Cml Microsystem Share Price (CML)

the 2014 P/E of 13.4x does not look at all demanding. While a c 10% premium to the average of an albeit imperfect peer group of UK hardware and international storage companies, we feel this is easily justified given the robust cash generation, scope for upside and continued strong earnings growth beyond our forecast period.

Our estimate changes are detailed overleaf. On marginal top line upgrades our 2013 PBT and EPS are increased by 10% with the respective 2014 figures moving up by 11%. Our 2014 forecasts assume 7% growth, but as discussed above, successful penetration of the SATA storage market could drive operationally geared upside in the 2014/15 timescale.

No operational update was given, but to recap, continued delivery to plan should improve the prospect of an upward inflection in growth and margins. The company’s storage business, where the commercialisation of SATA controller chips substantially expands CML’s addressable market, provides the most significant growth opportunity. In wireless, customer launches of products using CML’s chipset solutions, where CML provides modem, RF and sometimes voice coding chips (expanding revenue per device by 2-2.5x) should support a mid- to high-digit growth trajectory. The recent establishment of a Sheffield-based RF and mixed-signal design team, with expertise in wideband RF (to complement the company’s existing narrowband core competence) is a longer-term investment, but should open up a broader range of niche radio markets on a three- to four-year timescale.

Full-year sales are expected to be just over £25m (up c 7.2% y-o-y) and versus our £24.9m estimate. Profit before tax at “circa £5m” is around 10% ahead of our old £4.6m estimate, which we believe is likely to be largely due to strong cost control. Year-end net cash at £8.9m is substantially ahead of our £6.6m estimate.

Guess this has something to do with the new director Jim Lindop who owned company Jennic Ltd based in Sheffield and sold out to NXP Semiconductors in 2010. Interesting move, but no real impact on CML in the short to medium term. Only a buy at 300p so keep selling at current price.

Business description CML Microsystems supplies semiconductors into specialist communications and embedded flash memory storage applications.