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Xebec, Intel & Akoustis manufacturing, Resonant 1Q21 schedule and more +3

15:22 03-May-21

For the record, I've finished reviewing the Akoustis call and have still decided to hold off on adding it.  Flat revenue guidance when it was expected to double this quarter is the culprit.  That's due to delays from some customers, but concerns about manufacturing equipment delivery with lead times increasing are even more troubling in this semiconductor environment.  I'll continue to keep an eye on the company as I have confidence it will resume the revenue ramp before too long, but delays have a way of persisting and I could easily imagine single digits as we progress through the summer.

Xebec has purchased Nortekbelair Corp. for CAD2.6M plus 735,838 XBC shares at a price of CAD4.385 for total consideration of CAD8.5M.  Nortec had CAD4.5M in revenue for FY20, which makes the purchase price look fairly cheap, though the amounts here are fairly trivial.  This is the strongest sign yet of Xebec pushing into American markets, with 18.5K sqft of new manufacturing and a "Center of Excellence" in Maryville, TN.  That will offer more opportunities for growing pains as Xebec strives for efficient operations, but this seems like a good step in its transformation.  XEBEF is up almost 4% so far, to $3.60 and I continue to think it should eventually trade closer to $5.

Intel also had manufacturing news over the weekend and its planning is looking pivotal, after the CEO's visit to the E.U.  The company is seeking €8b in subsidies there.  Both sides just might be desperate enough, as TSMC clearly and rightly is unwilling to put up with the ridiculous E.U. labor policies.   However, Israel looks like a possibly more advanced, though less secure, alternative.  Despite the CEO pitch, INTC has declined below $57 while we wait to see if and how America and Europe will compete.  The stock would have to decline into the mid or low forties before I'd be interested as things stand.

While we're in Europe I'll document Vodafone's 6-year agreement to use Google Cloud for SAP, data analytics and new business services.  I see the first part as more significant for Google, with the rest showing how far off my dreams of a Vodafone combination may still be.

Moving east, Ebix has appointed Ms. Priyanka Kaul, who specializes in branding, to its board of directors.  At worst this is lip service to diversity and a slightly positive influence on the company's messaging.  At best it could really boost the EbixCash IPO and catalyze a much needed transformation to the Ebix image.  Regardless, I continue to forecast a high thirties near-term price target for EBIX surrounding the first quarter report in a few weeks, and a medium to long term target well above $50.

Resonant has scheduled its official first quarter report for the evening of May 12th.  The 5 analysts covering the company haven't updated their estimates following the preliminary results, as they have the company bringing in $1.4M next quarter, but Resonant already forecast flat revenue.  I mention this because it's always difficult to guess how stupid or smart the market will be. 

In the meantime, sort-of competitor Akoustis announced seemingly decent earnings this morning.  It also locked a second wafer level CSP flow of its filters for the mobile market with potentially outsourced manufacturing.  To review, Akoustis in-house production expansion for this year would already enabled it to completely source the CPE (consumer premises equipment) WiFi market.  Today's news gives it flexibility to target the mobile handset market that Resonant is relying on.  In a possible sell-the-news reaction, AKTS has declined below $11.  I have been in active discussion with multiple readers on the company, but reluctant to add a GRoDT stock to the website for the reasons given in this note:

I don't yet see us at the stage in market rotation where it's appropriate to be taking chances on unprofitable companies like these.  I see risk of sustained market decline as on the increase again, though not necessarily imminent, and those who think it's all up for whatever their horizon is might want to take their chances.

However, I will review this morning's call and revisit that decision for AKTS even though mass manufacturing is a deceptively difficult step for a company to take, particularly in a tight chip and commodity market.

That's got natural gas up to $2.95 domestically all of the sudden, and prices for LNG delivery to Japan and Korea continuing to rise through next year.  GLNG investors should be encouraged, and those willing to commit income should note the next May 7th GMLPP ex-date, which will the last before NFE delists it.  GMLPP is back up to $24.25 though, and it's not completely certain that NFE will call them on Halloween-2022.  So that opportunity is fading.

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