Small investment bank Roth Capital has invited no less than 12 Israeli firms to its Growth Stock Conference this week on the west coast of the US, as most of the companies have plans to hold secondary offerings or to be bought this year, if the market's current positive conditions continue.
One of the Israeli firms at the conference is Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI), which I hold in my portfolio tracked by "Globes". Nova already completed a follow-on offering, after its share price jumped 15-fold since February of 2009. About a month ago, another small investment bank, Needham, successfully raised a net $17 million for the firm, and Roth Capital was a co-manager of the offering. The amount was double the company's entire market value at the bottom of the market crisis last year.
Nova specializes in metrology equipment for measurements during the chip production process, and its rocketing share price came together with last year's rocketing of investments that existing and potential customers made. Those customers are the biggest chip companies in the world, like Intel (INTC), IBM, TSMC, Korean memory product companies Samsung and Hynix, US based Micron, and Japan's Toshiba.
Nova CEO Gabi Seligsohn represents the company at the conference, and investors want to know if there has been an improvement over the last month in its orders backlog, because its guidance issued with the fourth quarter results was seen as too conservative, and the stock fell.
Nova generally competes in its field against one giant KLA-Tencor (KLAC), and against another small company, Nanometrics Inc. Giant customers prefer to buy from two suppliers, and so generally Nova finds itself going head to head against Nanometrics for the role of second supplier. It is already known in the market that two giants IBM and TSM buy from Nova as the main second supplier, but it also sells to Samsung, Hynix, and Micron.
Nanometrics succeeded in separating Nova from Intel a few years ago, including from Intel's operations in Israel, and in Intel's next wave of investments, Nova will try to get back in.
Seligsohn was conservative in his guidance, claiming visibility was not yet as clear for the second half of the year as it was for the first half. I assume he referred primarily to Nova's competition against Nanometrics for Toshiba, which is expected to order tens of metrology systems, and if Nova wins there, it will have to raise its guidance.
Additionally, its known that in light of huge expected demand for flash memory for smartphones, tablet computers, and laptops, Toshiba and SanDisk Corporation (Nasdaq:SNDK) are seriously considering huge investments in a fifth facility. If Nova this year gains expanded business with Toshiba, it stands to reason that it has an inroad for this facility as well. If it happens soon, it is not expected to contribute before the middle of 2011.
Another small Israeli chip equipment firm which is at the conference, and which I own in my portfolio tracked by "Globes" is Camtek Ltd. (Nasdaq: CAMT; TASE:CAMT). In recent years, the company has undergone several strategic processes, which should bring it to well over a generally critical threshold for small companies, $100 million in annual sales.
Camtek has gotten into the niche of inspecting LED chips, a sector which is growing and is expected to continue to grow in coming years. It is known in the market that the company has succeeded in supplying solutions that other companies could not, to leading companies in the LED niche, such as Cree, whose stock price has risen 240% because of the growth in the industry.
In the past year, Camtek has moved production of its chip inspection machines from Migdal Ha'emek in northern Israel to a factory under its ownership in China, a move which should impact production costs this year. At the same time, it took advantage of the crisis to buy two Israeli companies in special niches which should be significant growth engines in the coming year.
One acquisition was Printar, which makes and sells systems and inks for the printed circuit board (PCB) industry Significant sales of Printar's systems are only expected next year, and when that happens, it will primarily profit from selling the special inks.
Camtek also acquired SELA - Semiconductor Engineering Laboratories from Elron Electronic Industries Ltd. (Nasdaq: ELRN; TASE: ELRN). Like Printar, SELA has been relocated to Camtek's buildings in Migdal Ha'emek.
Published by Globes [online], Israel business news - www.globes-online.com - on March 16, 2010
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