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10-3-2006 CAMT - Camtek Ltd.

CURRENT PRICE: $6.23

TYPE OF PLAY: EARNINGS GROWTH /MARKET EXPANSION/ VALUE /TECHNICAL ANALYSIS



Camtek designs, develops, manufactures and markets intelligent optical inspection systems to the Semiconductor Manufacturing and Packaging, High-Density Interconnect Substrates (HDI-S), and Printed Circuit Board (PCB) industries. Their products address specific needs of each industry with dedicated solutions, based on a common core of intelligent imaging technologies. Within the semiconductor industry, the area of Macro-Defect detection has been a bright spot and the company's market expansion has continued as evidenced by the recently announced Toshiba order for multiple, Falcon 830 bumped-wafer metrology systems. These will be utilized in Toshiba's key Oita, Japan plant.

On August 7th of this year, the company reported record quarterly results (.17 EPS) Not only is this a sequential increase of the latest quarter but it also marks an increase of 240% over the comparable quarter of 2005. This is significant as many other companies in the sector have not faired nearly as well. Of particular importance for continuing growth and expansion is the fact that these improvements in revenue stream and gross profit margins (up 10% to 54.6% currently) have come while the company is investing significant resources into new technology and market penetration. The company also spoke about the release of a new product soon in their conference call.

Camtek continues to maintain a cash position of over $30 million (~$1 per share). As reported in their latest earnings conference call, the company has forecast $100-$110 million for 2006 revenues. While a yearly EPS of .70 or more is likely based on the first half, current margins and guidance, we will use a conservative EPS of .60 for example purposes. A trailing P/E of 15 for CAMT showing EPS of .60 for the year equates to a price per share of $9. However, if the industry average of 24 P/E is attained, a value of over $14 would be observed. In our view, this is a company executing on all fronts: market expansion, product growth, revenue growth, and cost containment. All of this is resulting in the dramatic increase observed in net-income and associated EPS number.

With an already strong foothold in the Asian market, the company continues to work at increasing its own exposure and share in the market. On October 3rd, they will be at the SEMI Expo in Moscow. They are also set to show their products at many other events throughout this year and into next year (full schedule of all events is on Camtek website under "Events"). On June 29, 2006 Camtek announced that its shares would be included in the Tel-Tech 15 index on the Tel Aviv Stock Exchange (TASE). This should bring even more visibility to the investing communities who have been beginning to take interest in Israeli business, especially after Warren Buffett spent $4 billion to purchase an 80% share of Iscar proving that Israel is a viable target for U.S. investing dollars.

From a technical analysis perspective, we feel that the stock has been in a large consolidation period and is very compressed and poised to move higher in the future. Increasing volume over the past week is also encouraging.

LINKS FOR FURTHER READING:
CAMT Homepage
Last Earnings Release
SEC filings for CAMT
General CAMT statistics
CAMT Conference Call (will take a second to load)
CAMT upcoming trade shows and conferences