Editor’s Note: Related tickers: Google Inc (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Wintek Corporation (TPE:2384), Apple Inc. (NASDAQ:AAPL)
When it comes to supply chain companies in the tech device world, sometimes one big deal is all it takes to move to the next level. A contract with a top company, such as Google Inc (NASDAQ:GOOG) or Amazon.com, Inc. (NASDAQ:AMZN) is a very big deal. This is particularly true in today’s day and age with these tech companies growing at a rapid pace and always looking for a way to outdo its competitors;continue reading here for more info.
Meet Wintek
Wintek Corporation (TPE:2384), which also trades on the Taiwan Stock Exchange,is one of those supply chain companies that is going to benefit big time from its business with Google and Amazon.com, Inc. (NASDAQ:AMZN).The touch panel maker is known as one of the best in the world, and according to Digitimes the company is expected to reach revenue of nearly $268 million during the third quarter of 2013; this is due in large part to its business with Google Inc (NASDAQ:GOOG) and Amazon.
Established in the early nineties, Wintek has become a global company with offices in three continents and component manufacturing facilities in China, Taiwan, India and Vietnam. If you’ve heard of this company prior to reading this article, chances are you’ve read about Wintek Corporation (TPE:2384)’s 2010-era troubles with Apple Inc. (NASDAQ:AAPL) iPhone screens and the toxic chemical n-hexane, which has been shown to cause nerve damage and paralysis in extreme circumstances.
It should be stressed that Apple was never shown to be responsible for the usage of n-hexane, and with these troubles largely behind it, investors can focus on Wintek’s rosy prospects.
The prospects
Like many bull cases for tech suppliers, the key thesis behind Wintek lies in its sheer volume; the aforementioned Digitimes report discussed this extensively:
“Wintek has reportedly begun shipping touch panels for Google’s next generation Nexus 7 as well as Amazon’s 7-inch Kindle Fire HD as of June 2013 and will continue doing so throughout July and August when Wintek’s’ shipments are expected to peak, said the sources.”
The outlet also added that “touch panel shipments for the Google Inc (NASDAQ:GOOG) Nexus 7 are expected to be around 500,000 units a month as of July,” and that“monthly touch panel shipments for the Kindle Fire will be around 300,000-400,000” in Q3 of this year and “a total of about 6-7 million units in 2013.”
Regarding Apple Inc. (NASDAQ:AAPL), while the tech giant was less reliant on Wintek Corporation (TPE:2384) for its last iPhone than previous iterations of the smartphone, the supplier may play a significant role in the next generation iPad Mini. According to Grand Cathay Securities analyst Mars Hsu, “Touch panels for notebook computer production account for about 50 percent of Wintek’s total sales,”and although there are mixed reports that Apple is being phased out, the next iPad Mini represents another possible boost.
The play
Wintek Corporation (TPE:2384) is an obvious way to play the ongoing tablet boom—which IDC forecasts to surpass total PC shipments by 2015—due to the fact that it has exposure to Google’s Nexus 7, Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle, and possibly, the unconfirmed next-gen Apple Inc. (NASDAQ:AAPL) iPad Mini.
From a valuation standpoint, Wintek sports a price-to-book multiple of 0.8x and trades at a mere 0.3 times sales, despite a 9.8% growth in revenues last year. Fellow supplier Foxconn, which also trades on the Taiwan Stock Exchange, grew revenues by only 1.6% last year.
By comparison, Apple Inc. (NASDAQ:AAPL) (2.4), Amazon (2.0) and Google Inc (NASDAQ:GOOG) (5.4) trade at far more expensive top line multiples than Wintek, but it’s not just the valuation that’s attractive.
Wintek Corporation (TPE:2384)’s EBITDA is trending upwards, the company sports a manageable (total) debt-to-equity ratio of 1.12, and analysts agree that the stock is worth looking at. In terms of New Taiwan Dollars (NT), the most bullish analyst estimates that shares of Wintek can see a 35% upside from current levels, which would mark an appreciation almost on par with the stock’s book value parity.
Final thoughts
While it’s obviously more difficult to make a play on Wintek Corporation (TPE:2384) because it’s not traded on U.S. exchanges, the potential upside here is solid, particularly if Apple Inc. (NASDAQ:AAPL)’s rumored next-gen iPad Mini is on the supplier’s table. The presence of Amazon.com, Inc. (NASDAQ:AMZN) and Google Inc (NASDAQ:GOOG) solidifies Wintek’s outlook, and frankly, past growth is above its closest peer and the valuation is cheap. We’d recommend taking a longer look; continue reading here to learn more about Insider Monkey’s best market-beating strategy.
Disclosure: none
