Ebix 1Q21 schedule, NFE OMIB, Golar execs and trading update ?3

12:41 14-May-21

To put more color on the semiconductor space and general macro...  Senators are expected to unveil a $52b over 5 year bi-partisan compromise to support domestic chip production next week.  That may be contributing to the lackluster recovery in HIMX, but if so I think it would be a misread as Himax is fabless.

The same isn't completely true for MagnaChip, which dropped as much as 11% on a Korean article that merely confirms that the Korean government is considering the deal, since OLED being National Core Technology is nothing new.  Again, it could well be that the Korean government will step in even though technology is not being transferred.  MagnaChip scheduling shareholder vote is a small sign of confidence from the company, and I've already given my amateur opinion on Korea's law, but actual decision making there is even more of a wildcard than in America.

If the government does nix the deal, my read of the agreement is that MagnaChip gets $84.3M or $1.82 per share.  That increases another $21M to $2.27 per share if the buyer breaks the deal without government interference.  Furthermore, I disagree with analysis in the article that the company would then be sold for a bargain price.  The comparison to Hynix is ludicrous, as it was in financial trouble and a very different industrial environment.  I've commented many times about the (lack of) quality of the Korean press.

Another sign of that is the $450b (8.65x the prospective American support) that Korea is committing to foster domestic chip production over the coming decade.  That's probably not getting prime media coverage here for political reasons, but it should tell you something about the future of supply chains, especially given the circus that Congress continues to be.  The Fed also released some pretty underwhelming industrial production numbers today, but most of that is from the auto segment that both companies are servicing, apparently with increased pricing power.  MX is still down 3% percent today, below $21.50 which represents a probable annualized deal premium in excess of 70%, depending on the timing.  Risk remains, but I remain willing to take my chances on both stocks.

Ebix has now officially scheduled its first quarter report for the morning of May 17th.  Only two analysts cover the company with estimates for 86.5+/-5.5 cents of EPS from $202.5+/-1.5M declining to $182+/-22M this quarter.  I've already covered how these are out of whack.  I'm not sure how much attention the market will give a Monday morning report, but unlike with Orbital Energy Group, it's being done to avoid further regulatory delay filings.  I'll give the report plenty of attention.

A Director of New Fortress Energy purchased 1000 shares on the open market on Tuesday at $38.88.  That's more important to me than an overweight reiteration and $55 price target from Morgan Stanley.  Both should be of minor benefit to Golar, but I continue to hope that it has done some financing or hedging against its NFE shares.  We should know in a couple of weeks, from Karl Staubo whom Golar has brought back from the Partnership as CEO.  It has also promoted from within to take over his CFO role.

I'll also follow up to say that eMagin call had technical difficulties and only one analyst, who failed to ask the most important question about equipment delivery assurances.  It probably wouldn't have gotten a menaingful answer at this stage anyway, as the company is merely making down payments.  Regardless, it's pretty clear that this company would not be in business without government support or more massive dilution.  It had a $1.96M PPP loan forgiven, and still have 9.7M warrants outstanding with strikes ranging from 55 cents to $2.60, with the majority being between $1.50 and $2.00.  So, despite a sales backlog of $10.7M there's really very little potential upside here, and lots of risk.  That's not really a change from my prior notes, though.

I think the opposite is true for HIMX, which failed to participate in yesterday's rebound, possibly due to power blackouts in Taiwan.  There's no specific word from Himax, but TSMC said there should be no impact to major chip makers.  Additionally, the SID Display Week event next week should focus attention on the industry, though I would not buy into the developments for Intel or UDC.  I'd also continue to avoid CVA despite Covanta declaring a June 23rd ex-dividend date as commodities may be topping.

There are plenty of short-term opportunities in the market right now, and I think EBIX, HIMX and GLNG are tops among them, with MX and BGCP following as medium-term options.