From Reddit...Posted byu/State_of_Affairs 12 hours ago If you are interested in HIMX, now is the time to buy! Let's talk FY-2021 cash dividend. Background
HIMX released earnings for Q3-2021 that places year-to-date earnings at $1.69 per share. Guidance indicates further earnings of $0.745 - $0.795 per share for Q4-2021. So HIMX is effectively guiding $2.43 - $2.48 per share for FY-2021, which corresponds to a deeply undervalued forward PE of 4.62 - 4.71. (I am using today’s closing price of $11.45 as my basis for calculated the PE range.)
HIMX will also be paying an annual dividend based on FY-2021 earnings. This dividend is historically declared in sometime May (or June) and paid sometime in June (or July). The dividend could be a catalyst that finally starts to move HIMX to new highs.
Dividend Table
I have prepared a table showing the dividend paid by HIMX for every fiscal year since its IPO in 2006 (see below). Its purpose is to highlight the payout ratios for each of the 13 years that HIMX has paid a dividend. The payout ratio is the proportion of HIMX’s annual EPS that is paid out annually as a cash dividend. In the table, you can see that the payout ratio has ranged anywhere from 51.3% to 119.0%, with an average ratio of 77.9%. I note that three instances of the payout ratio were at 100% or above.
I believe that, for Q4-2021 and similar to Q3-2021, HIMX will post earnings at the upper limit of its guidance (i.e., $0.795/share). Using the average ratio of 77.9% with FY-2021 earnings of $2.48/share, we can estimate the annual cash dividend for 2021 to be $1.932 per share. This estimate implies a mind-boggling forward yield of 16.9% using today’s closing price. In comparison, the dividend yield for the S&P 500 and the iShares Semiconductor ETF is, respectively, 1.38% and 0.61%.
Discussion
HIMX pays out a very high proportion of its annual EPS as a cash dividend. To understand why, realize that Taiwan gives special tax considerations for dividends. In particular, a Taiwanese company which owns shares in another Taiwanese company is, regardless of the percentage ownership, exempt from business income tax on the dividends received from another Taiwanese company.
For example, Dr. Biing-Seng Wu is the founder and chairman of HIMX. He holds 74,579,944 ordinary shares of HIMX through two Taiwanese investment companies, i.e., Sanfair Asia Investments Ltd. and Chi-Duan Investment Co. (One ordinary share of HIMX is equal to one-half a U.S.-listed ADS and receives one-half of the dividend.) If HIMX declares a dividend of $1.932, the two investment companies will receive collectively $72,044,256 tax-free on behalf of Dr. Wu. A similar arrangement exists for Mr. Jordan Wu, the CEO of HIMX and brother of Dr. Biing-Seng Wu. However, Mr. Wu has established different Taiwanese investment companies for this purpose.
The point here is that the HIMX’s board and executive management have a serious tax incentive to pay themselves using dividends. Moreover, because HIMX did not declare a dividend for either 2018 or 2019, the board and executive management will be highly incentivized to issue themselves a fat dividend in 2022 to make up for these missing years. So the $1.932 amount I estimated above is a very real possibility and may even be conservative.
Conclusion
The impending 2022 cash dividend is very bad news for anyone short HIMX. As of October 15, the short interest in HIMX sits at 24,652,040 shares (or 14.1% of the float). At an estimated forward yield of 16+%, the shorts in HIMX are deluding themselves into thinking that they can slow-roast prime rib in front of a ravenous pride of lions and not get mauled.
The market is going to smell HIMX’s juicy dividend months in advance and start buying long before the dividend is declared. I believe the trigger point for such buying will be the Q4-2021 earnings announcement, during which, the FY-2022 EPS will be confirmed. Based on historical norms, HIMX should release Q4-2021 earnings the first week of February.
If you are interested in HIMX, now is the time to start buying. Today's post-earnings jump in price may be the start of a strong movement upward, just like November of last year. If HIMX moves to adjust its forward yield to 5% – which would still be better than every other semiconductor stock on the NASDAQ – HIMX will move from its present price of $11.45 to north of $30. So by buying now, not only would you get to experience fantastic gains, you will mostly like also be rewarded with a fat dividend if you are willing to hold until July.
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Himax Technologies Is Grossly Undervalued May 10, 2021 3:33 AM ETHimax Technologies, Inc. (HIMX)8 Comments2 Likes Summary HIMX is grossly undervalued based on commonly used valuation metrics. HIMX’s gross margin expansion thesis is sustainable due to transition to differentiated products. Valuation gap will close as the company continues to execute its product differentiation strategy. Target price is increased to $29. In Ultra Modern Electronic Manufacturing Factory Design Engineer in Sterile Coverall Holds Microchip with Gloves and Examines it. Photo by gorodenkoff/iStock via Getty Images I have written two articles on Himax Technologies (NASDAQ:HIMX) recently. The first article was written in November 2020 after the 3Q print. The second article was written in February 2021 after the 4Q print. In both articles, I was very bullish based on the actual and projected gross margin expansion. Since HIMX has relatively fixed operating expenses, most of the increase in gross profit drops directly to the EBIT line. The results of HIMX improved rapidly since 3Q2020, driven by continuous GM expansion. This is shown in Figure 1.
Figure 1: HIMX's EPS growth is driven by its GM growth. Source: Company releases.
Even with the rapid EPS growth, the growth of its share price has stalled since its rapid rise from about $4 six months ago. It closed on May 7 at $12.86. This is shown in Figure 2.
Figure 2: HIMX ADS price chart. Source: SA.
With the rapid increase in its EPS, but with its stalled ADS price, HIMX ADS is now grossly undervalued. This article will detail the gross undervaluation and the transformation of HIMX's products to be more differentiated, which supports a higher valuation.
HIMX is grossly undervalued based on commonly used valuation metrics HIMX's gross undervaluation is shown in Figure 3. Figure 3 shows the projected results of 2021 based on my model, as well as the TTM results as of 1Q2021 and 4Q2020. My 2021 model is rather conservative. The model assumes that the GM for 2Q through 4Q stays at the 46.5% level, which is the midpoint of management's guidance for 2Q. I have further assumed that there will be no more capacity addition in 3Q and 4Q, even though management guided for some addition. I have not taken into account the revenue from the LCoS product that will start to ship in 3Q. Furthermore, the model does not take into account the revenue from the WiseEye total solution PO HIMX received for production commencing in 4Q. Hence, there is ample upside for my 2021 model.
Figure 3: 2021 results model vs 1Q2021TTM and 2020 results. Source: Author's model.
Even with the conservative assumptions, the model shows an estimated 2021 EPS of $2.04. Yet the ADS is trading at $12.86, which is only a 5.7x forward EV/Net Profit for the year! The same model shows that the ADS is trading at forward 6.6x EV/FCF for the year, or a forward FCF yield of over 15%!
It is possible that investors still remember Google Glass (NASDAQ:GOOG) (NASDAQ:GOOGL), Hololens, and 3D facial recognition for Android phones, where the shares were bid up but then collapsed when no sustainable results ensued. It is possible that investors may only want to pay for actual results. Hence, I calculated the value of the same metrics on a TTM basis. The results are shown in the bottom part of Figures 3. The share price of $12.86 yielded an EV/Net Profit multiple of 18.5x, EV/Revenue of 2x and EV/FCF of 13.9 (or a FCF yield of 7.2%) based on TTM results at 1Q2021. These multiple values appear to be reasonable. I used these multiple values to estimate the share price at the 2Q2021 print and the 4Q2021 print. The results are shown in Figures 4.
Figure 4: Modeled share price at time of 2Q print and 4Q print. Source: Author's model.
Figure 4 shows potential appreciation of HIMX's share over the next three to nine months. These multiples are very modest compared to those of HIMX's peers and yield a new target price of around $29 in about 9 months. If HIMX can demonstrate that its product offering has structurally changed to achieve a sustainably higher GM, I believe that even a $40 target price is reasonable.
I will use peer multiples as a sanity check. I use the same peers that I have used before: SYNA, MXL, DIOD, SMTC. To this list, I have added SIMO, another Taiwan-based company. Comparable valuation metrics for the peer group are shown in Figure 5. While the SA data base does not show the exact same metrics that I used in Figure 4, a quick glance at the comparable metrics shows that the values of the metrics that I used in Figure 4 are rather conservative. This sanity check confirms the conclusion that HIMX shares are grossly undervalued.
