Weekly Roundup 2022-07-22

Author: Danyaal Munshi

Weekly Roundup 2022-07-22

Lunar Capital Weekly Roundup

Index / Fund / Rate Start of Year Last week This Week % change YTD
JSE ALSI 73 723 65 089 68 070 -7.67%
NASDAQ Composite 15 833 11 452 11 834 -25.26%
S&P 500 4 797 3 863 3 961 -17.42%
Prime Lending Rate 7.25% 8.35% 9% 24.14%
Lunar BCI WW Flexible Fund 165.68 141.63 148.08 -10.62%
USD/ZAR 15.96 17.08 16.85 5.58%
EUR/ZAR 17.95 17.23 17.21 -4.12%
Brent Crude 77.86 102.60 103.71 33.20%

Source: iress

Company and Market News

Last week, ASML released their Q2 2022 results. Revenue and net income for the quarter both increased by 35% compared to the Q2 last year.

ASML have indicated that they expect net sales for Q3 2022 to be between €5.1 bl and €5.4 bl. And for the year they expect revenue growth to be around 10%. This is lower than they previously stated. They noted that it is due mainly to delayed revenue recognition from the fast shipments they are implementing. They noted that some customers are indicating signs of slowing demand from certain consumer-driven market-segments. However ASML are still seeing high levels of demand for their systems. They currently have strong net bookings for their systems. According to ASML, the strong demand is driven by global megatrends in automotive, high-performance computing, and green energy transition.

Due to the on-going supply-chain issues, ASML is using the process of fast shipment to deliver their products to customers. This means that ASML will skip some of the testing at their factories and will do final testing at their customers’ site. ASML will only then be able to recognise revenue at a later stage. Their customers, however, are able to test the systems they receive from ASML earlier and can begin production of microchips earlier.

With the ongoing geo-political tensions, ASML faces the risk of being forced to stop selling their DUV (Deep Ultraviolet) systems to China. Semiconductor companies require export licenses, as semiconductors are considered dual-purpose products that are used for general consumption and military use. Currently, they are unable to sell their flagship EUV (Extreme Ultraviolet) systems to China.

ASML is one of the leading suppliers to the semiconductor industry. The company provides chipmakers with the hardware, software, and services to mass produce microchips. Some of their clients include Intel, Samsung, and TSMC. ASML effectively has a monopoly on making equipment that uses photolithography (process of using light to print patterns on silicon) to produce microchips.

Below is a table comparing some of the rolling 12-month results for ASML.

Rolling 12-Month Period Ended Net Income (€’bn) Free cash Flow (€’bn) PE at end of week Results Release Return on Capital Employed
03-Jul-22 5.62 9.24 37.74 32.53%
04-Jul-21 4.78 6.55 55.64 25.09%

Source: iress

 

Disclosure: ASML is held in the Lunar BCI Worldwide Flexible Fund.

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