Author Topic: SMCI - Super Micro  (Read 12024 times)

writser

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Re: SMCI - Super Micro
« Reply #70 on: August 16, 2019, 09:46:25 AM »
Yes, the reshuffles and the new board member are good. 164m cash was a bit sloppy from me, that was the previous quarter.

- Premium multiple isn't something that's even on my mind here.

I didn't mean I expect this to trade at a 50x P/E ratio or something like that. But what I was trying to say is: where do you think this should trade? It's not _super_ cheap at the moment. Maybe it is when you look at an EV/EBIT basis but I think that that is a bit optimistic as the cash will be plowed back into the business. After today's run we're trading at a TTM P/E multiple of ~11, slightly above tangible book and a EV/EBIT of 6 (guesstimate)? What I'm saying is I'm not really comfortable buying at a 11x multiple saying it should trade at a 15x multiple. First of all that's not my cup of tea and second, this is a business with some issues so I'm not actually sure a much higher multiple is warranted. I guess it is cheap but I like to have something more tangible.

Do you have a target price in mind and if so, how did you arrive at it? I've been in an out twice or something opportunistically but I find it hard to peg a price on the business.
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scorpioncapital

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Re: SMCI - Super Micro
« Reply #71 on: August 17, 2019, 02:59:29 AM »
Do China Tarriffs in some ways effect them? I know Intel and some of the others were impacted somewhat.

Yes, they have been and continue to be negatively impacted. They work closely with Intel, so I would imagine there's a similar dynamic.

I read they moved some manufacturing to Taiwan...although in theory Taiwan is still China, not sure if that means things going in or out of Taiwan from the USA are affected the same way.

It may be a conspiracy theory, or maybe just local cultural connection but the CEO is of Chinese heritage. Do you think China might somehow make exceptions to a more rigid import or export regime for companies like this?

Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #72 on: August 19, 2019, 07:07:28 AM »
Do China Tarriffs in some ways effect them? I know Intel and some of the others were impacted somewhat.

Yes, they have been and continue to be negatively impacted. They work closely with Intel, so I would imagine there's a similar dynamic.

I read they moved some manufacturing to Taiwan...although in theory Taiwan is still China, not sure if that means things going in or out of Taiwan from the USA are affected the same way.

It may be a conspiracy theory, or maybe just local cultural connection but the CEO is of Chinese heritage. Do you think China might somehow make exceptions to a more rigid import or export regime for companies like this?

CEO is from Taiwan. And no, I don't think that.

Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #73 on: August 19, 2019, 07:31:53 AM »
Yes, the reshuffles and the new board member are good. 164m cash was a bit sloppy from me, that was the previous quarter.

- Premium multiple isn't something that's even on my mind here.

I didn't mean I expect this to trade at a 50x P/E ratio or something like that. But what I was trying to say is: where do you think this should trade? It's not _super_ cheap at the moment. Maybe it is when you look at an EV/EBIT basis but I think that that is a bit optimistic as the cash will be plowed back into the business. After today's run we're trading at a TTM P/E multiple of ~11, slightly above tangible book and a EV/EBIT of 6 (guesstimate)? What I'm saying is I'm not really comfortable buying at a 11x multiple saying it should trade at a 15x multiple. First of all that's not my cup of tea and second, this is a business with some issues so I'm not actually sure a much higher multiple is warranted. I guess it is cheap but I like to have something more tangible.

Do you have a target price in mind and if so, how did you arrive at it? I've been in an out twice or something opportunistically but I find it hard to peg a price on the business.

I don't have a target price here. I doubt anyone knows the intrinsic value (a phrase I dislike) of something like this given the significant uncertainty and lack of full financials.

I think an argument could still be made here that the company trades around liquidation value. That's still too cheap for a company that is consistently profitable and has shown impressive growth (they did significantly more rev last Q than in all of FY 2010).

Hopefully they will grow. If they don't grow then they will have the cash. If they do grow...well, the market likes companies that are growing (and rightfully so).

All this said, I did sell part (not all) of my position on Friday. So I have taken some chips off the table, so to speak.