AZ Electronic Materials makes the chemicals that are essential for electronic devices such as flat panel displays and light emitting diodes. And while tough economic conditions meant volatile demand during the first half, second-quarter sales rose 8 per cent compared with the first quarter and management expects a "stronger growth environment" for the fourth quarter. That improving outlook leaves the shares looking too cheaply rated.
The integrated circuit (IC) materials unit did see half-year sales slip 1 per cent year on year to $265.8m (£168m). But the division's niche operation grew sales 2 per cent as that business benefited from further product penetration, as well as increased wafer capacity and utilisation by customers. Management expects new product launches in the second half and beyond to help continue those trends. Meanwhile, optronics sales dropped 2 per cent to $108m - reflecting abnormally large flat panel inventories at the group's customers. However, management says that certain customers have restarted capital expenditure projects - which is helping to boost demand. AZ also increased research and development spending by 12 per cent to $28.1m - which helps explain the 10 per cent slide in group operating profit to $68.7m.
UBS expects full-year EPS of 37¢ (35¢ in 2011).
AZ ELECTRONIC MATERIALS (AZEM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 293p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 292-294p | 12-MONTH HIGH: | 325p | LOW: 204p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 195¢* | NET DEBT: | 44% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 392 | 60.9 | 10.7 | 3.80 |
| 2012 | 384 | 58.5 | 9.90 | 4.00 |
| % change | -2 | -4 | -7 | +5 |
Ex-div: 5 Sep Payment: 19 Oct *Includes intangible assets of $1bn, 268¢ a share £1=$1.5897 | ||||
