Hi. Are there any close followers of Aspocomp here? Opinions on the company, does it benefit from the 5G market? At least the share price development seems to be wild.
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The order book is at interesting figures (4.9 million). Since 2017, the revenue for the next quarter has been approximately 2.5 times the order book, which would give over 12 million in revenue. Earlier this year, the total was 23 million. Together, these would be 20% over last year, while the guidance is only about +10%.
"FUTURE OUTLOOK
The company maintains its full-year guidance unchanged. In 2019, revenue is estimated to grow by approximately 10 percent from 2018, and operating profit is expected to improve from 2018. In 2018, revenue was 29.1 million euros and operating profit was 2.9 million euros."
The market reaction to the negative news was really slow. I would have had time to sell out of my positions many times over.
Yeah, I managed to sell mine 11 and 35 seconds after the negative news. Interesting to see what the result will be. Last year’s EPS (earnings per share) was 0.59, 0.40 EPS would also be a good level at the current price.
Yeah, I also saw that Nordnet sold off quickly there.
Greetings! There hasn’t been much discussion about Aspocomp yet, but there’s some – so I thought I’d briefly comment on the profit warning here too and contribute my two cents!
Although a negative profit warning was certainly very possible after a weak start to the year, its timing and magnitude (“will be significantly below”) were a clear negative surprise. Prior to the latest report, I wrote, “In a weak scenario, Aspocomp might also have to issue a negative profit warning later in the year, in which case momentum would probably be sought from a lower level,” but Q2 was still expected to be strong based on spring comments outside the automotive industry. That assessment clearly went awry. Now, the timing of the warning suggests that Q2 figures are presumably in, and there’s at least reasonable visibility for Q3. When combined with the company’s comment about a general weakening of demand at the beginning of the summer season, both Q2 and Q3 are likely to be difficult. And the beginning of the year was already weak, so 2020 seems to be an “off-year” in terms of results. Unfortunately, there’s no visibility into next year, so the speed of earnings recovery is practically impossible to estimate without further information.
Regarding the stock’s valuation, it’s a contradictory situation. With 2020 multiples, the stock is relatively expensive, even if my own forecast is too pessimistic, and really expensive if it materializes. But looking 12 months ahead, 2020 figures naturally don’t have much significance if earnings were to recover to recent years’ levels next year. However, with Aspocomp, it’s difficult to look strongly ahead when 1) visibility is chronically poor, making earnings difficult to forecast, and 2) the earnings trend has now turned negative, which is not solely due to the coronavirus pandemic (H2’19 earnings growth was also negative). When also considering the stock’s high-risk profile, a clear upside potential should be visible for the recommendation to turn positive. Now, the potential, which certainly exists, is largely shrouded in fog.
Nevertheless, it’s an interesting company, and if we look at the really big picture, the roughly five-year increase in both earnings and share price has been tremendous. In addition, a major investment program is nearing completion for a company of this size, so there’s potential going forward. Let’s see if it can return to the path of earnings growth, and with what slope. After the Q2’20 report, we’ll be wiser once we get some substance around the meager information from that profit warning.
Here’s a link to the breakfast version of the latest update: Aspocomp: Kysyntä on ilmeisesti sakannut pahasti - Inderes (no Premium needed, the report is out too, of course).
Let’s keep following, happy investing!
PS. The market is indeed very inefficient in these small caps, so quick reactions can do a lot of good.
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Aspocomp up 5% today. Aspocomp has at least in the past had a lot of cooperation with Nokia, whose good momentum is certainly also reflected in Aspocomp. Or has this changed in recent years?
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Officially, Aspocomp does not disclose this, but Nokia has been, in recent years, and I believe still is, one of Aspocomp’s largest customers. However, the share has decreased significantly when looking at a slightly longer time series – and that’s a good thing, not being so dependent on a single customer.
On the other hand, I don’t believe Nokia is behind the recent surge. The surge started with this announcement, after which there has been more movement in Aspocomp’s stock. It seems that sometimes investors get excited, and sometimes interest wanes again 
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Strange that the company is already predicting mid-year that earnings will be significantly lower than the previous year. If visibility into the future is weak, then wouldn’t guidance have to be raised in the best case, or is it seen that nothing can improve the situation during H2. Peers’ outlooks and results have been much better, which should now also lift Aspocomp.. for nothing?
Well, there’s been quite a lot of catching up to do in early 2020. H1’20 operating profit was -0.2 MEUR, while H1’19 at this stage was a comfortable 2.3 MEUR. The deviation is therefore about 2.5 MEUR, which is a really big number for a small company like Aspocomp.
In the latter half of the year, we can certainly improve from the comparison period, but even the best half-year result ever wouldn’t be enough to close the gap. And the market situation doesn’t seem favorable for this. This year will probably not be salvageable in terms of results, but there’s always next year.
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What kind of cramp hit the stock price during the last hour on Friday? I was left wondering about the compiled explanations in the Q3 report regarding the decrease in demand in the automotive industry segment, even though car manufacturers across Europe have reported numbers exceeding consensus and, particularly, improved demand in September.
