Why ASMP is vulnerable to a stock overhang

There's a potential sell-down by parent company.

According to Maybank Kim Eng, ASMP could face a stock overhang arising from a potential sell-down by parent ASM International (ASMI). 

On 13 Mar 2013, ASMI sold 11.9% (47.4m) of ASMP shares to reduce its stake to 40.1% from 52%. A sixmonth lock-up period preventing ASMI from selling down its stake in ASMP further expires this week.

Here's more:

In our opinion, ASMI is likely to dispose of its holding in ASMP over time to unlock shareholder value. ASMI’s stake in ASMP is currently worth USD1.6b or 80% of ASMI’s market cap of USD2.0b.

Factoring in its net cash of ~USD0.4b, ASMI’s shares are effectively valued near zero, yet in 2Q13 its core business generated the highest profit margins since 1Q12.

Importantly, we see little synergy between the businesses of ASMI (front-end chip equipment) and ASMP (back-end chip assembler), which have been operating independently for decades.

In addition, ASMP’s limited cash dividend payout and falling returns may adversely impact the value of ASMI’s holding in ASMP. We believe ASMI’s board is being urged by shareholders to divest its holding in ASMP over time.