Home 190522 RoodMicrotec | SCM: Stability Creating Momentum [Issuer Sponsored Report]
190522 RoodMicrotec | SCM: Stability Creating Momentum [Issuer Sponsored Report]

190522 RoodMicrotec | SCM: Stability Creating Momentum [Issuer Sponsored Report]

No. pages 32

RoodMicrotec is an independent service provider for companies that develop Application-Specific Integrated Circuits (ASICs) for use in the Automotive, Industrial, Healthcare and HiRel/Aerospace sectors. Until fairly recently, the company’s services only included engineering, testing and programming, qualification and reliability analysis, and failure analysis, on an individual basis. Through close co-operation with a select group of highly specialised business partners, the company now also offers services that cover all aspects of the ASIC value chain, from the design of semiconductors, all the way to the delivery of the end-product (serial parts).

This full-service concept is referred to as Supply Chain Management (SCM).

The key advantage of the SCM contracts is that – in contrast to the ad-hoc nature of the contracts for individual services – they enable the company to create income streams of a more recurring nature over the full life span of a product (up to five years and often even longer), which contributes to more predictable revenue and improved stability in the long run.

The transformation from a rather cyclical company, highly dependent on ad-hoc business, into one with improving visibility and a more stable revenue will take time. Since the company decided to prioritise growth in SCM, it has secured six contracts until recently. Five of the six contract are in the production phase. One contract was terminated because a customer decided not to go ahead with the development of the end-product.

Last week, when RoodMicrotec issued its 1Q19 trading update, the company announced that three out of its four SCM projects under negotiations have been converted into contracts. These are now in the engineering phase and the company expects production to start in 2020 and 2021. This brings the total number of SCM projects to eight.

Additionally RoodMicrotec is in negotiations on three new projects with different customers, two in the Automotive market and one in the Industrial market. This offers the opportunity to increase the number of SCM projects to twelve. With the growing number of projects the revenue share of the SCM contracts (last year approx. 25%) will steadily rise to a much higher level.

Financially, RoodMicrotec has been making good progress. In the past three years, the company managed to grow its revenue by 9.5%, per annum, on a Compound Annual Growth Rate (CAGR) basis and posted a net profit again in 2018. The balance sheet shows a net debt of EUR 0.9m or a mere 0.7 times Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). Notably, the company has issued EUR 2.5m in perpetual bonds to meet its obligation towards the German pension fund. Although the interest payments have been subject to certain conditions (which are not expected to be met in the near future), the very high coupon of 11.70% is a factor to monitor closely. Consequently, looking at the reported debt ratio in isolation would be incorrect.

Looking ahead, the company has set financial targets for 2020. Delivery of these targets will mainly depend on two factors. Most importantly, revenue growth will have to remain in line with that of recent years. It will be less crucial, but similarly important to monitor the revenue mix (with a somewhat lower gross margin on SCM contracts).


       Summary and Conclusion
1.    Introduction
2.    Activities
2.1. RoodMicrotec: an independent service provider
2.2. What is an ASIC?
2.3. The ASICs value chain: from design to logistics
2.4. Strategy
3.    Market Environment
3.1. Introduction
3.2. Automotive sector
3.3. Industrial and Healthcare
3.4. HiRel/Aerospace and Other
3.5. Competitive landscape
4.    Historic financial performance
4.1. Profit and loss account
4.2. Balance sheet
4.3. Cash flow
5.    Deliverables
5.1. Financial targets
5.2. Scenarios
5.3. Valuation multiples
6.    SWOT analysis

Legal notice

This publication has been prepared by the Idea-Driven Equities Analyses company B.V. (hereafter: the IDEA!) solely for information purposes.

The Content is provided on an as is basis, without warranty (express or implied). Whilst the Content has been prepared with all reasonable care from sources we believe to be reliable, no responsibility or liability shall be accepted by the IDEA! for any errors or omissions or misstatements howsoever caused. Any opinions, forecasts or recommendations reflect our judgment and assumptions at the date of publication and may change without prior notice. the IDEA! will not accept any responsibility for updating any advice, views, opinions or recommendations contained in this document.

No guarantees or warranties regarding accuracy, completeness or fitness for purpose are provided by the IDEA!, and under no circumstances will any of the IDEA!, its officers, representatives, associates or agents be liable for any loss or damage, whether direct, incidental or consequential, caused by reliance on or use of the Content.

The Content has been prepared for general information purposes only and is not (and cannot be construed or relied upon as) personal advice nor as an offer to buy/sell/subscribe to any of the financial products mentioned herein. No investment objectives, financial circumstances or needs of any individual have been taken into consideration in the preparation of the Content.

Financial products are complex, entail risk of loss, may rise and fall, and are impacted by a range of market and economic factors, and you should always obtain professional advice to ensure trading or investing in such products is suitable for your circumstances, and ensure you obtain, read and understand any applicable offer document.

the IDEA! has been commissioned to prepare the Content. the IDEA!’s representatives or associates do not hold interests, transact or hold directorships in the companies mentioned herein; they may however perform paid services for these companies. the IDEA! and its associates, officers, directors and employees, do not hold securities in the companies referred to herein nor trade in those securities.

the IDEA! receives fees from the company referred to in this document, for research services and other financial services or advice we may provide to that company. The analyst has received assistance from the company in preparing this document. The company has provided the analyst with communication with senior management and information on the company and industry. As part of due diligence, the analyst has independently and critically reviewed the assistance and information provided by the company to form the opinions expressed in the report.
Diligent care has been taken by the analyst to maintain an honest and fair objectivity in writing this report and making the recommendation.

Where the IDEA! has been commissioned to prepare Content and receives fees for its preparation, please note that no part of the fee, compensation or employee remuneration paid will either directly or indirectly impact the Content provided.

This Content is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Content is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

This Content is distributed in the United States of America solely to "major institutional investors" as defined in Rule 15a-6 (U.S. Securities Exchange Act of 1934) and may not be furnished to any other person in the United States. Each U.S. recipient by its acceptance hereof warrants that it is a "major institutional investor" as defined, understands the risks involved in dealing in securities or any financial instrument and shall not distribute nor provide this report, or any part thereof, to any other person

the IDEA! relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This Content is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, the IDEA! does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Investors outside the United States and United Kingdom are encouraged to contact their local regulatory authorities to determine whether any restrictions apply to their ability to purchase investments to which this Content refers.

Copyright 2019 the IDEA! All rights reserved.
No further distribution is permitted without the IDEA!’s express written consent.

Download report

RoodMicrotec | SCM: Stability Creating Momentum

Created Date: Wednesday May 22, 2019 12:28:21
Last Updated Date: Wednesday May 22, 2019 12:28:21
Download in: 1Downloads
euroirp-logo© 2011 the IDEA! | terms of use | disclaimersitemap |