Stock Alert for Opnext Inc. (OPXT) " />

Stock Alert for Opnext Inc. (NASDAQ: OPXT)

Opnext Inc. (OPXT) designs and manufactures optical components, modules and subsystems for communications uses. The Company sells its products, which enables network connectivity to address the data usage by the global population, to other businesses. Additionally, it sells infrared and visible light optical devices for industrial and commercial use. Its optical communications components consist of discrete transmitters and receivers typically consisting of a hermetically packaged compound semiconductor laser or photodetector. These components utilize internally fabricated or externally sourced lasers or photodetectors built from indium phosphide (InP) or gallium arsenide (GaAs) compound semiconductor materials systems. The subsystems specialize in 40 gigabit per second and 100 gigabit per second long distance optical communications.

Share Statistics (27-Mar-12)   FY

2010

FY

2011

%

Chg

Q4

2010

Q4

2011

%

Chg

Symbol OPXT Revenue, $Mn 319.13 357.64 12.07% 97.05 53.07 -45.32%
Current price $1.73 Gross marg. 19.07% 19.70% 3.30% 19.94% 3.77% -81.09%
52wk Range: $0.78-$3.05 Oper. margin -14.48% -87.09%
Avg Vol (3m): 368,427 Net margin -24.60% -8.90% -63.82% -10.49% -87.32% 732.41%
Market Cap. 156.23M              
Shares Outstanding 90.30M EPS, $ -0.86 -0.50 -41.86% -0.11 -0.35 218.18%

Source: Reuters.com, SEC Filings.

Investment Highlights

OPXT advanced over 53% to close Tuesday trade at $1.73, boosted by news the high-speed optical communications technology provider will be acquired by rival Oclaro Inc. (NASDAQ: OCLR) in a stock swap worth about $177 million. OPXT jumped to an intraday high of $1.74 as volume swelled to nearly 12 million shares.

Shares in OPXT have gained 58.7% in the last five days and 57.3% in the last month.  Year-to-date, the stock is down 26.7%.

According to the release, the merger is expected  to mark a major transformation in the optical industry and create a new industry leader in the fast-growing optical components and modules market, forecast to reach $9.2 billion in 2015. The broad product portfolio, technology innovation, engineering resources, cost structure and strategic customer relationships of the combined company are expected to expand its opportunities for growth and to create long-term shareholder value,  the companies said in a statement.

Under the deal, OPXT shareholders will receive a fixed ratio of 0.42 shares of OCLR common stock for every share of OPXTt common stock they own.

The combined company is expected to achieve positive non-GAAP operating income in the first full quarter after the close and is expected to achieve annualized cost synergies of $35 million to $45 million within 18 months of the close of the transaction. OPXT expects restructuring and system integration costs to total $20 million to $30 million.

Source:

http://finance.yahoo.com/news/oclaro-opnext-agree-merge-202300058.html

Financial Summary

OPXT posted revenue of $53.1 million for the third fiscal quarter ended December 31, 2011, down 38.3% sequentially and down 45.3% compared to the quarter ended December 31, 2010.  The Company attributed the decline to the loss of production capacity at Fabrinet, its contract manufacturer in Thailand, following the flooding in October 2011.

On a non-GAAP basis, the Company reported an operating loss of $21.5 million for the December quarter, up from $7.1 million in the September quarter. Net loss was $46.3 million, or negative $0.51 per fully diluted share, compared to a net loss of $10.0 million or negative $0.11 per share in the September quarter.

Non-GAAP net loss came in at $21.6 million, $0.24 per fully diluted share, compared to a loss of $6.5 million, or $0.07, in the September quarter. EBITDA was negative $38.9 million, compared to negative $1.5 million in the September quarter, and adjusted EBITDA was negative $16 million compared to positive about $100,000 in the September quarter.

OPXT’s Cash and cash equivalents totaled $85.2 million at December 31, 2011. Net of short-term debt, cash and cash equivalents were $65.7 million at December 31, 2011.

Source:

http://investor.opnext.com/releasedetail.cfm?ReleaseID=646987

Financial Strength (27-Mar-2012)

Company

Industry

Sector

Quick Ratio (MRQ) 1.30 2.63 1.00
Current Ratio (MRQ) 2.42 3.21 2.75
LT Debt to Equity (MRQ) 6.20 23.70 10.85
Total Debt to Equity (MRQ) 24.93 46.49 20.10
Interest Coverage (TTM) -73.11 6.15 1.22

Source: Reuters.com, SEC Filings.

Technical Analysis

Source: http://stockcharts.com

OPXT is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

The MACD for OPXT currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Company Name Ticker Price per Mrkt. Cap. P/E P/S
Mar27-2012 symbol Share, $ $ Mn 2012 2013 2012 2013
Finisar Corp. FNSR 20.14 1.84B 23.15 16.64 1.92 1.72
JDS Uniphase Corp. JDSU 14.79 3.40B 23.48 15.57 1.99 1.76
Semiconductor – Broad Line Median       17.41 n/a 1.78 n/a
Opnext Inc. OPXT 1.73 156.23M n/a n/a 0.51 0.43

Source: Thomson Financial

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