Figure 5: Comparable peer valuation metrics and their current values. Source: SA data base.
HIMX's gross margin expansion thesis is sustainable due to transition to differentiated products There can be many reasons why there is such a huge value gap. As a long-term investor, I am happy when
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Earnings next week so good time for open discussion. Institutional ownership increased to almost 20% and I see continuous inflows. This is a good sign but we need more. The biggest challenge I think is clarity on the long term outlook, can good times last beyond current shortages. If we see solid evidence in earning report, than we will see stock reaching new highs and heavy institutional inflows. What we know so far from multiple industry reports (and Wu forecast) that shortages will last into 2022 so we get nice period of support as new revenue streams gathering strength. Plenty of news on growth in Automotive, but it seems that everyone is going after that market so Wu's forecast for huge growth in Auto need to be backed up by some numbers this quarter. On WLO, I see mixed reports and even the most positive do not show this as a huge market, so while Himax was saying this could be biggest growth driver, I just do not see it. WLO will eventually be helped by growth of AR and we should see inflection point in this space soon with Facebook\Rayban glasses released this year, and Apple probably next year. What I am hoping for(but do not expect) in earning report is indicators that they expanding production as that would mean both revenue and PR from high end partnership. The most bubbling prospects of growth I see is in Wise Eye. There is constant activity on the gitHub and looks like Himax has about a year head start on competition. The problem of course is they do have formidable competition. We still did not see margins and revenue from these product so that is another clue to see in ER - can this provide replacement for revenue and margin for eventual reduction in DD margins. Obviously transition to AMOLED and other cutting edge DD technologies is also important clues on how much these revenue deteriorate if at all.
C
A few random comments:
+ HIMX holding up okay considering the Taiwan covid case increases and sell-off in Tech and Small Cap spaces
+ HIMX needs to get their message out with the ongoing Needham conference, the upcoming Citi conference starting tomorrow and then the Cowen conference starting June 1st.
+ Seems HIMX needs to emphasize their 2Q guidance of: => Revenues to increase by 15% to 20% sequentially => Gross margins of 45.5% to 47.5% depending on the final product mix. => With the increase of both revenue and margin, net profit will increase substantially in second quarter. IFRS profit attributable to shareholders is expected to be in the range of $0.54 to $0.60 per fully diluted ADS
+ Yahoo Finance is not showing any EPS updates…but I am seeing some at Barrons website which I will link in a reply here. Still, it seems not all analysts used by Barrons have updated their estimates as they currently show a high of $0.57 (midpoint of guidance which is what they should all be), a low of $0.36 and an average of $0.47.
+ Need to get the message out about how to think of 3Q 2021 as the analysts used by Barrons are projecting a high of $0.48 (decrease of $0.11 from 2Q), a low of $0.33 and an average of $0.41 (decrease of $0.06 from 2Q).
+ While I don’t have the details on Credit Suisse’s $1.95 EPS for FY 2021, we can guess at the quarterly breakdown as we know HIMX did $0.38 EPS for 1Q and is guiding for a midpoint of $0.57 EPS for 2Q. So, $1.95 - $0.38 - $0.57 = $1.00 which is an average of $0.50/share for each 3Q & 4Q 2021.
So, will HIMX EPS drop from $0.57 midpoint in 2Q to an average of $0.50 EPS for 3Q and 4Q? And, I am mostly fine if that is true as those earnings should still deserve a 15 P/E which would give a share price of nearly $30.
Finally, what we really need is clarification on a return of the dividend. I doubt we get one this summer…but HIMX needs to address and make it known:
+ When the dividend will be back (perhaps in 2022 based on FY2021 profits) => Due to the possible size (perhaps $1/share based on just over 50% of the FY2021 earnings of $1.95) would it be a single annual dividend in early summer as before….or perhaps quarterly.
But mostly, why leave investors and analysts guessing? Just give some certainty….even if there are no plans. Just make the plans known.
Finally, HIMX should also make their thoughts known on share buybacks.
Comments/Discussion?
C
HIMX to see:
+ HUGE EPS raises (3Q, 4Q, FY2021, FY2022) as current 3Q EPS est is $0.43 & Mgmt guided to $0.78 midpoint => 3Q will compare to $0.07/share 3Q 2020 (1,000% YoY increase)
+ Price target could go over $30 as HIMX earned $0.38 and now $0.62 or $1 in 1H21 => With guided $0.78 in 3Q & drop it 10% for 4Q and you have ~$2.50 for FY2021 => $30/$2.50 = 12 P/E which is $16.x gain from weekend $13.9x for 115% gain => 20 P/E would give a $50 stock price => Current price target is $23 & would be under a 10 forward P/E
+ Funds who attended the 5 confs in May/June could see these and buy/add
So, when the analysts, retail and trading bots find these very large EPS and price target raises, HIMX share price should really move up.
Then, the July short reports were 12.x million shares which is 10% of float. We also know ~2.75 million shares were ‘borrowed’ last week so that could help any short squeeze.
As per the dividend, it should be over $2/share IF HIMX pays out their typical 75+% of prior year’s profits.
What is the downside here? We just need the bots & institutions to see the HUGE EPS and Price Target raises…and the lower P/E and huge dividend.
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Two articles on Digitimes today that reference Himax and business positive, headlines bellow
Taiwan COF packaging/testing service providers positive about 4Q21 demand Prices for DDI used in large-size panels unlikely to slip
Also, there is interesting article on Trendforce
AR/VR Device Shipment for 2022 Expected to Reach 12.02 Million Units Thanks to Rising Opportunities in Metaverse. W
Ever since Facebook gone Meta, there is a lot of buzz about Meta economy, and even Cramer pushes investment into Metaverse related companies, he just does not realize Himax can be one of the dominant players in AR hardware.
Himax is $30+ per share company. Do not sell your shares cheap. If you have the cash to add, buy more while the opportunity is there. You can thank me later.
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HIMX is the cheapest stock I have ever seen except when IMOS received $100 million from Spansion in 2010 from Spansion bankruptcy HIMX is my 2nd largest holding next to IMOS and also is one of IMOS largest customers. Chipmos ( IMOS) after receiving $100 million was trading at a market cap of less then $50 million and generating free cash flow.. HIMX is trading at less then 4x FCF and growing over 50% as they have no capx being a fabless company. They should be trading at a low of 13x P/E or $30. 1- My suggestion is to institute a 25 cent quarterly dividend now as they would normally payout over $1.50 in 2022( and payout the rest as a special dividend in 2022) as they are required to payout the previous years profits or pay a 10% penalty tax on undistributed earnings.Many Taiwan companies are starting to pay dividend quarterly. 2- List HIMX on the Taiwan exchange as a dual listing where they have much better institutional coverage and also smarter investors. The stock price would triple if they did that and would also get rid of the shorts and MM manipulation. The shorts would also have to pay us the quarterly dividend. 3- last thing would be immediately institute a $100 million buy back as they are earning over $400 million a year in cash and are just printing money everyday including Sundays.
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"Revenues, gross margin and EPS all hit new records in this quarter, surpassing our prior highs in the fourth quarter of 2020, thanks to persisting demand across our major business segments. Looking into the second quarter, the demands remain robust and the global semiconductor shortage has not shown signs of receding. We expect another strong financial result for the second quarter"
So they said before that every quarter, they will get expansion of the capacity in 2021 and that means that Q2 will have even higher revenue than Q1 while they will be able to at least maintain Q1 gross margin, that means more than 70 million profits in Q2 on top of 70 they made in Q1 and though things might slow down in Q3 they will still be pumping some serious cash as the new products will start being rolled out. By now it becomes kind of obvious that during summer they will bring back dividends(though based on last year income, we should expect something modest). How will they use the rest of the cash though is very interesting to me as this is the key to where stock will go to long term and I am hoping that when they do official announcement in May, we will get a hint.
