Actually, Liverpool is best known for its legendary football club, the "Reds". But the city and its region in the northwest of Great Britain have much more to offer. This is also true in terms of science. For more than 60 years, the Daresbury Laboratory has been driving research in a variety of fields, ranging from nuclear physics to supercomputers. This week, this internationally recognized facility is hosting the 12th "Vacuum Symposium UK." In addition to technical meetings, training courses and poster sessions, the program of the two-day event (June 13 and 14) includes an exhibition. Of course, the VAT Group cannot be missing at such an event. The Swiss company describes itself as the world's "leading developer and producer of high-performance vacuum valves, multi-valve assemblies, vacuum modules and metal diaphragm bellows." It is less the anticipation of the industry symposium than the rally in the chip sector that is likely to have boosted VAT shares recently. Over the course of a month, the mid cap has risen in price by 22%. This makes VAT Group one of the top 5 performers in the 216-strong Swiss Performance Index.
The Haag-based company's vacuum valves are used in the research and production of a wide variety of electronic components. In addition to LEDs, solar cells and displays, these include semiconductors in particular. In 2022, the "Semiconductor" division contributed 63% of Group sales (see chart). As much as three quarters of the business was related to the chip industry, according to the company. Against this background, it is not surprising that the latest news from this technology field has rubbed off on the domestic equipment supplier. In May, several chipmakers commented positively on the outlook for artificial intelligence (AI). Among them was Nvidia. The U.S. industry player literally pulverized Wall Street's expectations with its forecast for the current second quarter. Nvidia supplies semiconductors that help process the enormous volumes of data generated by AI applications such as ChatGPT.
A potential AI boom would come just in time for VAT. After all, just a few weeks before the positive news from overseas, the technology company had reported a "cyclical downturn in semiconductors." This had burdened the order intake in the first quarter of 2023. Specifically, VAT Group received orders with a volume of CHF 136 million - 54% less than in the first three months of 2022. Since the order book is bulging after the boom of recent years, net sales declined less sharply. At CHF 233 million, revenues in the first quarter were 12% below the level of the previous year. VAT Group thus exceeded its own forecast (CHF 210 to 230 million). The company was particularly affected by weakening demand for memory chips used in smartphones, tablets and PCs. Here, the consequences of inflation, rising interest rates and the resulting economic uncertainties are becoming apparent. In contrast, the AI boom already seems to be having a positive impact on business. "Investments in state-of-the-art logic chips for data processing remained at a solid level," VAT wrote in a media release. This circumstance could help the group get back on track for growth next year after a decline in sales and earnings in 2023. At least, that's how the management plans it.
Even if the mid cap were to suffer setbacks - operationally or on the stock market - an attractive return would be possible with the Softcallable Barrier Reverse Convertible (BRC). The product, which is denominated in CHF, pays a coupon of 11.50% p.a. regardless of the further development of the VAT Group share price. The nominal is partially protected: As long as the underlying does not fall to or below the barrier of 59% of the initial level, investors receive the nominal amount back in full at maturity. If the cushion is not sufficient, the investment would be exposed to the full risk of VAT Group. To avoid markdowns in this scenario, the underlying would have to climb back up to or above the strike by the final fixing. Please also note: Leonteq may call this issue in advance. It is possible to exercise the soft callable feature for the first time after half a year and then every three months. If the issuer makes use of this, the BRC will be redeemed early together with the accrued coupon.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.