USI | Company Research

Cirtek Holdings Phil. Corp. (TECH.PM)

Growth to come from new acquisitions
Follow-on offer of up to Php2.88b

Healthy growth in the 1H 2015

More acquisitions expected this year
Raising capital to fund future acquisitions
Growth to come from new acquisitions

Raising capital to fund future acquisitions. TECH is looking to

raise up to Php2.88b via a follow-on offer. It plans to offer up to
80m primary shares at a maximum offer price of Php24/sh, with an
oversubscription option of additional 40m shares, jacking up the
gross proceeds to Php2.88b. TECH is hoping to close a deal late
this year or early 2016.
Growth to come from new acquisitions. TECH moving forward
plans to grow their business through acquisitions of new synergy
companies that can be complimentary to the companys current
business. At Php26.15, TECH is trading at 11.7x PER 2016E, at a
discount to the industry average of 15.5x. Initiate Buy

FYE Dec. (USD 000)

Net Sales
Net Income (USD)
Profit Margin (%)
EPS (Php)
EPS Growth (%)
PER (x)
BPS (PHP)
P/BV (x)
DVPS (USD)
Div. Yield (%)
ROE (in %)

October 2015

2013A
43,984
4,769
10.8
0.69
+13
39.5
4.41
6.1
0.00479
0.7
15.6

2014A
51,792
6,925
13.3
1.00
+45
27.2
5.34
5.1
0.00642
1.0
17.5

8500

30

8000
7500
7000

10

Targets more acquisitions this year. Cirtek is interested in bitesized companies worth about $40m to $50m. Last year, Cirtek
bought Remec Broadband Wireless International Inc., thereby
acquiring radio frequency (RF), microwave and millimeterwave
capabilities. Since then, it continued to manufacture and ship
microwave radio products to over 30 global customers.

PER (x)
11.7
12.4
10.1
8.2
14.1
15.5

40

20

Healthy growth in the 1H 2015, on the back of additional

revenue contribution from Remec. Net income surged 45% to
$3.02m (Php140m) on the back of its new acquisition, Cirtek
Advanced Technology and Solutions (CATS, formerly Remec
Broadband Wireless International, Inc.). Revenues grew 24% to
$28.3m (Php1.3b) as its starts to book additional revenues from
the new acquisition. It is on-track to achieve its guidance this year
of +30% to $8.4m.

Peer Comparison
FY Est. (2016)
CHIPS
Hana Microelectronics
Siliconware Precision
Amkor
Diodes Inc.
Industry Ave.

Share Price Performance

P/BV (x)
4.1
1.7
1.7
1.1
2.5

ROE (%)
15.4
13.9
18.6
13.6
9.4
18.2

2015E
115,779
9,933
8.6
1.43
+43
18.9
6.56
4.1
0.005
0.8
10.6

2016E
199,106
16,078
8.1
2.32
+62
11.7
6.64
4.1
0.01
0.8
15.4

0
19-Nov-14

6500
6000
19-Feb-15

19-May-15

TECH

Absolute (%)
PSEi (%)

19-Aug-15

PSEI Composite Index

July
Aug Sept
Oct
YTD
-3.0
+3.9
-4.1
+0.9
+51.4
-0.2
-5.9
-2.9
+3.1
-1.7

Stock Information
Rating
Bloomberg Ticker
Company Name
Sector
Subsector
Last Traded Date
Last Traded (Php)
Fair Value (Php)
Upside (%)
Par Value (Php)
Issued Shares (in mn)
Float (in mn)
Market Cap. (Php mn)
52-wk high/low (Php)
1-yr ADTO (Php mn)

Buy
TECH.PM
Cirtek Holdings Phil. Corp.
Industrial
Electronics Comp & Equip.
7-October-2015
27.00
35.00
+32
1.00
339.06
90.6
9,154
10.08-36.00
4.4

Activity
Notice of final offer price
Offer Period
PSE TPs Commitment Period
Tentative Listing Date

Date
Oct 21
Oct 23-30
Oct 27
Nov 5

Source: TECH

Company Description
Cirtek Holdings Philippines Corporation, through its operating
subsidiaries, is engaged on two major activities: (1) provides
full service/turnkey solutions including wafer probing, wafer
back grinding, assembly and packaging and final testing of
semiconductor
devices,
and
(2)
offers
complete
manufacturing solutions for value-added, highly integrated
RF, microwave and millimeterwave technology products.
Major Shareholders
Camerton, Inc.
Public

% Total
70.6
29.4

USI Equity Research

Lexter L. Azurin
Analyst
lla@unicapital-inc.com
(632) 844 4415

CIRTEK PHILIPPINES HOLDINGS CORPORATION

Company Overview
Cirtek Holdings Philippines Corp. (TECH) is an
independent full service provider of turnkey
solutions from package design development,
wafer probe, wafer back grinding, assembly and
packaging and final testing of semiconductor
devices to drop shipments of clients. The
company operates out of its plant in Laguna
Technopark in Binan, Laguna and its sales
office in Menlo Park, California to cater to its
North American clients.
TECH is the holding company of two whollyowned
subsidiaries, Cirtek
Electronics
Corporation (CEC) and Cirtek Electronics
International
Corporation
(CEIC). Both
subsidiaries are engaged in various services
related to the assembly and testing of
semiconductor devices.
It started with only 3 clients in 1984 and has grown to the current count of 55 as of December 2014. Its main product
offerings include protection packages, light sensor packages, real time clock, voltage control oscillators, electronic
relays and power management devices. These products have posted double digit growth rates in 2010 and have
continued to perform well in the first half of 2014.

