Wireless chip specialist
Investors had baulked at the hefty price tag for the loss-making business, which was reduced after it released a profit warning during the takeover process. Indeed, Zoran lost a further $4.7m (£2.96m) in its first period under CSR's ownership, dragging the overall group business to a fourth-quarter pre-tax loss. But management remains confident that the deal enhances its ability to develop platforms for end-markets in which it has the scale to compete profitably – including automotive, imaging, location and audio, which enjoyed a particularly strong fourth quarter as customers, including Sony and Nokia, launched new products. Platform revenues now account for 56 per cent of revenues, up from 36 per cent a year earlier, which helped lift gross margins to a record 51 per cent.
The recent decision to exit the increasingly commoditised TV business should help enhance profitability further, as will the $130m of annualised cost savings which will have been implemented by the end of the first half.
Broker Numis expects full-year underlying pre-tax profit of $65.3m, giving EPS of 25.1¢ (from $29.9m and 8.6¢ in 2011).
|ORD PRICE:||272p||MARKET VALUE:||£546m|
|TOUCH:||271-272p||12-MONTH HIGH:||420p||LOW: 153p|
|DIVIDEND YIELD:||2.4%||PE RATIO:||23|
|NET ASSET VALUE:||437¢*||NET CASH:||$278m†|
A further $50m of share buy-backs and a hefty dividend hike may have pacified CSR's long-suffering investors for now, but it's still too early to tell whether its new strategy is enough to deliver in highly competitive consumer-facing segments. Hold.
Last IC view: Fairly priced, 186p, 19 Dec 2011