This is a big reason I invested (again) in IMOS. Excerpt from a great seeking alpha article:
This is a high quality company with a long operating history, excellent customers, and a clean balance sheet. We expect the company to generate approximately $4 per share of free cash flow this year (~40% FCF yield), similar to last year's $4 per share FCF, and next year's $4 FCF. According to recent comments from management, the company will be net debt free by year-end versus almost $500 million of net debt in early 2009. Prior to 2012, the company's EPS has been muted and negligible due to above-trend depreciation from legacy cap-ex, but with depreciation decreasing to $160 million in 2012 from $195 million in 2011, EPS will exceed $1 this year. Depreciation falls to $125 million in 2013 and $105 million 2014, so EPS will grow dramatically if all else stays equal.
But all else should not stay equal -- it should improve. ChipMOS assembles and tests LCD driver-ICs, flash memory and commodity/mobile DRAM, and is highly levered to the smartphone and tablet markets. So if you believe, as we do, that the growth of smartphones/tablets is a sustainable megatrend, but don't want to pick a winner between Apple (AAPL), Amazon (AMZN), Google (GOOG), Microsoft (MSFT) or others, ChipMOS is a great, cheap way to get exposure, especially since it faces few competitors in the assembly and test space.
Using 2013 metrics, we arrive at our valuation based on shares trading at 8x-10x 2013 EPS of $2.50-$3.00 ($20-$30), 6x-8x 2013 Free Cash Flow of $120 million ($24-$32), or 4x-6x EBITDA of $220 million ($29-$44). These are conservative estimates that are essentially the same numbers as 2012, except EPS, which increases because of a $35 million decline in depreciation.