Current Price: ~ $51/share
Projected Yield: ~ 2.74%
KLATencor designs and manufactures yieldmanagement and processmonitoring systems for the semiconductor industry. The systems are used to analyze the manufacturing process at various steps in a product's development. The firm's laserscanning products are used for wafer qualification, process monitoring, and equipment monitoring. KLATencor also provides systems for optical metrology and ebeam metrology.
Estimated WACC for the firm today is 16.47% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Average Annual Growth FCF: ~ 46%
Year

FCF
$Millions

2002

215

2003

112

2004

294

2005

447

2006

241

2007

527

2008

611

2009

173

2010

418

2011

772

TTM

884

Average Annual Growth FCF: ~ 46%
CAGR FCF: ~ 15%
Consensus Forecast Industry 5Year Growth: ~ 15% per year
Consensus Forecast Company 5Year Growth: ~ 10% per year
Internal Growth Rate: ~ 17%
Sustainable Growth Rate: ~ 32%
Scenario 1
FCF for the 6 months ending December 31, 2011 is $379 million; $758 million annualized.
 Start at $758 million FCF
 Assume a 5year growth rate in FCF of 10% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future cash flows, discounted at a WACC of 16.47%, give a present value for the entire firm (Debt + Equity) of $7006 million. If the firm's fair value of debt is estimated at $871 million, then the fair value of the firm's equity could be $6135 million. $6135 million / 167 million outstanding shares is approximately $37 per share and a 20% margin of safety is $30/share.
Year

FCF
$Millions

0

758

1

834

2

917

3

1009

4

1110

5

1221

Terminal
Value

8151

The firm's future cash flows, discounted at a WACC of 16.47%, give a present value for the entire firm (Debt + Equity) of $7006 million. If the firm's fair value of debt is estimated at $871 million, then the fair value of the firm's equity could be $6135 million. $6135 million / 167 million outstanding shares is approximately $37 per share and a 20% margin of safety is $30/share.
Scenario 2
All else being equal,
All else being equal,
 Assume a 5year growth rate in FCF of 10% per year, then 6.50% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

758

1

834

2

917

3

1009

4

1110

5

1221

Terminal
Value

13464

 Present Value of the entire firm (Debt + Equity): $9484 million
 Value of Equity: $8613 million or $52/share
 20% margin of safety is $42/share
Scenario 3
All else being equal,
All else being equal,
 Discount the firm's future cash flows at a WACC of 12.50%
 5year growth rate in FCF of 10% per year, then 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

758

1

834

2

917

3

1009

4

1110

5

1221

Terminal
Value

10743

 Present Value of the entire firm (Debt + Equity): $9506 million
 Value of Equity: $8635 million or $52/share
 20% margin of safety is $42/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
No comments:
Post a Comment