AMS Osram - comment

The numbers are OK but don’t justify the 15% increase in share price seen this morning.  However, the rally in the equity and bonds this morning is more likely to do with short covering.  The Company posted a positive FCF (after interest), ahead of our model, which is partially driven by further NRE payments which have lowered R&D spend.  Guidance is muted for H1 with a stronger expectation for H2.  

Management provided no update on the disposal of the Kulim factory, briefly mentioning it was still possible for this year.  Leverage remains elevated, due to subdued revenue growth.  However, stronger-than-expected cost savings have maintained EBITDA margins, and in turn cash flow.  The stronger H2 guidance, driven by the ramp-up of project wins and mobile phone sensors coupled with the 10.5% coupon should provide support for the bonds.  We intend to maintain our position.  There is a credit investor call at 3 pm.