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| Date: Friday 05th 2008f September 2008 05:32:01 PM |
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Sweet Memory for Komag - 06/29/2007 |
| By: Hari Wibowo |
Less
than a month after buying Komag Inc. (KOMG), we have unfortunately have to
part with it. No, it is not as sad as you think. When we
bought Komag back in
June 2007 (Oh yes, it is still June 2007 by the way), Komag was trading at a
forward P/E ratio of 8 while hoarding $ 3.23 per share of positive net cash.
Our fair value calculation shows that Komag can fetch $ 47 per share.
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| With commanding lead in supplying disk drive company, Komag is expected to do well for years to come. Small hiccups had caused Komag shares to stumble and enable us to pick it up at a lower valuation. However, this past day, Western Digital (WDC) agreed to acquire Komag with a pricetag of $ 1 Billion. With $ 90 Million in positive net cash, Komag is actually purchased lower than what the price tag implies. | |
| Another new development for Komag is its second quarter business outlook. Komag expects revenue for 2Q 2007 to be down 30% from 1st quarter of 2007, which implies a worsening scenario. As a result, Komag expects to post operating loss for the second quarter of 2007. That doesn't look good. Apparently, business has gone worse in the last few weeks. Meanwhile, Komag shares has risen to $ 31.87 per share due to the acquisition news. | |
| We bought Komag four weeks ago at $ 24.20 per share. With the merger news, Komag is up 24% in the past month. While we aims for Komag to rise to $ 47.73 per share eventually, this acquisition news will limit Komag's potential since the company itself seems like to have talk with Western Digital about the acquisition. Therefore, we believe that Komag's shares has reached its full potential due to this acquisition announcement. | |
| Today on Friday 29th June 2007, we are selling Komag at $ 31.87 and took the profit and run. It is a short sweet ride but the upside seems to be limited at this point. You can view our complete portfolio list here. |
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| Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Komag Inc. (KOMG) or any other securities. |
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