AMSSY - ams-OSRAM AG: A Major Risk Has Materialized

2024-05-27 01:38:44 ET

Summary

• Ams-OSRAM AG faces major setbacks as a key project is cancelled, rendering a new factory in Malaysia obsolete.
• The cancellation impacts the company's future revenue and profit growth, thereby its valuation.
• There is not much room for error left, lest another capital increase become a distinct possibility, if not even a probability.
• Even under optimistic assumptions, I do not see much upside for the stock.

Just when ams-OSRAM AG ( OTCPK:AUKUF ; OTCPK:AMSSY ) seemed to have found its footing, it was yet again hit by major bad news. One of the most important, if not the most important, projects was cancelled by the customer, thereby rendering a brand-new factory in Kulim, Malaysia virtually obsolete. To add insult to injury, ams appears to be stuck with substantial lease liabilities for the time being, after selling the buildings to investors in anticipation of a large contract to produce state of the art 8-inch microLEDs. The stock market reacted as one would expect it to react: by sending the stock tanking. At the time of writing, it still trades some 28 lower than when I last covered ams. In this article, I will assess how the recent developments impact the investment thesis....

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