Magnachip :: no deal, yet.
"The waiting is the hardest part" -Tom Petty
Yesterday Magnachip Semiconductor [ Symbol: MX ] issued the following press release announcing an expansion to the company’s stock repurchase plan. The buyback plan’s size is being increased from $75 million to $87.5 million in total, and has $50 million remaining following the completion of the $37.5 million accelerated buyback earlier this year.
Magnachip Announces Expanded Stock Repurchase Program
Sep 12, 2022
SEOUL, South Korea, Sept. 12, 2022 /PRNewswire/ -- Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced that the Board of Directors has authorized an expansion of the Company's previously announced stock repurchase program from $75 million to $87.5 million of the Company's common stock. The Company has already repurchased shares worth $37.5 million under the program.
The remaining $50.0 million of the expanded $87.5 million program will be repurchased in the open market or through privately negotiated transactions. In connection with the repurchase program, the Company has established a stock trading plan in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.
The timing of stock repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.
This is a welcome development in our view with MX shares trading at their current levels. In fact, 50% of today’s share price is sitting in cash and the company has no debt. Importantly, this new stock buyback plan is “in accordance with Rule 10b5-1”, which does not prohibit the company from negotiating with potential acquirers or pursuing other options.
In the second quarter of 2022, MX earned revenue of $101.4 million with a gross profit margin of 28.6%. Management guided the third quarter lower due to supply chain challenges and a slowdown in the smartphone market.
Revenue of $101.4 million was down 2.6% sequentially and down 11.0% year-over-year (YoY). The YoY decrease was mainly due to severe supply shortages for 28nm 12" OLED wafers, partially offset by an 11.1% YoY increase in Power solutions business revenue.
Gross profit margin was 28.6%, down 890 basis points from Q1 and down 120 basis points from Q2 a year ago. The sequential decrease was primarily the result of: 1) the prior quarter benefiting 200 basis points from a one-time timing mismatch of lower cost 12" wafers, 2) lower demand for China smartphones resulting in an inventory reserve of approximately $4.7 million related to 12" display products, 3) higher foundry cost relating to 12" wafers and 4) unfavorable product mix.
GAAP diluted loss per share was $0.07.
Non-GAAP diluted earnings per share (EPS) was $0.23.
The stock market and semiconductor stocks have fallen throughout the year, and Magnachip is not immune to the overall market weakness. The semiconductor index [Symbol: SMH] has declined roughly 35% this year from $320 to $210.
We continue to view Magnachip shares as attractive for purchase and are willing to wait patiently for a more positive environment for shares to trade toward their fair value of $20 or higher.