TowerJazz (Nasdaq: TSEM; TASE: TSEM) will acquire a company in 2011 and boost capacity at its Israeli fab to meet demand for design wins from 2010-12, says Miller Tabak Roberts Securities LLC based on an interview with TowerJazz CEO Russell Elwanger. The company's management also expects to receive 60% of an Israeli government grant by July.
Miller Tabak analyst Eric Rubel does not comment on Tower's shares, but recommends buying its bonds which mature in 2012-15.
Rubel believes that TowerJazz will post earnings before interest, taxes, depreciation and amortization (EBITDA) of $45.2 million on $135 million revenue for the fourth quarter of 2010. He predicts EBITDA of $45.2 million on $131 million revenue for the first quarter of 2011, due to seasonal weakness in the industry.
Rubel predicts that the company's EBITDA will rise to $179.6 million in 2011 from $167.7 million in 2010, and that its revenue will rise to $541 million from $509.2 million.
Rubel says, "Management expects to add capacity for 150,000-200,00 wafers per year in the Tower facility in Israel. We think some of that expansion began in the fourth quarter of 2010 and will continue into 2011." He says that this translates into $60 million in capital expenditure.
Regarding expansion, Rubel says, "Management is also focused on acquiring an asset in 2011, as it expects that it will require additional capacity to meet demand for design wins from 2010-2012. Ideally, it would like to acquire a facility with a supply agreement that could serve as a bridge over the three year period that the company brings up its own design flows. The company would expect to use a combination of cash and stock to fund the acquisition."
Tower's share price closed at $1.54 on Nasdaq on Friday, giving a market cap of $359 million. The share price rose 3.2% by early afternoon on the TASE today to NIS 5.39.
Tower does business as TowerJazz since acquiring Jazz in 2008.
Published by Globes [online], Israel business news - www.globes-online.com - on January 16, 2011
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