AMKR - Valens Credit Report - 2023 05 19
Cash bond markets are materially overstating credit risk with a YTW of 6.682% relative to an Intrinsic YTW of 4.772%, while CDS markets are overstating credit risk with a CDS of 209bps relative to an Intrinsic CDS of 131bps. Meanwhile, Moody's is materially overstating AMKR's fundamental credit risk, with its Ba3 credit rating five notches lower than Valens' IG4+ (Baa1) rating.Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. While most management members are not material owners of AMKR's equity relative to their annual compensation, CEO Rutten's significant holdings indicate he may influence other NEOs to align with shareholders and pursue long-term value creation for the firm. Moreover, management members have low change-in control compensation relative to their annual compensation, indicating they are unlikely to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
Earnings Call Forensics™ analysis highlights that management is excited they support routers and switches for data centers, and they are confident they delivered revenue above mid-points of guidance.
Amkor Technology is a provider of outsourced semiconductor packaging and test services, which include semiconductor wafer bump, wafer probe, wafer back-grind, package design, packaging, system-level and final test and drop shipment services. The company's Advanced Products include flip chip chip scale packages, wafer-level packages and flip chip ball grid array packages, while its Mainstream Products include leadframe packages, substrate-based wirebond packages and micro-electro-mechanical systems packages. The company provides its services to integrated device manufacturers, fabless semiconductor companies and contract foundries.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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