JWC Acquisition (tba)
|
Aeroflex Holdings (ARX) $254mm IPO
with a market cap of $1.2bb at price range mid-point of $14.50
Scheduled for Friday, November 19, 2010 |
|
CONCLUSION |
|
Aeroflex is overpriced because |
|
. It has a long track record of losing money
. For the fiscal year ended June 30, 2010 interest payments were 30% more than operating earnings. Percent of revenue: 13% interest payments, 10% operating earnings |
|
. Tangible book value is a negative $450mm |
|
. Can’t pay dividends because of restrictive debt covenants |
|
BUSINESS |
|
Global provider of radio frequency, or RF, and microwave integrated circuits, components and systems |
|
DIVIDEND POLICY |
|
Amounts available to pay cash dividends are restricted by subsidiaries' debt agreements |
|
COMPETITORS |
|
AMS primarily competes with large defense-related technology providers, including BAE Systems and Honeywell. In addition, AMS competes with a number of specialty semiconductor providers, including Actel, Hittite Microwave Corporation, ILC / Data Devices Corporation and Microsemi. |
|
ATS primarily competes with Agilent and a number of specialty test and measurement providers, including Anite, Anritsu, Rohde & Schwarz and Spirent. |
|
USE OF PROCEEDS
$228mm |
|
. $204mm to repay debt & fees
. $17mmto sponsors |
|
. $7mm for general corporate purposes |
|
Aeroflex Holdings |
ARX, C, 6 |
|
June 30 fiscal year |
|
|
Post IPO shares: 82mm |
|
Microwave circuits |
|
|
|
|
|
|
|
Plainview NY |
2007 |
2008 |
2009 |
Sept3mos09 |
Sept3mos10 |
IPO Mkt |
|
Revenues ($mm) |
$643 |
$599 |
$655 |
$130 |
$160 |
Cap (mm) |
|
Gross profit |
42% |
48% |
52% |
|
|
$1,193 |
|
Operating income % of rev |
-14% |
-3% |
10% |
|
|
@$14.50 |
|
Interest |
$75 |
$84 |
$84 |
|
|
|
|
Interest % of revenue |
12% |
14% |
13% |
|
|
|
|
Net income |
-$122.0 |
-$76.0 |
-$12.0 |
-$20.5 |
-$5.8 |
|
|
Net income % of rev |
-19% |
-13% |
-2% |
-16% |
-4% |
|
|
Adj EBITDA |
$135 |
$145 |
$166 |
$25 |
$28 |
|
|
Adj EBITDA % of revenue |
21% |
24% |
25% |
19% |
18% |
|
|
Backlog |
$251 |
$271 |
$306 |
|
|
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
annualizing Sept 3 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Aeroflex Holdings(ARX) |
$1,193 |
1.9 |
-51 |
3.4 |
-2.6 |
21% |
|
SCORECARD |
|
Mgt |
Market |
Market Do- |
Proprie- |
Total |
|
1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
|
20 is perfect |
|
2 |
1 |
2 |
1 |
6 |
|