Source: TECH
Industry Overview
Semiconductor industry expected to
grow, but major drivers will be Asia
Pacific region
Based on the recent World Semiconductor
Trade Stats, the global semiconductor is
seen to continue growing at a compounded
annual growth rate of 8% over the next 10
years. The report also noted that the Asia
Pacific region will be the key driver in the
coming years. In fact, the region now
accounts for more than 50% of the global
semiconductor market. Notice the graph
below how rapid Asia Pacific grew over the
last 10 years. Given the current uncertainties
in the market, the need for lower cost will
continue. This will ultimately lead to higher revenues for the outsourcing industry. Over the long run, this will be the
main driver of future revenue growth of CHIPS.

October 2015

CIRTEK PHILIPPINES HOLDINGS CORPORATION

Competitive advantage

Focus on customer- and application-specific packages (higher ASP and higher barriers for the customer)
Consistent track record of top-line growth and profitability (even during industry downturns)
Broad customer base and diverse end-market applications for Cirtek's products which translates to
operational stability
The acquisition of CATSI puts Cirtek in a position to offer more comprehensive, vertical solutions to the
market

Cirtek Advanced Technologies and Solutions (CATS) overview

Has over 18 years of experience in producing high quality RF, Microwave, Millimeter wave in
low/medium/high volumes, high mix for industrial and commercial applications (as a former manufacturing
arm of REMEC)

PEZA- Registered as a Pioneer Status

World class manufacturing facility (ISO 9001 and 14001 certified) located in Carmelray Industrial Park 1,
Laguna.

Received numerous awards from top global microwave OEMS

Has shipped over 1,000,000 Microwave Radio System products to over 30 customers globally

One of a handful of outsourced facilities outside the US that can offer top-level solutions
Product Road Map of CATS

Growth will be driven by wireless communication, consumer, and automotive

Energy efficiency/going green
As environmental issues have become more of a concern, semiconductor devices are being made to address
environmental concerns by reduce power consumption, reduce heat dissipation, capture solar energy, and create
more efficient lighting solutions, among others. Semiconductor devices are being created with the specific use in
green technology and energy efficiency. IMS Research estimates that semiconductors used in power generation
applications will grow annually by 18% in the coming years. Semiconductors used in automotive applications are
expected to grow by 8% due to the increased demand for hybrid cars, whose drives have higher semiconductor
content than regular cars, the requirement for low consumption and emission in cars, and the demand for safer
vehicles.
Internet of things/connected devices
More people throughout the world are seeking the ability to communicate, whether using the telephone, email or the
internet at high transmission speeds. Semiconductor components are required in the backbone and for processing
data in networks. The increase in demand for smartphones and tablet PCs is also expected to increase demand for
semiconductor devices.
Health and Security
There is continued strong demand for electronic products and applications driving up need for manufacturing services
particularly in health and security.
October 2015

CIRTEK PHILIPPINES HOLDINGS CORPORATION

Industry Overview

Semiconductors still continue to account for bulk

of the Philippines exports.

Industry growth for the Millimeter Wave market is

projected to grow from about $900m to $1.1b by
2020

October 2015

CIRTEK PHILIPPINES HOLDINGS CORPORATION

Table 1. Sales per division (1H 2015)

In US $000
CEC
Discrete
Multichip
Integrated Circuits (IC)
Quad-Flat No-Leads (QFN)
New Products
Hermetics
Total CEC
CATS
Cougar
ODR
IDU
IPR
EMS
Bridgewave
IRFU
Total CATS
Total

1H 2015

1H 2014

% Ch

5,693
4,853
3,163
2,280
3,100
1,080
20,169

5,529
5,883
5,678
2,082
2,679
967
22,818

+3.0
-17.5
-44.3
+9.5
+15.7
+11.7
-11.6

158
4,672
909
469
87
866
1,009
8,170
28,339

22,818

+24.2

Table 2. Valuation summary

Stock
Cirtek Holdings
Hana Microelectronics
Siliconware Precision
Amkor
Diodes Inc.
Malaysian Pacific Ind.
Chipmos Technologies
Japan Aviation
ST Microelectronics
Skyworth
NVIDIA
Alterra
Xilinx
Microchip Tech.
Average

Mket Cap
USD (mn)
205
992
4,632
1,576
1,216
369
1,186
2,558
7,723
20,206
11,975
15,494
12,232
9,632

PER (x)
2016E
11.7
12.4
10.1
8.2
14.1
12.3
10.6
14.3
16.4
17.7
19.5
31.6
20.8
16.2
15.5

P/B Ratio
2016E
4.1
1.7
1.7
1.1
1.6
1.7
2.7
1.5
5.5
2.6
4.5
3.9
4.1
2.5

ROE
2016E
15.4
13.9
18.6
13.6
9.4
13.5
16.4
16.0
10.1
28.0
12.7
13.5
23.3
47.1
18.2

Source: Bloomberg estimates

October 2015

CIRTEK PHILIPPINES HOLDINGS CORPORATION

Table 3. Summary of the offering

Summary

Shares

% of offer

Trading Participants

16,000,000

20.0

QIBs

64,000,000

80.0

80,000,000

100.0

Total
Allocation per TP

120,000 (approx)

Table 4. Proceeds of the offering

Use of Proceeds

Amount (in Php)

% of total

Disbursement

Fund strategic acquisitions

630.7

34

2015

Capital expenditures

631.9

34

2015-2016

Payment of financial obligations

278.2

15

2015-2016

Working capital requirements

314.1

17

2015-2016

1,854.9

100

Source: TECH

Bulk of the proceeds will be used to finance future acquisitions as well as future capital expenditures. Part of the
proceeds will be used to pay off its debts.

October 2015