When Politicians Are Away, Investors Come Out To Make Hay -

When Politicians Are Away, Investors Come Out To Make Hay

Dec 09, 2024Jeremy ParkinsonFinance0

Image Source: Pixabay
Since the US presidential elections were won by Donald Trump on November 5, 2024, normal politics there entered an interregnum or lame duck period leading to a surge of investors into a range of things. In Germany, following the collapse of the German government, the German Dax 40 stock market index went up 7% in the past month. Since the French government collapsed a week ago the CAC 40 gained 2.8% by week end. I invented a new adage for that using these old ones as a guide – “When the cat ‘s away, mice come out to play” and “Make hay while the sun shines” – concluding that when politicians are away, investors come out to make hay. That political collapse in France boosted my until then stagnant French picks and following my buy-in to a German company a week ago I was rewarded with a 9% gain. The political vacuum situation in neither France nor Germany is likely to change soon so investors could look forward to making more hay. That German pick of mine might see further nice gains…

Aixtron On the NYSE the symbol is (AIXXF) and (AIXX.N) on the German Frankfurt exchange where I own it. The AIXTRON Group is a leading supplier of deposition systems for the semiconductor industry. The company was founded in 1983 and is based in Herzogenrath near the Dutch border and has branches and representative offices in Asia, the USA, and Europe. The company’s products are used by a wide range of customers worldwide to manufacture high-performance components for electronic and optoelectronic applications based on compound or organic semiconductor materials. These components are used in a wide range of innovative applications, technologies and industries including fibre optic communication systems, wireless and mobile telephony applications, optical and electronic storage devices, computing, signaling and lighting, displays, as well as a range of other technologies. The Company’s business activities include developing, producing and installing equipment for the deposition of semiconductor and other complex materials, process engineering, consulting, and training, including ongoing customer support and after-sales service. The Company supplies its customers with both production-scale material deposition systems and small scale systems for research and development (R&D) or small scale production. More information can be found on the company website They claim to be the longtime market leader in MOCVD systems. MOCVD, known as Metal-Organic Chemical Vapour Deposition (MOCVD), is a technique for growing thin semiconductor films on a substrate. With MOCVD, many nano-layers can be deposited with great precision, each with a controlled thickness, to form materials with specific optical and electrical properties.A MOCVD system is a type of chemical vapor deposition (CVD) system that uses metal organic precursors to deposit thin films of material onto a substrate. The system consists of a reactor vessel, a gas delivery system, a substrate holder, and a temperature control system. The metal organic precursors are introduced into the reactor vessel along with a carrier gas, and the temperature is carefully controlled to ensure the growth of a high-quality thin film.The use of MOCVD has several advantages over other deposition techniques. One advantage is that it allows for the deposition of complex materials with precise control over the thickness and composition of the thin films. This is particularly important for the production of high-performance semiconductor devices, where the material properties of the thin films can have a significant impact on the device’s performance.

Another advantage of MOCVD is that it can be used to deposit thin films on a variety of substrates, including silicon, sapphire, and gallium arsenide. This flexibility makes it an essential process in the manufacturing of a wide range of semiconductor devices, from computer chips to LEDs.MOCVD systems are widely used in the semiconductor industry, and they have been instrumental in the development of many advanced technologies. I got that MOCVD information from the website of a Chinese company – Semicorex – which is not mentioned among competitors on Aixtron’s website. That could be a negative among the many positives that include Aixtron’s huge 82% market share among the competitors it does mention. It is a plus in the sense that a Chinese MOCVD maker already exists thus minimising the danger from a new one moving in. That danger is also minimized by the fact that what they do is a niche of its own with a costly wide moat to deter new entrants. I first learned of Aixtron about ten years ago but stayed away because I doubted that what they did then had much of a future. That proved correct and the share price went nowhere for a long time. I decided to take another look recently and concluded they had repurposed their technology for applications that have a large and long term future. The financial results took a huge upward turn from 2021 as a result…
Income statement in EUR millionsAll figures from the Financial Times Year on year Aixtron SE grew revenues 35.99% from 463.17m to 629.88m while net income improved 44.55% from 100.44m to 145.19m. They achieved that super growth despite the near recession conditions in Germany and much of Europe for at least the past three years!