Potential ways to use that cash are: -Stock Buy back- they have done this before, Benefit to stock moderate, risk low -Pay out loans - they already re-structured some last quarter, Benefit to stock moderate, risk low -Hoard Cash and make income , probably not ideal but still beneficial scenario -Further expand WLO production Capacity, they said before it is a possible scenario if they get Apple business and win other high profile clients, saw on the news that TSMC is starting early production of next gen Apple products and in the normal scenario Himax would know if they in next gen product in Q2, this has higher (moderate) risk but also offers higher stock benefit long term -Pump Money into R&D of their non DD products or outright buy another company in complementary industry, highest risk and highest potential rewards
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I have not sold any of my shares in this correction. Although Friday we saw a huge recovery, I do think the shake off benefits the real holders as a new base is set. If the company hits or passes its earnings projection we should move quickly over the $20 mark. Look a company that made .296 last year that was higher than what, the past ten years plus on an annual bases is now projected to make .30 in one quarter more than all of last year and projected to have sales above one billion and earnings for the full year above a buck? Where are they making mistakes that they deserve the price they are at today? Even if you go back to the Google Glass times when the price jumped, their balance sheet wasn't as strong as it is today. So we ask ourselves today what has changed to bring the price down by almost 50% from its high of $17.88 to $9.97 before buyers took over to only a loss of 17 cents? NOTHING! This move down was quick and a recovery could be quick as well. Once the preannouncement comes sometime in the second half of April IMHO if the numbers are where we expect from their projection, the markets should then come to the conclusion HIMX is for real. Some of this down turn is because not many upgrades have come. Yahoo either posted the wrong date (they have 2020 and not 2021) or are not giving the information unless you get their premium service. Besides many Analyst IMHO do not understand the company. IMHO once we get through March 9th-10th we could see a good move up as the annual correction period comes to a close. Then May has the saying "sell in May and go away" but for HIMX this event may not happen as they provide earnings. Again JMHO.
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I am baffled at stock market price continued push lower against very strong and positive news.
1. Per Digitimes, Himax is raising prices 10 - 20% and that will bode well for Q2 profits, so we should expect Q2 estimates go up by something similar, say to $350 million revenue and $45c per share profit.
2. Himax publishing on GitHub info about second generation board for Azure platform, so relationship with Microsoft and activity in AIoT is moving at rapid pace which bodes well for their diversification effort.
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Few things: - Will not post links anymore , too many post get deleted, should always be easy to search source name -There was discussion on Options few weeks ago , well , last Friday was day when lots of options with interest outstanding were closing so that sell out I would put on that + generally negative market day -Virtual CES is so far is interesting but with no direct announcements related to Himax. However the industry trends positive to Himax seem to be on growth trajectory. -Digitimes today had several articles on foundries expanding production so there is good hope that Himax will get solid footing on capacity expansion. Also, now they say that demand is solid through Q3, so it looks like we have visibility further into a year. Another digitimes article talks about fast automotive IC demand growth in 2021 which chimes with Wu's comment about automotive IC growth multiple. There are new SDK releases for WiseEye boards to support new type of sensors and that gives clear direction that we will see expanded use cases around smart home like smart firealarms, weather stations, etc. WiseEye will be a hot area of growth and it is interesting if they give us a hint on modeling product growth to earnings growth. Some of the new use cases can be very big - Typical home has one doorbell, several TVs (but market is already saturated), several FireAlarms but right now smart Fire Alarms means it is connected and can signal to the phone a threshold breach vs actually learn from your environment. We can have products with large addressable demand and priced where new features actually worth price of upgrade. In a pre-announcement they said "strong momentum across all major business segments", Hopefully that means that they have solid demand and booking on WLO so no efficiency drag.
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Okay, let’s take a weekend dive into HIMX. We know they are presenting and meeting people at the Needham conference May 17-20 (Mon - Thur) and the Citi Bank conference May 20 - 24 (Thur - Mon).
We also know (taken from Conf Call transcript at Seeking Alpha):
+ HIMX 1Q results were: => net revenue of $309 million, an increase of 12.1% sequentially and an increase of 67.4% compared to the same period last year. The 12.1% sequential increase of revenue exceeded our guidance of an increase of around 5% to 10% quarter-over-quarter with strong demand across all our major business segments. => Gross margin was 40.2%, exceeding guidance of 37% to 38% and significantly improved from 31.2% of the fourth quarter 2020. => IFRS profit per diluted ADS was $0.383, exceeding our guidance of $0.30 to $0.34. Strong sales and improved gross margin contributed to the better than expected earnings results.
+ HIMX guided for 2Q results with further revenue and margin growth from the already high 1Q results such as: => Revenues to increase by 15% to 20% sequentially => Gross margins of 45.5% to 47.5% depending on the final product mix. => With the increase of both revenue and margin, net profit will increase substantially in second quarter. IFRS profit attributable to shareholders is expected to be in the range of $0.54 to $0.60 per fully diluted ADS
+ While we focus a lot on P/E and EPS, HIMX also has a strong balance sheet as per: => “Turning to the balance sheet, we had $245.8 million of cash, cash equivalent and other financial assets as March 31, 2021 compared to $126.6 million at the same time last year and $201.4 million a quarter ago. The higher cash balance was derived mainly from $60.3 million of operating cash inflow during the quarter.”
So, we know HIMX is firing on all cylinders…so let’s look at how HIMX can continue to grow…and that is both near term (2Q & 3Q is mostly more of the same) and then longer term. See my reply here for Conf Call comments on growth factors:
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Another must-read gem from Reddit. I will post the link in a reply post in case Yahoo! tries to delete this one.
Summary
Technical analysis indicates that now is an excellent time to buy into HIMX. As shown in the chart below, HIMX is breaking out of a four-month long decline and buying now allows an entry point that comes with low downside risk. Moreover, this break-out is occurring in November, exactly one year from the break-out that occurred last November. Comparing the two break-outs suggests that strong gains lie ahead for HIMX.
$10 Support Held
HIMX has a support at $10 that has been tested multiple times this year (see chart). This support first started as a resistance (point 1), which then switched to a support that was subsequently tested six times (points 2-7). In general, the more a support is tested and holds, the stronger it gets. For example, at point 6, the support was breached and HIMX closed below $10. However, the very next trading session HIMX recovered and closed above $10. In subsequent trading sessions the $10 support was tested but not breached (point 7). If a support is breached, but subsequent trading sessions fail to confirm this breach, the support is considered to have held. The chart shows that the $10 support has held pretty much throughout 2021.
Downward Channel Broken
HIMX has been in a downward channel since July 1, forming a descending flag pattern. However, HIMX broke out of this pattern between Oct. 28 - Nov. 1, which is right where the upper channel line intersects the $10 support. A break-out at this location is not coincidental and very bullish for HIMX, especially given the strong post-earnings follow-through on Nov. 5. In fact, this break-out mirrors the start of the break-out that happened back in November 2020. Again, very bullish.
Conclusion
After months of decreasing prices, HIMX has formed a reversal that is turning into a strong break-out. This break-out will especially accelerate if the bears capitulate and close out their short positions. (As of October 15, the short interest is 24,652,040 shares or 14.1% of the public float.) I have already posted about the lure of HIMX’s FY-2021 dividend, which will most likely be above $1.92 per share and correspond to a 16+% forward yield. But there is one other thing to consider.
The market is heading into December, a time in which many investors and institutions re-balance their stock portfolios for the next year. Such re-balancing includes investors and institutions reducing their exposure to stocks that performed well but have become overextended. The resulting profits are rotated into undervalued names. HIMX is deeply undervalued relative to virtually all other semiconductor stocks. For example, AMD and NVDA have forward PE ratios of 41.04 and 63.74, respectively, while HIMX has a forward PE ratio of about 4.7. As such, HIMX is going to garner a lot of buying interest in December due to its ridiculously low PE, strong projected 2022 revenues, expanding 2022 margins, and mind-boggling 16+% forward yield.
The bottom line here is to get in early before HIMX really starts to move. If Friday’s (Nov. 5) price action is any indication, investors liked what management had to say during their earnings call (Nov. 4) and more will buy into HIMX as the word starts to spread. The technical analysis shown in the chart below indicates that now is an excellent entry point in HIMX and comes with low downside risk.
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Third quarter expectations !!!!!!!!!!!!!!
