Torex Semiconductor Ltd. researches, develops, manufactures, and sells integrated circuits (ICs) and active discrete components in Japan and internationally. The company offers DC/DC converters, voltage regulators and detectors, push button controllers, LED lighting drivers, load switches, power MOSFETs, temperature sensors, and transient voltage suppressors; charge pump, battery charge, hall, PLL clock generators, and oscillator ICs; and Shottky barrier, Zener, switching, bridge, and fast recovery diodes. Its products are used in industrial/IoT and automotive product applications. Torex Semiconductor Ltd. was incorporated in 1995 and is headquartered in Tokyo, Japan.

Japan

Torex Semiconductor Ltd.

Technology

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends twice a year. 

6616.T reported revenue of JPY 24 500mn in the last 12 months, down 7% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 132% from FY23 to JPY -338.11. Market expects EPS to reach JPY -90.90 in FY25.

Over the past six months, the stock has consistently fallen, resulting in a 15% total decrease. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 8ppts and its growth decelerated by 11ppts in the past month. There is a distinction between the stock's performance and that of its peers from the same country and industry. Over six months its performance trailed that of this peer group by 19ppts and its growth decelerated by 7ppts in the previous month. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -3.4% in the last 12 months, a decline from 0.1% in FY23. 

Historically, 6616.T has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -15.2%, down from -6.1% in FY23. 

Torex Semiconductor Ltd. reported a return on equity (RoE) of -17.1% in the last 12 months, down from -6.6% in FY23. The market consensus projects an RoE of 2.3% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to -9.6% in the last 12 months, a decrease from -4.1% in FY23. The market analysts predict that RoA will be 1.3% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to -11.7%, below the peers. The consensus estimate for FY24 for RoCE is 2.0%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.0 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

6616.T has poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, and weak debt servicing capacity. We note low margin volatility, adequate interest coverage, and an favourable capital structure, among the positive credit factors. 

In highly turbulent market conditions, 6616.T is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, 6616.T is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. 

From both historical and forecast perspectives, the stock is considerably underpriced compared to similar stocks. Specifically, the stock is 'cheap' on P/E, undervalued on EV/EBITD. 

Torex Semiconductor Ltd.

¥ 1088

4

Torex Semiconductor Ltd.

¥ 1088

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

¥ 1088

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