Stock Preacher

Aixtron Aktiengesellschaft (NASDAQ: AIXG)

AIXTRON AG (AIXG) is a provider of deposition equipment to the semiconductor industry. The Company’s technology solutions are used by a range of customers globally to build components for electronic and opto-electronic applications based on compound, silicon or organic semiconductor materials. The components are used in displays, signaling, lighting, fiber optic communication systems, wireless and mobile telephony applications, optical and electronic storage devices, computing, as well as a range of other technologies. AIXG’s business activities include developing, producing and installing equipment for coating semiconductor materials, process engineering, consulting and training, including ongoing customer support. It supplies to customers both full production-scale chemical vapor deposition systems and small-scale systems for research and development use and small-scale production use.

The Company’s securities are listed on the Frankfurt Stock Exchange and, in form of American Depositary Shares (ADS), on the Global Market of the NASDAQ Stock Market, and are included in the TecDAX index, the NASDAQ Composite Index, the MSCI World Small Cap Index, the Nature Stock Index (NAI) and the Dow Jones Stoxx 600.

Founded in 1983, the Company is headquartered in Herzogenrath, Germany.

Source: Reuters.com, SEC Filings.

Financial Summary

During the third quarter of 2009, AIXG recorded revenues of EUR82.0 million, a 28% increase compared to EUR63.9 million in the same three months period last year. The positive average U.S.-dollar/euro rate and the progressively strong revenue volumes within the recent quarter, contributed to a strong revenue number. Cost of sales improved from 58.0% of revenues in Q3 2008 to 57.6% of revenues in the current reporting period. In absolute terms, cost of sales increased by 28% from EUR 37 million in Q3 2008 to EUR 47.3 million in Q3 2009. At the same time, the gross margin remained flat at 42% of revenues. The third quarter 2009 net income was EUR 11.6 million, 111% up year-on-year from EUR 5.5 million in the third quarter 2008.

The equipment order backlog of EUR 152.4 million at September 30, 2009, is 4% lower than at the same point in time in 2008 (EUR 158.1 million). However, with the increasing 2009 order intake volumes, the September 30 order backlog has further increased (by 39%) versus the June 30 backlog of EUR 109.4 million. The management expects that about EUR 88 million of existing backlog will be converted into revenues before the end of 2009.

Cash and cash equivalents including cash deposits increased by 58% to EUR 111.1 million as of September 30, 2009 compared to EUR 70.5 million as of December 31, 2008. The Company recorded no bank borrowings as of September 30, 2009 and December 31, 2008. Trade receivables increased from EUR 38.8 million as of December 31, 2008 to EUR 44.4 million as of September 30, 2009 in line with the increased business volume.

Recently, AIXG’s management increased its 2009 guidance to revenues of EUR 280 million. This total revenue figure bears enough operating leverage potential to enable the Company to reach an 18% EBIT margin for the fiscal 2009. Management sees a strong possibility of the revenue momentum carrying over into 2010. According to Reuters Estimates, analysts on average are expecting the Company to report revenue of EUR 276.9 million for fiscal year 2009 and EUR 429.8 million for the fiscal 2010.

Source: Yahoo! Finance, SEC Filings.

Analyst Consensus

Analysts polled by Thomson Reuters expect AIXG to “Outperform.

Source: http://markets.ft.com/tearsheets/analysis.asp?s=aixg

Investment Highlights

AIXG is one of the leading providers of deposition equipment to the semiconductor industry. The Company’s technology solutions are used by a diverse range of customers worldwide to build advanced components for electronic and opto-electronic applications based on compound, silicon or organic semiconductor materials and more recently carbon nanostructures. Such components are used in display technology, signal and lighting technology, fiber communication networks, wireless and cell telephony applications, optical and electronic data storage, computer technology as well as a wide range of other high-tech applications. Demand for AIXG’s products is driven by the sustained miniaturization, increased processing speed, improved efficiency, and reduced cost of ownership demands for current and emerging microelectronic and optoelectronic components

The Company’s product range includes customized production and research scale compound semiconductor systems capable of depositing material films on up to 95 x two-inch diameter wafers per single production run, or smaller multiples of 4-to-6-inch diameter wafers, employing Metal-Organic Chemical Vapor Deposition or organic thin film deposition on up to Gen. 3.5 substrates, including Polymer Vapor Phase Deposition or Organic Vapor Phase Deposition for Organic Light Emitting Diodes applications or Plasma Enhanced Chemical Vapor Phase Deposition for depositing complex Carbon Nanostructures. AIXG also manufactures full production and research scale deposition systems for silicon semiconductor market applications capable of depositing material films on wafers of up to 300 mm diameter, employing technologies such as: Chemical Vapor Deposition, Atomic Vapor Deposition and Atomic Layer Deposition.

During the third quarter of 2009, the Semiconductor-Nanowires for Solar Cells and LEDs (NaSoL) research project, supported by the state of Northrhine-Westfalia, was formally approved and started. Under the project leadership of AIXG, and in cooperation with the University of Duisburg-Essen and other industrial partners, the research project team will design and build a technology platform for LEDs and solar cells employing nanowire-structures. The project’s goal is to develop new growth processes for nanowires, replacing traditional semiconductor layers, using metal organic gasphase epitaxy. The plan is to increase the efficiency both of solar cells and of white LEDs.

The Company’s equipment order intake in the third quarter of 2009 reached EUR 117.6 million, and consequently was 103% higher than in Q2 and 125% higher year-on-year. Benefitting from the increasing business volume, the gross margin, EBIT margin, and net profit margin (42%, 20%, and 14% respectively) rose sequentially and on a year-on-year comparison basis. As the demand for LED applications, and TV backlighting in particular, bring AIXG’s order volume to a new all time high, market sentiment and faster than predicted adoption suggest that this trend will continue into 2010.

Aided by the increased applications and substantial competitive capacity increase, the cost of LEDs is predicted to continue to drop while their performance continues to improve. According to the latest August 2009 report, Strategies Unlimited, an independent semiconductor market research institute, the market for High Brightness LEDs in illumination is forecasted to reach nearly $2.85 billion by 2013, corresponding to a CAGR (2008 through 2013) of 40%. By 2013, the market for HB LEDs in signs and displays is estimated to reach $7.2 billion, which corresponds to a CAGR of 55%.

Semiconductor manufacturing equipment billings reached $2.69 billion in the second quarter of 2009. The billings figure is 13% lower than the first quarter of 2009 and 66% less than the same quarter a year ago. Earlier this year, equipment bookings fell to levels last reported in the early 1990s. Since then, bookings increased for five months in a row as market conditions recover. In 2009, the chip industry will see back-to-back yearly declines for the first time in its history, with global chip revenue expected to decline 16.3%, to $219.2 billion, hit by the sweeping economic downturn. The semiconductor industry is expected to bounce back in 2010 and 2011, with worldwide semiconductor revenue reaching $251.2 billion in 2010, a 14.6% increase from 2009, and in 2011 revenue reaching $274.9 billion, a 9.4% increase from the previous year.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=AIXG

AIXG is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

The MACD for the Company currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

AIXG is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

Comparative Analysis

The steady growth of new orders in 2009 made the Company’s management to issue positive outlook driven by strong adoption of LED TV applications. The strong growth of AIXG justifies premium trading compared to selected peer group.

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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