Hopefully this translates into the anticipated uptick in sales fro Q2-Q4.
"Actions has received the China Semiconductor Innovative Product and Technology for seven consecutive years. After receiving the Most Promising Product Award in 2013, ATM7029 is again being recognized by the China Semiconductor society with this award. Furthermore, Actions was also recognized as the China Best Growing IC Design Enterprise in 2013."
I have been reading more and more articles lately re the state of the semiconductor industry and how China is the largest market in both production and consumption. Also, 2 of every 3 semiconductor IPOs are in China. Furthermore the Chinese government is contributing financial resources to assist the industry.
The consensus is that the government wants to create a few big semiconductor players that could compete wi Qualcomm, Intel and Marvell. This obviously means consolidation in the Chinese market where acts is.
Given acts massive IP vault and cash hoard, acts could be a very attractive target for an acquiring company.
That is good news. Acts must diversify its client base now to not only gain market share and increase revenues but also to protect itself against potential client loss/migration.
I was just browsing on AliExpress (retail arm of Alibaba) and found that on the bestseller tablet list, number 4 is Gooweel G10X tablet 10inch Capacitive screen ATM7029. This is very good news since till now Actions was only in Ainol and Ramos.
By the way number 3 from the top of the list was white box P706 using ATM7021. Big number of orders. Number one on the list was white box using Allwinner A23 Dual-Core SoC. The difference in orders between no 1 and number 3 was very small. Seems like Actions chip is taking some market share. AcliExpress is a huge web retailer selling all over the world.
More on the competitors:
The following are some of the most popular tablet makers in China:
Yuandao M10 - RK3188, 10.1", 1920x1200
iFive 3 - RK3188, 9.7", 2048x1536
Onda v975m - M802, 9.7", 2048x1536
iFive X3 - RK3188, 10.1", 1920x1200
The above are some top tablet makers. Would be nice if some of the above used Actions chip set in the future. At the moment Ainol and Ramos use Action SoCs. These are also popular.
PS: Many people are looking forward to both A80 and RK3288 chip releases from Actions competitors.
There must be quite a few orders in the pipeline. The 1st quarter estimate is $12M - $13M. The full year estimate fro 2014 is 20% - 25% growth on 2013's revenue number of $69.4. Based on that, the mid-range full-year estimate is $85M. That means only 15% of the year's revenue is expected in the 1st quarter. I would fully expect that the dip in price on the low 1st quarter estimate will reverse when future guidance points to the $85M expected for the full year.
1. Increased revenues
2. Break even to a few cents annual earnings
3. New tablet chips announced and rolled-out
4. More share buybacks
5. Cash levels stay consistent
6. Share price $2-3.5
I would like to see more design wins and new deals announced with new vendors/distributors.
If they can keep buying at less than $3.00, why should they go for a tender after at 3.50? The share prices will be close to the recent drop soon.
Good point. It makes no sense for the management to pay out dividends or do Dutch tender. They need to keep their ammunition to brake to the front of their Chinese competitors. ACTS was very clear that there will be no tender. They need cash to go to 28nm process, 64bit and maybe LTE. It makes sense. Richard Fearon was very unhappy about this but so what. This is life. job one for ACTS is to beat Rockchip, Allwinner and Mediatech. Rockchip already has 28nm. ACTS is a bit of a newcomer in comparison to the others. The 800 lb gorilla is of course Qualcom. ACTS needs SoC close to Qualcom spec at much lower price.
Looking at the other Richard Fearon complaint, that is cash spend on R&D. The over $6M quarterly expense only makes sense if the company reaches sales over $30M quarterly. At 30% operating margin $6M R&D and $3M other costs, the $30M is a break even point. They need to get to $40M and beyond to be really profitable. So far sales are a far cry from such sales.
I think we need to see this from management’s point of view. They are trying to break into a fiercely competitive business. Their market share is tiny compared to the industry leaders. They know that this is a business where the top company gets the lion’s share of the profits, and everyone else gets squat. Their only strategic assets are contacts, related industry experience, and a huge steaming pile of cash. They also don’t know you don’t get from the bottom to the top in one or two years. To compete they have to have the wherewithal to be in this for the long run. We might want something different but I think we have to accept that aren’t going to see any of that cash distributed. It is what it is.
I just listened to the conference call. While I would have liked to have seen a tender offer announced, I actually see good news in the reason they opted against an offer. The bankers they consulted did not feel that enough shares would have been tendered in the $3.30 - $3.50 range to make the administrative cost of the offer worthwhile. I would assume that they polled a few large holders to get the price range and feel out whether people would accept the $3.30 - $3.50. That being said it is time to try something else. How about a special one-time $1.00 or $2.00 per share dividend?
Yes, good points. However, keep in mind that the business itself is not that significant to the valuation. The cash dwarfs it. In my opinion the discount is due to concerns about the cash. Increasing borrowings, insignificant buybacks, and potential new share issuance coming due to the F6 filing. These are red flags. There is no rational explanation for not buying back shares at these levels. Why worry about tiny interest spreads when you can buy your own shares for 70 cents on the dollar RISK FREE?
Yes, I understand. But it seems like a lot of trouble for little return. Any gains they might make could easily be wiped out with currency fluctuations. It's not necessary. Also, the loans are growing each and every year.
The buybacks are meaningless. There are more shares outstanding in 2013 than in 2012 due to options. Lastly, what is up with the share registration of 10 million new shares. They've been public for years and now they need this. Too many red flags for me. What can I say.
Agree techie. Acts promised 25 percent rev growth in 2013 and they beat it. They promising 20-25 percent growth for 2014. That is excellent and would bring their revs closer to levels seen in 2008. If they can meet their promise I could care less which quarters they book the revenues in. What concerns me is the lack of giving something back to shareholders. $1.8m in buybacks is nothing, especially since their share price us so low compared to their book value. I like management but am a bit ticked off by the lack of a tender offer.
Although in the CC they did state that they expected revenue growth of 20-25 percent which is quite good. It appears that they are banking heavily on the 2nd, 3rd and 4th quarters.
Re your no 1 concern. They are just opportunistic. The cash loan was borrowed in US dollars at very low interest. This was better for them than using their own cash that produces better return than the rate Action has to pay. I'm very certain that all is above board regarding their reported cash.
My disappointment is with sales. They just seem unable to grow sales in any meaningful way. Today's guidance is really low. Like a throwback to two year ago paltry sales.
As I look at the competition to their ATM chips I see big boys like QCOM or INTC. Snapdragon 805 is a great chip. Intel is also there with good stuff. How can the little ACTS compete. Price I suppose is the only thing. I don't have enough engineering knowledge to evaluate the technological advantages of these chips. But with price there are a few of small ACTS like competitors in China. The main ones are Rockchip, Allwinner and Mediatech. They have chips that compete with ATM line.
I have checked on Alibaba the ACTS chip are designed in a few other tablets besides Ainol and Ramos but also Bai Yu, Videostrong, Dan Ming. I'm not sure if some of them are just trading companies and not manufacturers.
Last comment is that top ATM7039 doesn't include bluetooth, LTE or GPS. I suppose Snapdragon has that included. Snapdragon is much more expensive.
All in all Actions has a chance to get market share for SoC but so far with $12M guidance this doesn't look too good.