Fiscal data as of Dec 31 2023 2023 2022 2021 2020 2019 REVENUE AND GROSS PROFIT Total revenue 630 463 429 269 260 OPERATING EXPENSES Cost of revenue total 351 268 247 161 151 Selling, general and admin. expenses, total 46 40 34 27 26 Depreciation/amortization 1.18 0.80 0.81 0.90 1.02 Unusual expense(income) 0.22 (0.22) 4.42 (3.39) (1.39) Other operating expenses, total (6.69) (4.58) (8.61) (10) (9.02) Total operating expense 473 358 330 234 221 Operating income 157 105 99 35 39 Other, net — — — — — INCOME TAXES, MINORITY INTEREST AND EXTRA ITEMS Net income before taxes 158 105 99 35 40 Provision for income taxes 12 4.67 4.09 0.60 7.24 Net income after taxes 145 100 95 34 32 Minority interest 0.00 (0.04) 0.82 0.41 0.36 Net income before extra. Items 145 100 96 35 33

The margins are super!

Gross margin 41.61% Net profit margin 18.46% Operating margin 19.92%

Operating expenses include a huge amount for R&D. This was the situation at the end of Q3 2024 – in the first nine months of 2024, R&D expenses increased by 15% to EUR 68.7 million (9M/2023: EUR 59.8 million). In Q3/2024, R&D expenses amounted to EUR 21.2 million, an increase of 2% (Q3/2023: EUR 20.8 million). That Q3 expense is over 13% of revenue and should keep the company in the lead with its technology. Aixtron also has no debt and Euros 658 million in current assets to underpin future growth investments that includes building a new Innovation Center for 300mm technology at its headquarters in Herzogenrath. Around EUR 100 million is currently being invested in a state-of-the-art research and development complex with over 1,000m² of cleanroom space to work together with customers on the next-generation systems. The first AIXTRON system has already recently moved into the new cleanroom. The official opening of the Innovation Center is scheduled for the end of 2024. That is also another positive…A Counter Cyclical Investment. Orthodox business teachings used by many US companies means Capex is cut during down cycles. Aixtron has been in a down cycle for several quarters and has used that time to expand in time for the next up cycle. That down cycle sent the share price tumbling and offers investors a good time to buy in.
The potential gain for investors today YTD Aixtron’s price is down 57%. The PE is only 14. In my view that price crash is a market overreaction to the cyclical downturn that showed in Q1 figures. Q3 figures indicated an upturn may have started. The Q3 press release sounded very positive…Order intake and backlog above the previous yearThe current momentum in demand for equipment for efficient power electronics based on gallium nitride (GaN) and silicon carbide (SiC) is continuing. The order intake in the third quarter of 2024 reached EUR 143.5 million, up 21% on the same quarter of the previous year (Q3/2023: EUR 118.5 million). The order intake for the first nine months of 2024 was at EUR 439.5 million, a slight increase year-on-year (9M/2023: EUR 436.2 million). The equipment order backlog as of September 30, 2024 increased significantly year-on-year to EUR 384.5 million (September 30, 2023: EUR 368.0 million; June 30, 2024: EUR 400.6 million). Aixtron has a high market share in a niche sector with few competitors and the biggest danger is no growth in that sector. That does not seem to be a danger for the medium turn. Perhaps readers will say otherwise in the comments below if they know more about this sector. As I write the share price is up another 3%. That on top of my gain last week of 9%. All despite Germany’s political vacuum. If that is repeated for 52 weeks compounded I should be up around 142,000 times in time for next Christmas! I will drink to that! Analysts at the Financial Times have more sober views and forecast the following, quote “The 18 analysts offering 12 month price targets for AIXTRON SE have a median target of 20.50, with a high estimate of 37.00 and a low estimate of 14.90. The median estimate represents a 39.03% increase from the last price of 14.75.” My conclusion is that now is a good time to buy. More By This Author:Veolia Investors Will Profit Hugely From Cleaning Up “Forever Chemicals” In Our Drinking Water And Much More
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