In the final meters, one larger purchase, which then strongly raised the price of the illiquid stock. I haven’t noticed any news or anything similar that could have boosted the price.
Generally, the demand for circuit boards is expected to come with a delay, especially since inventory levels were still high. However, Aspocomp, as a small player, is not tied to the entire market but rather to specific customers. On the other hand, as long as Asian giants have excess capacity and can also respond to “smaller needs,” purchases may be directed there instead of to Aspocomp. This also probably has some effect, or at least it did in Q3.
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It’s quiet on this board.. Juha’s update:
We are raising Aspocomp’s target price to 4.2 euros (previously 3.8 €) and our recommendation to “add” (previously “reduce”). The year 2020 was truly difficult for the company, and the Q4 result may bring another disappointment, but we believe profitability will recover in 2021. If the expected turnaround in results materializes and the company returns to profitable growth, the current valuation level of the share is low (2021e P/E 10.5x). Visibility is chronically poor for Aspocomp, but in our opinion, looking a bit further, the stock’s risk/reward ratio is reasonably good.
2020 was miserable, but not entirely bad
The coronavirus pandemic disrupted the entire PCB market in 2020, and the year turned out to be miserable for Aspocomp in terms of results. Although the Q4 result is reasonable in our estimate, we predict that the 2020 operating profit will remain at approximately 0.4 MEUR (2019: 3.4 MEUR). The Q1-Q3’20 operating profit was negative, and the year also included an ugly negative profit warning. Although the year was miserable in terms of results, positive developments occurred behind the numbers, looking to the future. A significant part of the weakness can be attributed to the telecommunications sector (5G product development cycle) and the automotive industry, which suffered from the corona crisis and industry disruption, and the company’s investments in the semiconductor industry have already yielded results (revenue increased by about 80%). The company enters 2021 with a more balanced customer portfolio, not solely dependent on, for example, the telecommunications sector.
2021 may bring a turn for the better
Visibility for Aspocomp is always foggy, so only surprises are certain. Nevertheless, the market outlook seems relatively promising entering 2021, as product development has generally started and technological development appears to have gained additional momentum from the coronavirus pandemic. Demand for telecommunication networks, which are important for the company, and thus for quick deliveries, may pick up quickly as 5G development progresses and the overcapacity situation of mass suppliers corrects as general demand picks up. Quick deliveries in the telecommunications sector were at times historically weak in 2020, so there is room for improvement. In semiconductors and security, the outlook has already been strong. We expect the market situation to normalize this year and Aspocomp’s revenue to recover close to the 2019 level, as demand for Telecommunication Networks recovers and the strong development of the Semiconductor and Security, Defense, and Aviation segments continues. At the same time, profitability should recover strongly, although we predict that 2021 operating profit (2.8 MEUR) will remain significantly below the 2019 level (3.4 MEUR) as investments increase depreciation levels. We have not made any changes to our forecasts, but our confidence in them has improved slightly.
The expected value is positive, although the turnaround in results is already priced in
In our assessment, the weak result of 2020 is an exception rather than the rule, and looking beyond the corona slump, the company’s valuation is reasonable (2021e adj. P/E 10.5x EV/EBITDA below 6x). Despite a slight increase, Aspocomp’s stock is now 10-20% undervalued relative to its peer group (including Scanfil and Incap). This is partly justified because 2020 was much more difficult for Aspocomp than for its peers, and there are no concrete signs of a recovery in profitability yet. Still, looking a bit further, we see Aspocomp having all the prerequisites to return to profitable growth as the company’s investment program progresses and reflects in the results. In our opinion, the stock’s risk/reward ratio is not something to praise, but as the 2021 outlook clarifies, the stock may already be at a higher level. We are therefore prepared to wait for the 2020 financial statements with a cautious “add” recommendation.
https://www.inderes.fi/fi/tiedotteet/aspocomp-tiivistaa-johtoryhmaansa
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Well, last year’s performance was bad…
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Well, there’s a little glimmer of light to be seen here..
Aspocomp estimates that its net sales will increase and its operating result for 2021 will improve from 2020. In 2020, net sales amounted to EUR 25.6 million and the operating result to EUR -0.1 million.
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What do people think, will this general component shortage benefit Aspocomp, and potentially significantly given their scale? 
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I concluded that if times aren’t good now, then when will they be?
From Juha’s company update on March 11:
In an overcapacity situation, large mass manufacturers can exceptionally offer short delivery times, which erodes Aspocomp’s competitive advantage in high-margin quick deliveries.
The chip shortage only hit in the latter part of Q1, and thus, in my opinion, it wasn’t visible in the most recent analysis. Or what does @Juha_Kinnunen think about the effects of the chip shortage?