Eric Li -- Chief of Investor Relations/Public Relation Officer
"As before, our dividend was determined primarily by prior year's profitability. Our decision to pay out full net profit of last year's demonstrated the management's strong confidence for our business prospect. As of June 30, 2021, Himax has 174.3 million ADS outstanding, little change from last quarter. On a fully diluted basis, the total number of ADS outstanding was 174.7 million. Now turning to our third quarter 2021 guidance. For the third quarter, we expect further revenue growth from the already high level of Q2 2021. Gross margin should see another uptick and could reach another quarterly high. For the third quarter, we expect revenue to increase 13% to 17% sequentially. Gross margin is expected to be in the range of 15.5 -- 50.5% to 52%, depending on the final product mix. With the increases of revenue and margin, we anticipate net profit should increase substantially in third quarter.
Non-IFRS profit attributable to shareholders is expected to be in the range of $0.75 to $0.81 per fully diluted ADS. The third quarter IFRS profit attributable to shareholders is estimated to be in the range of $0.63 to $0.69 per fully diluted ADS. Similar to our usual practice, we will grant RSUs on around September -- on or around September 30 for this year for employees' share-based compensation. The third quarter guidance for IFRS profit per diluted ADS has taken into account the expected 2021 RSU grant, which, subject to Board approval, is now assumed to be around $75 million, out of which $26.3 million or $0.118 per diluted ADS will be vested and expensed immediately on the grant date. As a reminder, the total RSU amounted and the immediately vested portion are our current best estimates only and could vary materially depending on, among other things, our Q4 profit and the final decision for the total RSU amount and its vesting scheme.
As the case for previous year, the RSU grant in 2021 will lead to higher third quarter IFRS operating expenses compared to other quarters of the year. In comparison, the 2020 RSU totaled $5 million, out of which $4.8 million was vested immediately. Needless to say, our estimated total RSU amount is significantly higher than those prior years due to anticipated record high profit for this year. This is an illustration of our appreciation to team for their hard work. This also demonstrates our confidence in our long-term growth prospects."
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There is a lot to like about HIMX. Looking over some analysts numbers and crunching my own I would say that Q1 outlook is doable and once we see the pre-announcement in April we will have IMHO a clear for the rest of the year, especially in the effect of their Gross margins. for now my estimate for the year is earnings of $1.20. If Q1 proves out and Q2 estimates continue to show a move forward and Strong Gross Margins, then the price per share will move in chunks as we have seen in the last month and half, as the P/E adjusts. Also note: there is a very little institutional interest right now. When HIMX announces a dividend as I expect this year and passes the revenue of $1B over four Q's, Institutional interest will grow from the current 13.5%. So as Institutional shares grow the float of shares available for trade daily shrinks (this is something you should see happening if you are looking at the Float itself). What I mean to say is Institutions tend to hold shares and not trade them back and forth, they are long term holders (years). Now IMHO the affect of this tends to increase pricing and pressure eventually causing stocks splits to get more shares for Institutions by way of shares being sold from long term holders. Also HIMX has what, 50M outstanding shares they could issue yet. The shorts are a non issue currently as they are very, very low. So currently and long term if HIMX continues to show positive progress and more Institutions buy up shares, this could be a very positive year for the long term share holders IMHO. So we have Four steps coming to the table:
1. Upgrades 2. Dividend announcement (I project around .25) 3. Institutional Buyers 4. The Pre announced Q1 coming in, at or above estimates already provided.
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People , do not get discouraged - for someone who watched Himax over long period of time, there is nothing new. Thanks to Concerned Citizen(cc) , we learned to look at Iborrowdesk numbers yesterday, there were 3,400,000 shares to borrow for shorting but today we end with 1,600,000. This behaviour we have already seen and it was not indicating any bad news for the company. Actually - Good news, they only moved the stock down .25 where at previous times this would give $1 down day. Also, there is less of the pool available for shorting and once they at 0, the stock bounces back as short who run out of ammunition run for cover. Top that with high likelihood of very strong Q2 and projections for Q3, changing PE comps as CC mention in his posts and we should see breakthrough that will start with descent pop that over next few weeks should lead to new highs of the stock price.
There is one 'why' that could be on people's mind, why they did not pre-announce and we will get answer for that. I think that this is small risk as even if they announce earnings at low end of the forecasted, they are still phenomenal earnings for current stock price.
My guess, and I stated this before, is they invest into sizing their WLO production and that took a chunk of earnings this quarter but that is actually good news for the long term. If they got Anchor customer revenue back this year and any new clients , they need to expand production. On the subject of WLO, if they announce work on higher frequency WLO which most likely will be used by Anchor in the future for under the screen face id, then Himax has WLO revenue stream is likely set for a long time.
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The numbers are in , as expected, strong revenue growth for Q3.
As it typically goes with Himax, good news comes with some disappointment. I always hope this will not happened but no, here we are again - foundry shortages limit growth, no dividend, same boring LCoS message, no orders in 3D ToF yet and can not show any visibility on plans for Anchor customer. The best we can hope for Apple , they did not get their order in yet because non driver for Q3 does not reflect large WLO purchase. Either we going to have really nice surprise if Apple places order for next gen or they lost them for 1 whole generation of products(at least).
Long term picture remains intact, one way or the other, non driver products will grow in significance while DD will continue its roller-coaster demand. Right now, WiseEye looks like it has best prospects for explosive growth but we talking about 2021 at earliest when we see any significant revenue coming from that product line.
So my best guess, short of any major client\partnership announcement(hype) or general economic cycle surprises, the stock will not break $10 on the upside but have limited downside because they are profitable and kind of said expect to be profitable in Q4(improve gross margin). To put it the other way, not enough reasons for analyst to upgrade \downgrade significantly.
I would like to see bounce to $6 based on better visibility near term and good long term prospects but since market typically does not listen to me, this is just a conversation starter. Anybody care to share their opinion on Himax stock?
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PR release of today shows great potential in the emerging AI market : “Our Intelli-Sensing module will drastically reduce the significant entry barriers to new market entrants or system developers in deploying computer vision and machine learning AI capabilities to edge devices by eliminating the software, hardware and camera design and development efforts, as well as procurement and module manufacturing arrangements. Additional versatile AI vision software feature releases will continuously be made available to meet the emerging demand for the customer’s new AI use cases,”
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Himax Technologies- The Economic Tailwinds Have Improved Oct. 21, 2021 12:51 AM ETHimax Technologies, Inc. (HIMX)3 Comments8 Likes Summary • Since my first analysis of Himax, the stock has fallen about 20%. • However, EPS has increased more than the market expected and the fundamental situation is still improving. • The stock trades below its fair value, especially because the chip shortage continues and the demand for Himax' products will likely be high for the next two years at least.
1. Business environment Himax (HIMX) develops display drivers for several electronic devices. Its products are not only used in TVs, mobile phones and cars, they are also integrated in monitors, tablets and cameras. 3D sensing is also a very promising technology which is used for e-payments and facial recognition. Hence, Himax plays a major role in key technologies which will face a growing demand in the short and long term. Firstly, there is currently a high demand for electronic devices like computers and tablets. Secondly, car manufacturers cannot satisfy demand for EVs since they need more chips than gasoline cars. Many manufacturers already announced production cuts and halts which indicate that the high short-term demand for chips will last the next quarters to come. Although big semiconductor companies like Taiwan Semiconductor Manufacturing Company (TSM) have announced plans to build new facilities to increase production capacities, a positive effect on global supply will be noticed only after a few years. Thirdly, it is likely that these two demand effects not only last, but will also intensify in the next few years, especially if the number of EVs sold increases strongly which is forecasted by economists. Furthermore, the global trend "digitalisation" will continue and products with Himax' display drivers will definitely profit from this trend. Last but not least, the rising interest in security technology (including facial recognition and different types of sensors) and Smart Home devices could further drive the company's growth. One major threat to Himax' growth is a supply chain disruption which is, according to the company's Q2 report, not in sight and won't affect its earnings and revenue growth.
