provides investors with exposure to long term high growth themes such as Big Data, 5G mobile networks and handsets, proliferation of semiconductors in autos and industrial “Internet of Things” through the leading global equipment supplier in assembly and packaging and surface mounted technology. The high-tech nature of the equipment supply industry provides barriers to new entrants and allows most incumbents to earn above cost of capital returns over the long term, with ASMPT being no exception. We expect the company to continue to make strategic acquisitions in related areas where it can plug technology holes and add value through investment.