FLEX
Flex Ltd
TMT
11/06/2020
Presented
| Date | 11/02/2020 |
| Price | $13.76 |
| Market Cap | $6.89B |
| Ent Value | $7.47B |
| P/E Ratio | 21.31x |
| Book Value | $6.22 |
| Div Yield | 0% |
| Shares O/S | 500.89M |
| Ave Daily Vol | 4,132,552 |
| Short Int | 1.99% |
Current
| Price | $34.38 |
| Market Cap | $13.65B |
| Flex Ltd. engages in provision of real-time supply chain insight and logistics services to companies. It operates through the following segments: Communications and Enterprise Compute (CEC), Consumer Technologies Group (CTG), Industrial and Emerging Industries (IEI), High Reliability Solutions (HRS), and Corporate and Others. The Communications and Enterprise Compute segment includes telecom business of radio access base stations, remote radio heads, and small cells for wireless infrastructure; networking business; server and storage platforms for both enterprise and cloud-based deployments; next generation storage and security appliance products; and rack level solutions, converged infrastructure, and software-defined product solutions. The Consumer Technologies Group segment offers consumer-related businesses in Internet of Things enabled devices, audio, and consumer power electronics, mobile devices; and supply chain solutions for consumer, computing, and printing devices. The Industrial and Emerging Industries segment comprises of metering infrastructure, energy storage, smart lighting, smart solar energy; and industrial, including semiconductor and capital equipment, office solutions, household industrial, and lifestyle, industrial automation and kiosks. The High Reliability Solutions segment relates to health solutions business and automotive business. The company was founded in May 1990 and is headquartered in Singapore. |
Publicly traded companies mentioned herein: Array Technologies Inc (ARRY), Flex Ltd (FLEX)
Highlights
The presenter is long shares of Flex Ltd (FLEX), a provider of outsourced electronics manufacturing services (EMS) for a number of different verticals. He believes an investment in FLEX is particularly timely now due to Array Technologies’ (ARRY) October IPO, which valued the company at a TEV of ~$4.8B - $5B. ARRY provides trackers which help solar panels track the sun and increase their efficiency. ARRY is the second largest player in the space, while NEXTracker, a subsidiary of FLEX, is the largest with ~30%+ market share. On the most recent earnings call, FLEX’s management team confirmed that NEXTracker’s revenue was $1B+ and operating margins were in line with ARRY (high teens%). His due diligence on the two companies leads him to believe that NEXTracker could take more share and grow faster than ARRY due to stronger international growth prospects. FLEX currently has a TEV of $8.4B vs. ARRY’s ~$4.8B - $5B TEV, and NEXTracker is arguably worth more than ARRY’s TEV. Based on his view of the NEXTracker asset and a mix shift toward higher margin verticals within FLEX’s core business, the presenter believes the risk/reward here is compelling. Applying a 13x multiple to his estimate of $2.00 in FY23 earnings, he has a price target of $26-$27 per share or ~47% upside from FLEX’s current price of ~$14/share.
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