2. Himax' first half year results and Q3 guidance Himax reported a record quarter with record revenues, earnings and margins despite capacity shortages across all business segments. The management states that it will increase capacities next year compared to 2021. In the second quarter 2021, Himax earned $0.62 per ADS and $1.00 per ADS in the first half. Revenues increased by 81% from last year to $674 million. The company guides $0.63-$0.69 per ADS for the third quarter, but Himax has always beaten its own guidance this year and it is likely that it will beat it again. If we assume $0.7 per ADS for the third and fourth quarter, the 2021 annual earnings per ADS would increase to $2.40 at least. 3. Balance sheet and valuation Himax is a financially healthy company with a net debt of $-335 million, $250 million cash on hand and an equity ratio of 53%. With 174.8 million shares outstanding and a share price of $10.6 (as of 10/20/21), the total market cap is $1.85 bn. Net cashflow from operating activities is expected to climb to $300 million and total equity climbed to $614 million. Himax paid a dividend of $0.27 per ADS, but the payout will be significantly higher next year. Fundamental ratios: P/E 2021 P/S P/B P/CF CAPE yield 2021-22 4.4 1.37 3.0 6.2 16 2.5-4.5% All in all, the stock is actually very cheap, because a P/B ratio of 3 for a fast-growing and financially strong company like Himax is acceptable. Since revenues will grow next year by 25-30% at least, as long as demand for the products will remain high, Himax' earnings and cashflows will show another significant rise. Data by YCharts The share price is up nearly 45% in 2021 while it was already much higher in summer. However, Himax is still very cheap according to its fundamentals. 4. Risks Himax is a Taiwan-based company with customers all around the globe. An economic shock, a Chinese military intervention or a severe supply chain disruption could heavily hit the company and are a real threat to its operations and business. However, there are no signs of any operational problems so far. 5. Conclusion Although Himax lost about 20% since my first coverage of the company, the fundamental situation hasn't changed to the worse. The high demand for its products likely guarantees more record quarters in the near future, which will be reflected in Himax' share price sooner or later. The fair price for Himax is well above $20 per share, especially if the company earns $3.00 per ADS next year, which is not very unlikely due to the current business environment. I recently increased my position in Himax and I am planning to hold the shares for years. Yours sincerely, Cassiopeia Value Investing
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I think we had enough on the stock price, lets have a little fun.
world-leading player - we should all know who this is Substantial volume shipment - We have not seen these words in LCOS since Google glass so the partner should be a big company I believe on the call they said "new customer" so probably not MSFT or GOOG. Rumors on Apple AR or future Facebook products did not mention anything about Industrial or Rugged so probably not them. Vuzix had buzz recently and has industrial use cases but I would not call them world-leading player and we have not seen anything with them and substantial volume. Anybody wants to guess who AR customer is ?
LCoS In the first quarter of 2021, Himax’s proprietary front-lit LCoS microdisplay, an integrated solution covering LCoS microdisplay, lightguide, and front-lit LED, had a successful design-win with a world-leading player for rugged headset for industrial working environment. It is an assisted-reality type hand-free head-mounted device, where the Company’s front-lit LCoS microdisplay module provides a 7-inch display view below line of sight to assist workers to access real time working information. Front-lit LCoS microdisplay of the Company demonstrated a perfect match with customer’s application in compact form factor, low power consumption and higher brightness. The Company is collaborating closely with the customer 11 for the strict industrial level qualification and expect substantial volume shipment starting from the third quarter of this year.
12 hours ago
If you are interested in HIMX, now is the time to buy! Let's talk FY-2021 cash dividend.
Background
HIMX released earnings for Q3-2021 that places year-to-date earnings at $1.69 per share. Guidance indicates further earnings of $0.745 - $0.795 per share for Q4-2021. So HIMX is effectively guiding $2.43 - $2.48 per share for FY-2021, which corresponds to a deeply undervalued forward PE of 4.62 - 4.71. (I am using today’s closing price of $11.45 as my basis for calculated the PE range.)
HIMX will also be paying an annual dividend based on FY-2021 earnings. This dividend is historically declared in sometime May (or June) and paid sometime in June (or July). The dividend could be a catalyst that finally starts to move HIMX to new highs.
Dividend Table
I have prepared a table showing the dividend paid by HIMX for every fiscal year since its IPO in 2006 (see below). Its purpose is to highlight the payout ratios for each of the 13 years that HIMX has paid a dividend. The payout ratio is the proportion of HIMX’s annual EPS that is paid out annually as a cash dividend. In the table, you can see that the payout ratio has ranged anywhere from 51.3% to 119.0%, with an average ratio of 77.9%. I note that three instances of the payout ratio were at 100% or above.
I believe that, for Q4-2021 and similar to Q3-2021, HIMX will post earnings at the upper limit of its guidance (i.e., $0.795/share). Using the average ratio of 77.9% with FY-2021 earnings of $2.48/share, we can estimate the annual cash dividend for 2021 to be $1.932 per share. This estimate implies a mind-boggling forward yield of 16.9% using today’s closing price. In comparison, the dividend yield for the S&P 500 and the iShares Semiconductor ETF is, respectively, 1.38% and 0.61%.
Discussion
HIMX pays out a very high proportion of its annual EPS as a cash dividend. To understand why, realize that Taiwan gives special tax considerations for dividends. In particular, a Taiwanese company which owns shares in another Taiwanese company is, regardless of the percentage ownership, exempt from business income tax on the dividends received from another Taiwanese company.
For example, Dr. Biing-Seng Wu is the founder and chairman of HIMX. He holds 74,579,944 ordinary shares of HIMX through two Taiwanese investment companies, i.e., Sanfair Asia Investments Ltd. and Chi-Duan Investment Co. (One ordinary share of HIMX is equal to one-half a U.S.-listed ADS and receives one-half of the dividend.) If HIMX declares a dividend of $1.932, the two investment companies will receive collectively $72,044,256 tax-free on behalf of Dr. Wu. A similar arrangement exists for Mr. Jordan Wu, the CEO of HIMX and brother of Dr. Biing-Seng Wu. However, Mr. Wu has established different Taiwanese investment companies for this purpose.
The point here is that the HIMX’s board and executive management have a serious tax incentive to pay themselves using dividends. Moreover, because HIMX did not declare a dividend for either 2018 or 2019, the board and executive management will be highly incentivized to issue themselves a fat dividend in 2022 to make up for these missing years. So the $1.932 amount I estimated above is a very real possibility and may even be conservative.
Conclusion
The impending 2022 cash dividend is very bad news for anyone short HIMX. As of October 15, the short interest in HIMX sits at 24,652,040 shares (or 14.1% of the float). At an estimated forward yield of 16+%, the shorts in HIMX are deluding themselves into thinking that they can slow-roast prime rib in front of a ravenous pride of lions and not get mauled.
The market is going to smell HIMX’s juicy dividend months in advance and start buying long before the dividend is declared. I believe the trigger point for such buying will be the Q4-2021 earnings announcement, during which, the FY-2022 EPS will be confirmed. Based on historical norms, HIMX should release Q4-2021 earnings the first week of February.
If you are interested in HIMX, now is the time to start buying. Today's post-earnings jump in price may be the start of a strong movement upward, just like November of last year. If HIMX moves to adjust its forward yield to 5% – which would still be better than every other semiconductor stock on the NASDAQ – HIMX will move from its present price of $11.45 to north of $30. So by buying now, not only would you get to experience fantastic gains, you will mostly like also be rewarded with a fat dividend if you are willing to hold until July.
May 10, 2021 3:33 AM ETHimax Technologies, Inc. (HIMX)8 Comments2 Likes
Summary
HIMX is grossly undervalued based on commonly used valuation metrics.
HIMX’s gross margin expansion thesis is sustainable due to transition to differentiated products.
Valuation gap will close as the company continues to execute its product differentiation strategy.
Target price is increased to $29.
In Ultra Modern Electronic Manufacturing Factory Design Engineer in Sterile Coverall Holds Microchip with Gloves and Examines it.
Photo by gorodenkoff/iStock via Getty Images
I have written two articles on Himax Technologies (NASDAQ:HIMX) recently. The first article was written in November 2020 after the 3Q print. The second article was written in February 2021 after the 4Q print. In both articles, I was very bullish based on the actual and projected gross margin expansion. Since HIMX has relatively fixed operating expenses, most of the increase in gross profit drops directly to the EBIT line. The results of HIMX improved rapidly since 3Q2020, driven by continuous GM expansion. This is shown in Figure 1.
