OmniVision August 31st Earnings Critical for MaryJaneSkiBum.com
Come August 31st, the story will be told……….
<<<<<• Omnivision filed its FY06 10K on Friday. We have updated our
model to reflect cash-flow details, but there are no material changes.
Takeaways include the following:
• OVTI shipped 155mm sensors in FY06, up 68% y/y.
• OEM and VAR business decreased to 69% from 79%, with the shift
favoring distributors, and marking ongoing commoditization, in our
view. The top three customers accounted for 41% of sales, down from
46% last year; so OVTI’s business diversified slightly. Sales to China
(up 67%) and S.Korea (43%) increased significantly, whereas sales to
Japan decreased 18%, but this simply reflects to where the handset
industry has shifted in 2005.
• Headcount increased 89% y/y to 1644, with sales increasing 120% to
137, and R&D increasing 44% to 238. 85% of staff are employed
outside of the US, principally in China. US and foreign patent awarded
increased over 50% to 126; with 286 on file, so R&D appears to be
yielding intellectual property.
• Backlog increased 123% y/y to $134.5mm, partly owing to scale, but
also due to shortening supply, which appears to be forcing OEMs to
extend orders out further; increasing OVTI’s visibility.
• Reiterate Overweight. At 9.4 times CY07E PF EPS of $1.88, a 51%
discount to the mean of our coverage, we believe OVTI is significantly
undervalued. OVTI is sitting on $6.19 per share of cash and trades at an
ex-cash P/E multiple of 6.7 times CY07E cash PF EPS estimate of $1.70.
Short interest in the stock remains high (over 20%) and the stock looks
well positioned to outperform heading into the seasonally stronger 2H06.>>>>>