With regard to Zhimao's investment in Camtek, we believe that this means that despite the slowdown in the industry, the test equipment division still has growth potential, which further confirms our positive view of Penang Jakota.
If you look at the amount of money Zhimao invested in Camtek, Penang Jakota's valuation looks attractive.
With the adoption of new technologies in the smartphone OEM and the diversification of the industry, it is believed that Penang Jakota's growth will be supported in the short term. We think the market is overly worried about the company's growth prospects.
Since the beginning of the year, the company's share price has lagged behind its peers and parent companies, and we think there is room for growth.
Industry news makes Penang Jakoda look attractive
Zhimao announced yesterday that it would buy a 20.5 per cent stake in Camtek for $74.3 million. Zhimao will acquire 6.1 million shares of Camtek from Priortech, the controlling shareholder of Camtek, for $58.1 million, as well as 1.7 million new shares issued by Camtek worth $16.2 million. The cash deal is priced at $9.50 per Camtek share, a 29 per cent premium to Camtek's closing price on Friday. Camtek mainly provides metering and testing equipment for the semiconductor industry. Camtek will also license to Zhimao to use its triangulation technology, a metrological solution, for non-semiconductor applications. In addition, Zhimao and Camtek agreed to cooperate on potential projects in the semiconductor market. The deal is expected to close by the end of the second quarter of 2019, subject to Camtek shareholder approval and regulatory approval. Even though Zhimao and Camtek belong to different market segments and the semiconductor industry as a whole is slowing, Zhimao's investment in Camtek may mean that there are still opportunities for growth in the back-end test equipment segment of the global semiconductor industry, which indirectly confirms our view that the market is overly concerned about the future of Penang Koda. The amount paid by Zhimao is equivalent to 17.3 times and 14.3 times 2018 and 2019 price-to-earnings ratios, with a price-to-book ratio of 4.0 times in 2017, which makes Penang Jakota's valuation look attractive.
The performance of stock price lags behind that of the same industry.
Although the market is worried about the growth prospects of downstream companies, the share prices of major upstream component manufacturers and equipment manufacturers have rebounded, such as AAC Technologies Holdings Inc. [2018.HK] rebounded 14.5%, Sunny Optical Technology [2382.HK] rebounded 26.5%, and Qiu Titanium Technology [1478.HK] rebounded 10.5% rebound ASM PACIFIC [0522.HK] rebounded 15.1%. In this rally, however, Penang Jakoda (up 6.8% year-to-date) lags behind its peers and its parent company.
We believe that Penang Jakoda deserves a better share price performance because its peers will be directly affected by the decline in smartphone sales, while Penang Jakoda's smartphone-related business is mainly related to the popularity of new technologies, not to do with total shipments. According to ams's latest results, ams remains committed to 3D sensing technologies, including structured light (SL), time of flight (ToF) and active stereo vision (ASV). Ams predicts that Android smartphone OEM manufacturers will start shipping ToF products in 2019 in the first half of 2019, and Android smartphone's first ASV 3D system will be launched in 2019. We expect Apple to launch the iPhone model with ToF in 2019. In addition to smartphones, Pangjkoda has successfully expanded its sales to wearable devices, and we believe that the company's provision of test equipment for other components of smartphones will also give the company growth momentum. The company has been committed to expanding its customer base from smartphones to automobiles and healthcare. According to the latest comments from Kulicke and Soffa, demand in the automotive and industrial sectors remained strong in the fourth quarter of 2018, but demand for OSAT in China was weak. The comments from Kulicke and Soffa to some extent confirm our view that the car market will support Penang Jakota's growth in the short term.
