ASML Semi Sees Opportunities
ASML Holding N.V.'s (ASML) June quarter revenue and EPS outperformed consensus estimates. The company has the leading position in the next generation immersion lithography tools, which will lead to long-term growth. The firm is managing weakness in the markets by cutting SG&A and R&D expenses.
Looking ahead to 2009, the management expects a positive tail wind, given the Dynamic Random Access Memory (DRAM) ramp-up of 55-nanometer, the healthy revenue growth at foundry customers and the transition to double patterning lithography by flash memory leaders. We are reiterating our Buy rating on the shares of ASML.
ASML is growing its market share. The company just added a major client in Japan. The management expects a positive tail wind in 2009 as the transition to double patterning in memory begins.
ASML's 193nm introduction is unlikely to face competition, at least in the near-term. In addition, the used equipment market is also improving, with tier II customers increasing their capacity by adding 200mm tools. The 200mm tools have better gross margins than the 300mm products, since these products are newer.
The firm is ramping immersion very quickly. Immersion is getting into production for the flash nodes at the 5x level that is 50-nanometer and above. Management expects that the flash customers are willing to ramp 4x nodes to another completely different node in high volume and also expect the DRAM customers to start to ramp for the first time, immersion into their business. This is the key to ASML's growth because DRAM today is still a business which is approximately twice the size of flash.
Montpelier Re a Value Buy
Montpelier Re's (MRH) second quarter operating earnings of $0.63 per share were slightly ahead of our expectations, attributable to a lower loss and loss adjustment expenses and active share repurchases resulting in fewer shares. Though the company made a provision of $15 million related to weather-related losses in the current period in U.S., it was more than offset by $28 million net subrogation collections and favorable prior year reserves.
While we remain concerned about the general softening in the reinsurance industry and increased competition, the company has begun to experience the benefits from its new initiatives -- premium declines from Bermuda have been replaced by premiums generated by the new Lloyds and U.S. platforms, with the London operation issuing an operating underwriting profit for the first time.
