Hardware firms undervalued

Hardware firms undervalued
David Manners Electronics hardware companies on the London stock market are undervalued by a factor of two, reckons David Milne, managing director of Wolfson Microelectronics. Milne thinks that the Americans understand the high-tech, high-growth area better than the British, which inclines him to look for a New York listing rather than one in London for a public flotation for Wolfson which could take place next year. “Fabless semiconductor companies are quite well valued,” he says, “the gross margins of fabless companies are very good – around 60 per cent – particularly in analogue and mixed-signal (where Wolfson operates), price/earnings ratios are in the 40s.” Since Wolfson turned over ?10m in 1997, that suggests a profit of ?6m and a market worth for the company of ?240m. Despite that, Milne is not tempted to go to the market before next year and is looking at the possiblitiy of a US listing. Last week in the US a stock exchange index specifically for publicly traded fabless semiconductor companies,was set up by the Fabless Semiconductor Association (FSA) and stockbrokers Montgomery Securities. “I spoke to them before they launched, I think it’s a good idea – it will raise the profile of fabless companies dramatically,” said Milne. The index will be called the FABLS Index. It consists of companies which have a market capitalisation of $100m or more. The index will track the stock movements of fabless companies and give the latest quotes. The FSA says there are 40 public fabless companies of which 31 will be included in the FABLS Index. Wolfson will not qualify for FABLS until it floats as a public company.


Leave a Reply

Your email address will not be published. Required fields are marked *

*