Figure 1: HIMX's EPS growth is driven by its GM growth. Source: Company releases.
Even with the rapid EPS growth, the growth of its share price has stalled since its rapid rise from about $4 six months ago. It closed on May 7 at $12.86. This is shown in Figure 2.
Figure 2: HIMX ADS price chart. Source: SA.
With the rapid increase in its EPS, but with its stalled ADS price, HIMX ADS is now grossly undervalued. This article will detail the gross undervaluation and the transformation of HIMX's products to be more differentiated, which supports a higher valuation.
HIMX is grossly undervalued based on commonly used valuation metrics
HIMX's gross undervaluation is shown in Figure 3. Figure 3 shows the projected results of 2021 based on my model, as well as the TTM results as of 1Q2021 and 4Q2020. My 2021 model is rather conservative. The model assumes that the GM for 2Q through 4Q stays at the 46.5% level, which is the midpoint of management's guidance for 2Q. I have further assumed that there will be no more capacity addition in 3Q and 4Q, even though management guided for some addition. I have not taken into account the revenue from the LCoS product that will start to ship in 3Q. Furthermore, the model does not take into account the revenue from the WiseEye total solution PO HIMX received for production commencing in 4Q. Hence, there is ample upside for my 2021 model.
Figure 3: 2021 results model vs 1Q2021TTM and 2020 results. Source: Author's model.
Even with the conservative assumptions, the model shows an estimated 2021 EPS of $2.04. Yet the ADS is trading at $12.86, which is only a 5.7x forward EV/Net Profit for the year! The same model shows that the ADS is trading at forward 6.6x EV/FCF for the year, or a forward FCF yield of over 15%!
It is possible that investors still remember Google Glass (NASDAQ:GOOG) (NASDAQ:GOOGL), Hololens, and 3D facial recognition for Android phones, where the shares were bid up but then collapsed when no sustainable results ensued. It is possible that investors may only want to pay for actual results. Hence, I calculated the value of the same metrics on a TTM basis. The results are shown in the bottom part of Figures 3. The share price of $12.86 yielded an EV/Net Profit multiple of 18.5x, EV/Revenue of 2x and EV/FCF of 13.9 (or a FCF yield of 7.2%) based on TTM results at 1Q2021. These multiple values appear to be reasonable. I used these multiple values to estimate the share price at the 2Q2021 print and the 4Q2021 print. The results are shown in Figures 4.
Figure 4: Modeled share price at time of 2Q print and 4Q print. Source: Author's model.
Figure 4 shows potential appreciation of HIMX's share over the next three to nine months. These multiples are very modest compared to those of HIMX's peers and yield a new target price of around $29 in about 9 months. If HIMX can demonstrate that its product offering has structurally changed to achieve a sustainably higher GM, I believe that even a $40 target price is reasonable.
I will use peer multiples as a sanity check. I use the same peers that I have used before: SYNA, MXL, DIOD, SMTC. To this list, I have added SIMO, another Taiwan-based company. Comparable valuation metrics for the peer group are shown in Figure 5. While the SA data base does not show the exact same metrics that I used in Figure 4, a quick glance at the comparable metrics shows that the values of the metrics that I used in Figure 4 are rather conservative. This sanity check confirms the conclusion that HIMX shares are grossly undervalued.
Figure 5: Comparable peer valuation metrics and their current values. Source: SA data base.
HIMX's gross margin expansion thesis is sustainable due to transition to differentiated products
There can be many reasons why there is such a huge value gap. As a long-term investor, I am happy when
+ HIMX holding up okay considering the Taiwan covid case increases and sell-off in Tech and Small Cap spaces
+ HIMX needs to get their message out with the ongoing Needham conference, the upcoming Citi conference starting tomorrow and then the Cowen conference starting June 1st.
+ Seems HIMX needs to emphasize their 2Q guidance of:
=> Revenues to increase by 15% to 20% sequentially
=> Gross margins of 45.5% to 47.5% depending on the final product mix.
=> With the increase of both revenue and margin, net profit will increase substantially in second quarter. IFRS profit attributable to shareholders is expected to be in the range of $0.54 to $0.60 per fully diluted ADS
+ Yahoo Finance is not showing any EPS updates…but I am seeing some at Barrons website which I will link in a reply here. Still, it seems not all analysts used by Barrons have updated their estimates as they currently show a high of $0.57 (midpoint of guidance which is what they should all be), a low of $0.36 and an average of $0.47.
+ Need to get the message out about how to think of 3Q 2021 as the analysts used by Barrons are projecting a high of $0.48 (decrease of $0.11 from 2Q), a low of $0.33 and an average of $0.41 (decrease of $0.06 from 2Q).
+ While I don’t have the details on Credit Suisse’s $1.95 EPS for FY 2021, we can guess at the quarterly breakdown as we know HIMX did $0.38 EPS for 1Q and is guiding for a midpoint of $0.57 EPS for 2Q. So, $1.95 - $0.38 - $0.57 = $1.00 which is an average of $0.50/share for each 3Q & 4Q 2021.
So, will HIMX EPS drop from $0.57 midpoint in 2Q to an average of $0.50 EPS for 3Q and 4Q? And, I am mostly fine if that is true as those earnings should still deserve a 15 P/E which would give a share price of nearly $30.
Finally, what we really need is clarification on a return of the dividend. I doubt we get one this summer…but HIMX needs to address and make it known:
+ When the dividend will be back (perhaps in 2022 based on FY2021 profits)
=> Due to the possible size (perhaps $1/share based on just over 50% of the FY2021 earnings of $1.95) would it be a single annual dividend in early summer as before….or perhaps quarterly.
But mostly, why leave investors and analysts guessing? Just give some certainty….even if there are no plans. Just make the plans known.
Finally, HIMX should also make their thoughts known on share buybacks.
Comments/Discussion?
+ HUGE EPS raises (3Q, 4Q, FY2021, FY2022) as current 3Q EPS est is $0.43 & Mgmt guided to $0.78 midpoint
=> 3Q will compare to $0.07/share 3Q 2020 (1,000% YoY increase)
+ Price target could go over $30 as HIMX earned $0.38 and now $0.62 or $1 in 1H21
=> With guided $0.78 in 3Q & drop it 10% for 4Q and you have ~$2.50 for FY2021
=> $30/$2.50 = 12 P/E which is $16.x gain from weekend $13.9x for 115% gain
=> 20 P/E would give a $50 stock price
=> Current price target is $23 & would be under a 10 forward P/E
+ Funds who attended the 5 confs in May/June could see these and buy/add
So, when the analysts, retail and trading bots find these very large EPS and price target raises, HIMX share price should really move up.
Then, the July short reports were 12.x million shares which is 10% of float. We also know ~2.75 million shares were ‘borrowed’ last week so that could help any short squeeze.
As per the dividend, it should be over $2/share IF HIMX pays out their typical 75+% of prior year’s profits.
What is the downside here? We just need the bots & institutions to see the HUGE EPS and Price Target raises…and the lower P/E and huge dividend.
Taiwan COF packaging/testing service providers positive about 4Q21 demand
Prices for DDI used in large-size panels unlikely to slip
Also, there is interesting article on Trendforce
AR/VR Device Shipment for 2022 Expected to Reach 12.02 Million Units Thanks to Rising Opportunities in Metaverse. W
Ever since Facebook gone Meta, there is a lot of buzz about Meta economy, and even Cramer pushes investment into Metaverse related companies, he just does not realize Himax can be one of the dominant players in AR hardware.
Himax is $30+ per share company. Do not sell your shares cheap. If you have the cash to add, buy more while the opportunity is there. You can thank me later.
1- My suggestion is to institute a 25 cent quarterly dividend now as they would normally payout over $1.50 in 2022( and payout the rest as a special dividend in 2022) as they are required to payout the previous years profits or pay a 10% penalty tax on undistributed earnings.Many Taiwan companies are starting to pay dividend quarterly.
2- List HIMX on the Taiwan exchange as a dual listing where they have much better institutional coverage and also smarter investors. The stock price would triple if they did that and would also get rid of the shorts and MM manipulation. The shorts would also have to pay us the quarterly dividend.