All sources, including Yle, are indeed shouting about undercapacity, and it is predicted to continue into next year, for example, NVIDIA and Qualcomm just mentioned it in their earnings reports. Of course, it’s not necessarily linearly the opposite, that now Aspocomp is rocking, but it should perhaps be (IMO). If the economy is generally strong, then the need for quick deliveries will arise anyway, and the chip shortage should boost it even further.
On the other hand, the chip shortage is not an ideal situation if the situation is so bad that customers shut down factories completely because goods are too largely finished.
And the shortage could also affect Aspocomp itself, although my understanding is that the “raw materials” for chips, etc., are not the problem now. The company itself wrote on its website on March 25:
How Aspocomp can help
We have an extensive material stock at our Oulu site and supply network with our European partners. It may be the case for European sourcing even if you are used to Asian supply chain for your products. We have been delivering solutions to PCB designs that are not typically produced in a QTA factory under normal circumstances. Get in touch with us and we will help you.
https://aspocomp.com/2021/03/25/lead-times-and-logistics/
From this, it’s easy for a super-profit hunter to “bull” double-digit returns for the next year if there has indeed been demand for quick deliveries and/or it’s coming during the rest of the year.
If one interprets that Morningstar summary to mean that 2020 was just an understandable dip and this year we’ll hit that historical 2-4 million euro net profit, then a P/E of 15 will again be allowed at some point.
Inderes is otherwise on the same page with that earnings level:
Looking ahead, in our opinion, the company would have to clearly fail if it could not exceed its 2019 results within the next three years.
However, the share price has also been mulling over negative news at about this level, so I don’t really expect any mighty plunge even if Q1 isn’t great. And I don’t intend to take a large number of shares from this, as I, as a layman, can’t make any sense of the longer-term outlook. I also chronically and strongly suspect that I am not, after all, smarter than the market in my interpretations of demand prospects, but that there are reasons for the mulling.
But one has to try, and I will therefore gladly watch over one earnings report or another to see if things start rolling reasonably with “skin in the game.”
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My apologies, @naata, for the delay in responding to this.
The industry has been experiencing various degrees of component shortages for a long time. Aspocomp, as a European player (for the Oulu factory), might be in a slightly different situation, but I wouldn’t draw major conclusions based on the company’s message to its (potential) customers. Aspocomp has, however, also raised the component shortage as a short-term risk. The following is taken from the financial statement:
Impact of the COVID-19 pandemic on the electronics supply chain
The COVID-19 pandemic and the restrictions it has caused significantly affect the supply chains of the entire electronics industry. The COVID-19 pandemic may also affect the availability of parts and components needed by electronics assemblers, which would weaken demand.
The overall situation is difficult to grasp, because as you yourself said, in a negative scenario, customers would not be able to complete their products at all (or they would be delayed). In that case, Aspocomp’s demand would also weaken. In a positive scenario, the situation would not be as bad; Aspocomp would be able to deliver and possibly gain new customers through the situation. Logistics challenges could also support this, which might increase Europe’s attractiveness (vs. Asia). However, circuit boards do not take up massive amounts of space, so is the container shortage really such a big factor? In addition, if components become more scarce, it usually tends to be the case that larger customers get theirs first. Of course, it’s good if they have been able to anticipate, but if the situation prolongs, it could also turn against Aspocomp.
Honestly, I cannot say what the overall impact will be, but I would not be at all sure that it would turn positive We will get more information about this in connection with Q1.
It is possible that a P/E of 15x would also be allowed with peak earnings - you see crazier things in the markets, almost daily nowadays. But let’s keep in mind that Aspocomp’s median P/E has been around 9-10x over the last 10 years. A >50% increase from that is a lot, and especially with the peak earnings you are expecting, it would be quite a leap. Aspocomp has not yet been able to demonstrate a sustainable track record of profitable growth, and 2020 went badly wrong. For understandable reasons, of course, but when compared to, for example, Incap or Scanfil from the same industry, Aspocomp’s result stands out unpleasantly.
It is true that Aspocomp’s share seems to have found some kind of bottom level during the pandemic. Despite the weak news, confidence in recovery has apparently been strong, and at least the 2020 result was pretty much overlooked. In that sense, a “huge plummet” would indeed be a big surprise to me as well, if the bigger picture remains unchanged.
And healthy self-doubt is always a good thing, I practice it myself constantly 
Indeed, I would be a bit more cautious regarding that valuation level. The current valuation already includes high earnings improvement expectations, because the 2020 results certainly cannot justify these levels in any way - nor, in my opinion, can the 2021 forecast. But of course, if earnings recovered to previous peak levels in the coming years as expected, and the earnings growth outlook also remained good, then the share’s return expectation would indeed be good. In my opinion, it should be, because high risk must be compensated with significant return potential.
But we will certainly be wiser after the Q1 earnings release. According to my own forecasts, the Q1 result will still be at a loss, so no miracles are expected from that. After that, expectations will start to rise and are already quite high.
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Now Aspocomp got a bigger contract just before the Q1 report 
Tomorrow we will surely hear more about this.
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It’s difficult… There’s a strange difference in performance compared to benchmarks.