FLEX
Flextronics International Ltd
TMT
10/11/2016
Presented
| Date | 10/05/2016 |
| Price | $14.11 |
| Market Cap | $7.78B |
| Ent Value | $7.59B |
| P/E Ratio | 17.77x |
| Book Value | $4.80 |
| Div Yield | 0% |
| Shares O/S | 551.03M |
| Ave Daily Vol | 4,312,270 |
| Short Int | 1.18% |
Current
| Price | $34.38 |
| Market Cap | $13.65B |
| Flex Ltd. designs, manufactures, and services consumer electronics for original equipment manufacturers. It operates through the following segments: High Reliability Solutions, Consumer Technology Group, Industrial and Emerging Industries, and Integrated Network Solutions. The High Reliability Solutions segment caters to medical, automotive, defense, and aerospace businesses. The Consumer Technology Group segment provides electronics, connectivity devices, and chain solutions to mobile devices and computing businesses. The Industrial and Emerging Industries segment offers semiconductor, capital equipment, industrial automation, kiosks, metering, and lighting. The Integrated Network Solutions includes radio access base stations, wireless infrastructure, optical routing, switching products, storage platforms, security appliance, and software solutions. The company was founded in May 1990 and is headquartered in Singapore. |
Publicly traded companies mentioned herein: Flex Ltd (FLEX), Lenovo Group Ltd (992 HK), Plexus Corp (PLXS), Ford Motor Company (F), Nike Inc (NKE)
Highlights
Flextronics (FLEX) used to be “a really bad business” with low margins, short-term visibility into revenues and little pricing power, but the company transitioned away from its semiconductor roots in 2009-2010 and has since focused on higher margin, longer-term opportunities across the medical device, automotive and other industries where it can “facilitate the ‘Intelligence of Things’ for its clients”. Now, there are barriers to entry and substantially greater visibility into future revenues, and while the stock has performed well recently (up 26% year-to-date) the multiple remains depressed because top line growth has been relatively slow. The presenter believes the company is unjustifiably cheap given its proven ability to generate FCF and commitment to returning capital to shareholders, and Flex should be at or near an inflection point that will help alter the perception of the company and drive multiple expansion. He is long at $14 and intends to hold the position for at least the next 12 – 24 months to see how the story unfolds. His earnings forecast for 2019 is in the $2.50 - $3 per share range (versus the Street at $1.60), and if the multiple expands to 14x – 15x as he hopes the stock should trade up to $30+.
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