Santa Ana-based circuit board maker TTM Technologies Inc. is on a tear.
Wall Street’s been paying renewed attention to TTM now that it’s seeing the fruits of an acquisition that doubled its size, boosted profits, paved the way into new markets and provided a bigger foothold in Asia.
The strong run tracks back to April, when TTM wrapped up its buy of the circuit board business of Hong Kong’s Meadville Holdings Ltd. for $521 million.
The third quarter marked TTM’s first period that reflected the full integration of Meadville’s business.
“We recorded our first quarter as a combined company with record income and record earnings,” Chief Executive Kent Alder said. “We are really pleased with how the company is performing and how we’ve positioned it for the future.”
TTM—whose shares are traded lightly with only a handful of analysts following them—has seen its stock soar nearly 60% in the past three months to a recent market value of $1 billion.
It’s bested Nasdaq, which is up about 18% for the same period.
The climb accelerated last month when TTM reported an outlook for the current quarter that blew analysts’ expectations out of the water.
TTM sees fourth-quarter profits coming in at $28 million to $34 million, well above Wall Street’s initial forecast of $25 million and up about 93% from a year earlier.
It’s looking for sales of $351 million to $367 million, in line with initial expectations and up about 139% from a year earlier.
Wall Street since has boosted its fourth-quarter outlook in line with TTM’s projections, with analysts expecting profits of $31 million on sales of $361 million.
“That deal was very, very good to TTM,” Anders Bylund said in a report on stock site TheMotleyFool.com. “The customer base is now much wider across end-market industries … and margins of every flavor are much stronger now than they were before.”
China Plants
The Meadville deal also gives TTM seven plants in China, adding 13,000 workers to its ranks. The company has some 400 workers in Orange County.
The smooth integration appears to have TTM hitting on all cylinders.
“The third quarter validated the purchase of Meadville and the integration is on track with accretion ahead of our forecast,” said Shawn Harrison, an analyst at Longbow Research in Ohio. “The combined company’s markets are growing and TTM is adding capacity in Asia where utilization is high while paying down debt.”
Harrison has a “buy” rating on the stock and earlier this month raised his price target to $20 a share, up from a previous target of $18.
TTM’s shares were trading at about $13 last week.
Chief Executive Alder said he’s looking to keep up momentum by “telling the story” to analysts and investors.
“We are in the process of going back to the Street and introducing our new company,” he said. “We are relatively unknown in the investor community.”
The integration of Meadville has come at a deliberate pace, Alder said.
“It’s a little more challenging than a merger of two North American companies,” he said. “You have to factor in the distance and culture and language and make sure you move forward with a measured, disciplined approach.”
In the past, TTM has held its own against Asian circuit board makers by focusing on custom boards made in smaller batches—leaving bulk, commodity boards to Chinese and other producers.
The company also does what’s called quick turn business to stay competitive in North America, where it gets higher profits on specialized, small runs of circuit boards that it can produce fast.
Most of its North America operations serve medical device makers, aerospace and defense companies.
New Markets
The Meadville deal puts TTM in a position to serve faster-growing markets and get about three-fourths of its projected $1.2 billion in 2010 sales from Asia. That’s because the Meadville operations—in addition to making run-of-the-mill, relatively low-priced printed circuit boards—also make specialized ones that go into consumer electronics such as touch-screen tablet computers and feature-rich smartphones.
That’s a key addition for TTM, which has counted on networking gear used by corporations and for industrial uses for the bulk of its sales. Its top customers are Cisco Systems Inc., Apple Inc., IBM Corp., LM Ericsson and Huawei Technologies Co.
TTM is no stranger to growing via acquisitions.
In 2007, the company doubled its yearly revenue with a $226 million buy of Tyco Printed Circuit Board Inc., a former Tyco International Ltd. unit.
The deal more than doubled TTM’s sales to aerospace and defense customers, a more stable and profitable source of work from customers such as Raytheon Corp., Boeing Co., and Northrop Grumman Corp. It also gave TTM initial entree into Asia with a Tyco assembly plant in Shanghai.
TTM moved its headquarters to Santa Ana in 2003 from Redmond, Wash., after it bought Advanced Circuits Inc., a unit of Honeywell International Inc. and took over its local plant.
The latest deal and integration of Meadville makes TTM a truly global player, according to Alder.
“Certainly, in our history in North America, we have grown through acquisitions,” he said. “Now that we have firmly established ourselves as leaders in North America, the next step in the growth process for TTM is to become a global company.”