3- last thing would be immediately institute a $100 million buy back as they are earning over $400 million a year in cash and are just printing money everyday including Sundays.
So they said before that every quarter, they will get expansion of the capacity in 2021 and that means that Q2 will have even higher revenue than Q1 while they will be able to at least maintain Q1 gross margin, that means more than 70 million profits in Q2 on top of 70 they made in Q1 and though things might slow down in Q3 they will still be pumping some serious cash as the new products will start being rolled out. By now it becomes kind of obvious that during summer they will bring back dividends(though based on last year income, we should expect something modest). How will they use the rest of the cash though is very interesting to me as this is the key to where stock will go to long term and I am hoping that when they do official announcement in May, we will get a hint.
Potential ways to use that cash are:
-Stock Buy back- they have done this before, Benefit to stock moderate, risk low
-Pay out loans - they already re-structured some last quarter, Benefit to stock moderate, risk low
-Hoard Cash and make income , probably not ideal but still beneficial scenario
-Further expand WLO production Capacity, they said before it is a possible scenario if they get Apple business and win other high profile clients, saw on the news that TSMC is starting early production of next gen Apple products and in the normal scenario Himax would know if they in next gen product in Q2, this has higher (moderate) risk but also offers higher stock benefit long term
-Pump Money into R&D of their non DD products or outright buy another company in complementary industry, highest risk and highest potential rewards
1. Per Digitimes, Himax is raising prices 10 - 20% and that will bode well for Q2 profits, so we should expect Q2 estimates go up by something similar, say to $350 million revenue and $45c per share profit.
2. Himax publishing on GitHub info about second generation board for Azure platform, so relationship with Microsoft and activity in AIoT is moving at rapid pace which bodes well for their diversification effort.
- Will not post links anymore , too many post get deleted, should always be easy to search source name
-There was discussion on Options few weeks ago , well , last Friday was day when lots of options with interest outstanding were closing so that sell out I would put on that + generally negative market day
-Virtual CES is so far is interesting but with no direct announcements related to Himax. However the industry trends positive to Himax seem to be on growth trajectory.
-Digitimes today had several articles on foundries expanding production so there is good hope that Himax will get solid footing on capacity expansion. Also, now they say that demand is solid through Q3, so it looks like we have visibility further into a year.
Another digitimes article talks about fast automotive IC demand growth in 2021 which chimes with Wu's comment about automotive IC growth multiple.
There are new SDK releases for WiseEye boards to support new type of sensors and that gives clear direction that we will see expanded use cases around smart home like smart firealarms, weather stations, etc. WiseEye will be a hot area of growth and it is interesting if they give us a hint on modeling product growth to earnings growth. Some of the new use cases can be very big - Typical home has one doorbell, several TVs (but market is already saturated), several FireAlarms but right now smart Fire Alarms means it is connected and can signal to the phone a threshold breach vs actually learn from your environment. We can have products with large addressable demand and priced where new features actually worth price of upgrade.
In a pre-announcement they said "strong momentum across all major business segments", Hopefully that means that they have solid demand and booking on WLO so no efficiency drag.
We also know (taken from Conf Call transcript at Seeking Alpha):
+ HIMX 1Q results were:
=> net revenue of $309 million, an increase of 12.1% sequentially and an increase of 67.4% compared to the same period last year. The 12.1% sequential increase of revenue exceeded our guidance of an increase of around 5% to 10% quarter-over-quarter with strong demand across all our major business segments.
=> Gross margin was 40.2%, exceeding guidance of 37% to 38% and significantly improved from 31.2% of the fourth quarter 2020.
=> IFRS profit per diluted ADS was $0.383, exceeding our guidance of $0.30 to $0.34. Strong sales and improved gross margin contributed to the better than expected earnings results.
+ HIMX guided for 2Q results with further revenue and margin growth from the already high 1Q results such as:
=> Revenues to increase by 15% to 20% sequentially
=> Gross margins of 45.5% to 47.5% depending on the final product mix.
=> With the increase of both revenue and margin, net profit will increase substantially in second quarter. IFRS profit attributable to shareholders is expected to be in the range of $0.54 to $0.60 per fully diluted ADS
+ While we focus a lot on P/E and EPS, HIMX also has a strong balance sheet as per:
=> “Turning to the balance sheet, we had $245.8 million of cash, cash equivalent and other financial assets as March 31, 2021 compared to $126.6 million at the same time last year and $201.4 million a quarter ago. The higher cash balance was derived mainly from $60.3 million of operating cash inflow during the quarter.”
So, we know HIMX is firing on all cylinders…so let’s look at how HIMX can continue to grow…and that is both near term (2Q & 3Q is mostly more of the same) and then longer term. See my reply here for Conf Call comments on growth factors:
Summary
Technical analysis indicates that now is an excellent time to buy into HIMX. As shown in the chart below, HIMX is breaking out of a four-month long decline and buying now allows an entry point that comes with low downside risk. Moreover, this break-out is occurring in November, exactly one year from the break-out that occurred last November. Comparing the two break-outs suggests that strong gains lie ahead for HIMX.
$10 Support Held
HIMX has a support at $10 that has been tested multiple times this year (see chart). This support first started as a resistance (point 1), which then switched to a support that was subsequently tested six times (points 2-7). In general, the more a support is tested and holds, the stronger it gets. For example, at point 6, the support was breached and HIMX closed below $10. However, the very next trading session HIMX recovered and closed above $10. In subsequent trading sessions the $10 support was tested but not breached (point 7). If a support is breached, but subsequent trading sessions fail to confirm this breach, the support is considered to have held. The chart shows that the $10 support has held pretty much throughout 2021.
Downward Channel Broken
HIMX has been in a downward channel since July 1, forming a descending flag pattern. However, HIMX broke out of this pattern between Oct. 28 - Nov. 1, which is right where the upper channel line intersects the $10 support. A break-out at this location is not coincidental and very bullish for HIMX, especially given the strong post-earnings follow-through on Nov. 5. In fact, this break-out mirrors the start of the break-out that happened back in November 2020. Again, very bullish.
Conclusion
After months of decreasing prices, HIMX has formed a reversal that is turning into a strong break-out. This break-out will especially accelerate if the bears capitulate and close out their short positions. (As of October 15, the short interest is 24,652,040 shares or 14.1% of the public float.) I have already posted about the lure of HIMX’s FY-2021 dividend, which will most likely be above $1.92 per share and correspond to a 16+% forward yield. But there is one other thing to consider.
The market is heading into December, a time in which many investors and institutions re-balance their stock portfolios for the next year. Such re-balancing includes investors and institutions reducing their exposure to stocks that performed well but have become overextended. The resulting profits are rotated into undervalued names. HIMX is deeply undervalued relative to virtually all other semiconductor stocks. For example, AMD and NVDA have forward PE ratios of 41.04 and 63.74, respectively, while HIMX has a forward PE ratio of about 4.7. As such, HIMX is going to garner a lot of buying interest in December due to its ridiculously low PE, strong projected 2022 revenues, expanding 2022 margins, and mind-boggling 16+% forward yield.
The bottom line here is to get in early before HIMX really starts to move. If Friday’s (Nov. 5) price action is any indication, investors liked what management had to say during their earnings call (Nov. 4) and more will buy into HIMX as the word starts to spread. The technical analysis shown in the chart below indicates that now is an excellent entry point in HIMX and comes with low downside risk.
Eric Li -- Chief of Investor Relations/Public Relation Officer
"As before, our dividend was determined primarily by prior year's profitability. Our decision to pay out full net profit of last year's demonstrated the management's strong confidence for our business prospect. As of June 30, 2021, Himax has 174.3 million ADS outstanding, little change from last quarter. On a fully diluted basis, the total number of ADS outstanding was 174.7 million. Now turning to our third quarter 2021 guidance. For the third quarter, we expect further revenue growth from the already high level of Q2 2021. Gross margin should see another uptick and could reach another quarterly high. For the third quarter, we expect revenue to increase 13% to 17% sequentially. Gross margin is expected to be in the range of 15.5 -- 50.5% to 52%, depending on the final product mix. With the increases of revenue and margin, we anticipate net profit should increase substantially in third quarter.
