Semiconductor Equipment - Berenberg Bank

ASML Holding NV
Technology Hardware
Strong cash and consistent dividends
ASML’s €1.6bn of net cash (€3.8/share) at the end of Q2 2013 accounted for 5%
of its market cap. The strong cash position will enable the company to explore all
possible M&A opportunities, and more importantly, ensure a consistent level of
R&D investment to maintain its technology leadership position.
ASML generated €532m of free cash flow in 2012, down from €1,770m in 2011,
due to a decrease in sales and EUV downpayments. We expect the timing of EUV
downpayments may cause fluctuations in free cash flow in 2013 and 2014 before
EUV ramps up in volume. Fluctuations in free cash flow fluctuation should end
after 2015, when EUV can deliver a more consistent level of operating cash flow.
Capital expenditure is guided up to €370m for 2013 (7.3% of 2013E sales), from
€172m in 2012, due to EUV and 450mm facility expansion. We estimate capex will
remain at a similar level until 2015, and return to €200m after all EUV- and
450mm-related facility expansion is complete. The overall cash position will not be
adversely impacted by the rising capex, as it will be offset by operating cash flow
growth over time.
ASML has a history of consistent dividend payouts as well as rising dividends. It
raised 2012 dividends to €0.53/share, from €0.46/share in 2011, equal to a 20%
payout ratio. If ASML distributes 17% (the average payout ratio in 2010-2012) of
net income, we estimate that the dividend will increase to €1.3/share in 2016,
which is a 2% dividend yield based on our price target.
Figure 17: stable dividend payout
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
25%
20%
15%
10%
5%
0.00
2011 2012 2013E 2014E 2015E 2016E
EPS DPS Payout ratio
0%
Source: Company date, Berenberg estimates
ASML began a share buyback programme in 2011. It has executed €1.13bn in share
buybacks to date, and announced another €1bn repurchase for 2013-2014 in Q1
2013.
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