AMS Osram - comment

AMS announced last night the loss of a cornerstone contract for its microLED strategy, rumoured to be Apple.  This is a major setback for the Company and genuinely calls into question its viability in the medium term.  Short-term impact is limited, as the new facility wasn’t expected online before end of FY25.  Cashflow is likely to improve in the short term with lower CAPEX, however, any CAPEX spent is going to be expensed (not capitalised) and therefore lead to lower margins.

We have exited the position and were monitoring the new bonds, trading at c.8.5% yield, as an opportunity to short, given the cautious guidance for H1 2024.  Unfortunately, we didn’t short it at the time, as the Company had sufficient liquidity and has delivered its guidance.  We are now re-examining the name.    

Company are holding a conference call  at 10 am UK time, +44 2071538944 with investors able to register at https://services.choruscall.it/DiamondPassRegistration/register?confirmationNumber=2674918&linkSecurityString=59f154d4c