Non-IFRS profit attributable to shareholders is expected to be in the range of $0.75 to $0.81 per fully diluted ADS. The third quarter IFRS profit attributable to shareholders is estimated to be in the range of $0.63 to $0.69 per fully diluted ADS. Similar to our usual practice, we will grant RSUs on around September -- on or around September 30 for this year for employees' share-based compensation. The third quarter guidance for IFRS profit per diluted ADS has taken into account the expected 2021 RSU grant, which, subject to Board approval, is now assumed to be around $75 million, out of which $26.3 million or $0.118 per diluted ADS will be vested and expensed immediately on the grant date. As a reminder, the total RSU amounted and the immediately vested portion are our current best estimates only and could vary materially depending on, among other things, our Q4 profit and the final decision for the total RSU amount and its vesting scheme.
As the case for previous year, the RSU grant in 2021 will lead to higher third quarter IFRS operating expenses compared to other quarters of the year. In comparison, the 2020 RSU totaled $5 million, out of which $4.8 million was vested immediately. Needless to say, our estimated total RSU amount is significantly higher than those prior years due to anticipated record high profit for this year. This is an illustration of our appreciation to team for their hard work. This also demonstrates our confidence in our long-term growth prospects."
1. Upgrades
2. Dividend announcement (I project around .25)
3. Institutional Buyers
4. The Pre announced Q1 coming in, at or above estimates already provided.
There is one 'why' that could be on people's mind, why they did not pre-announce and we will get answer for that. I think that this is small risk as even if they announce earnings at low end of the forecasted, they are still phenomenal earnings for current stock price.
My guess, and I stated this before, is they invest into sizing their WLO production and that took a chunk of earnings this quarter but that is actually good news for the long term. If they got Anchor customer revenue back this year and any new clients , they need to expand production. On the subject of WLO, if they announce work on higher frequency WLO which most likely will be used by Anchor in the future for under the screen face id, then Himax has WLO revenue stream is likely set for a long time.
As it typically goes with Himax, good news comes with some disappointment. I always hope this will not happened but no, here we are again - foundry shortages limit growth, no dividend, same boring LCoS message, no orders in 3D ToF yet and can not show any visibility on plans for Anchor customer. The best we can hope for Apple , they did not get their order in yet because non driver for Q3 does not reflect large WLO purchase. Either we going to have really nice surprise if Apple places order for next gen or they lost them for 1 whole generation of products(at least).
Long term picture remains intact, one way or the other, non driver products will grow in significance while DD will continue its roller-coaster demand. Right now, WiseEye looks like it has best prospects for explosive growth but we talking about 2021 at earliest when we see any significant revenue coming from that product line.
So my best guess, short of any major client\partnership announcement(hype) or general economic cycle surprises, the stock will not break $10 on the upside but have limited downside because they are profitable and kind of said expect to be profitable in Q4(improve gross margin). To put it the other way, not enough reasons for analyst to upgrade \downgrade significantly.
I would like to see bounce to $6 based on better visibility near term and good long term prospects but since market typically does not listen to me, this is just a conversation starter. Anybody care to share their opinion on Himax stock?
procurement and module manufacturing arrangements. Additional versatile AI vision software feature releases will continuously be made available to meet the emerging demand for the customer’s new AI use cases,”
Oct. 21, 2021 12:51 AM ETHimax Technologies, Inc. (HIMX)3 Comments8 Likes
Summary
• Since my first analysis of Himax, the stock has fallen about 20%.
• However, EPS has increased more than the market expected and the fundamental situation is still improving.
• The stock trades below its fair value, especially because the chip shortage continues and the demand for Himax' products will likely be high for the next two years at least.
1. Business environment
Himax (HIMX) develops display drivers for several electronic devices. Its products are not only used in TVs, mobile phones and cars, they are also integrated in monitors, tablets and cameras. 3D sensing is also a very promising technology which is used for e-payments and facial recognition. Hence, Himax plays a major role in key technologies which will face a growing demand in the short and long term. Firstly, there is currently a high demand for electronic devices like computers and tablets. Secondly, car manufacturers cannot satisfy demand for EVs since they need more chips than gasoline cars. Many manufacturers already announced production cuts and halts which indicate that the high short-term demand for chips will last the next quarters to come. Although big semiconductor companies like Taiwan Semiconductor Manufacturing Company (TSM) have announced plans to build new facilities to increase production capacities, a positive effect on global supply will be noticed only after a few years. Thirdly, it is likely that these two demand effects not only last, but will also intensify in the next few years, especially if the number of EVs sold increases strongly which is forecasted by economists. Furthermore, the global trend "digitalisation" will continue and products with Himax' display drivers will definitely profit from this trend. Last but not least, the rising interest in security technology (including facial recognition and different types of sensors) and Smart Home devices could further drive the company's growth. One major threat to Himax' growth is a supply chain disruption which is, according to the company's Q2 report, not in sight and won't affect its earnings and revenue growth.
2. Himax' first half year results and Q3 guidance
Himax reported a record quarter with record revenues, earnings and margins despite capacity shortages across all business segments. The management states that it will increase capacities next year compared to 2021. In the second quarter 2021, Himax earned $0.62 per ADS and $1.00 per ADS in the first half. Revenues increased by 81% from last year to $674 million. The company guides $0.63-$0.69 per ADS for the third quarter, but Himax has always beaten its own guidance this year and it is likely that it will beat it again. If we assume $0.7 per ADS for the third and fourth quarter, the 2021 annual earnings per ADS would increase to $2.40 at least.
3. Balance sheet and valuation
Himax is a financially healthy company with a net debt of $-335 million, $250 million cash on hand and an equity ratio of 53%. With 174.8 million shares outstanding and a share price of $10.6 (as of 10/20/21), the total market cap is $1.85 bn. Net cashflow from operating activities is expected to climb to $300 million and total equity climbed to $614 million. Himax paid a dividend of $0.27 per ADS, but the payout will be significantly higher next year.
Fundamental ratios:
P/E 2021 P/S P/B P/CF CAPE yield 2021-22
4.4 1.37 3.0 6.2 16 2.5-4.5%
All in all, the stock is actually very cheap, because a P/B ratio of 3 for a fast-growing and financially strong company like Himax is acceptable. Since revenues will grow next year by 25-30% at least, as long as demand for the products will remain high, Himax' earnings and cashflows will show another significant rise.
Data by YCharts
The share price is up nearly 45% in 2021 while it was already much higher in summer. However, Himax is still very cheap according to its fundamentals.
4. Risks
Himax is a Taiwan-based company with customers all around the globe. An economic shock, a Chinese military intervention or a severe supply chain disruption could heavily hit the company and are a real threat to its operations and business. However, there are no signs of any operational problems so far.
5. Conclusion
Although Himax lost about 20% since my first coverage of the company, the fundamental situation hasn't changed to the worse. The high demand for its products likely guarantees more record quarters in the near future, which will be reflected in Himax' share price sooner or later. The fair price for Himax is well above $20 per share, especially if the company earns $3.00 per ADS next year, which is not very unlikely due to the current business environment. I recently increased my position in Himax and I am planning to hold the shares for years.
Yours sincerely,
Cassiopeia Value Investing
world-leading player - we should all know who this is
Substantial volume shipment - We have not seen these words in LCOS since Google glass so the partner should be a big company
I believe on the call they said "new customer" so probably not MSFT or GOOG.
Rumors on Apple AR or future Facebook products did not mention anything about Industrial or Rugged so probably not them. Vuzix had buzz recently and has industrial use cases but I would not call them world-leading player and we have not seen anything with them and substantial volume. Anybody wants to guess who AR customer is ?
LCoS In the first quarter of 2021, Himax’s proprietary front-lit LCoS microdisplay, an integrated solution covering LCoS microdisplay, lightguide, and front-lit LED, had a successful design-win with a world-leading player for rugged headset for industrial working environment. It is an assisted-reality type hand-free head-mounted device, where the Company’s front-lit LCoS microdisplay module provides a 7-inch display view below line of sight to assist workers to access real time working information. Front-lit LCoS microdisplay of the Company demonstrated a perfect match with customer’s application in compact form factor, low power consumption and higher brightness. The Company is collaborating closely with the customer
11 for the strict industrial level qualification and expect substantial volume shipment starting from the third quarter of this year.