Greenbackd

Amtech Systems Inc (NASDAQ:ASYS) has filed its 10Q for the period ended March 31, 2009.

We started following ASYS (see our post archive here) because it was an undervalued asset play with a private investor disclosing a substantial holding. The private investor, Mr. Richard L. Scott, disclosed a 7.0% holding in July last year and Mr Scott has continued to purchase stock. As of February 17 this year, Mr. Scott holds 9.1% of ASYS’s outstanding stock. The stock is up 47.5% since we opened the position to close yesterday at $4.10, giving the company a market capitalization of $36.7M. We initially estimated the liquidation value to be around $40M or $4.40 per share. After reviewing the 10Q, we’ve maintained our estimate of the liquidation value at $40M, and slightly increased our estimate of the the per share liquidation value to $4.47 because the company repurchased around 144,ooo shares in the last quarter.

The value proposition updated

ASYS is generated positive operating earnings of $1.5M in the six months to March 31, which is encouraging. The summary of our estimate for the company’s liquidation value is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

Conclusion

At its $4.10 close yesterday, ASYS is trading at a little under 10% discount of our estimate of its value in liquidation. Given that it has continued to generate positive operating cash flow and earnings in a difficult operating environment, we think ASYS represents very good value at a discount to its liquidation value. The stock traded over $5.00 last week, but we elected to hold on because we believe that ASYS should be worth more. Management seem to have recognized that the stock is too cheap, and have taken the right steps by authorizing a $4M stock buy-back, and repurchasing 144,000 shares in the last quarter. Our only criticism is that the buy-back could be bigger and more stock should be bought back. This is a very small criticism, and ASYS has the option to increase the buy-back in subsequent quarters if the stock price continues to trade at a discount to liquidation value. We don’t know anything about Mr. Scott, but we like to see large stockholders increasing their stakes when the stock price drops. We think ASYS is very good value, and that’s why we’re maintaining our position.

[Full Disclosure:  We have a holding in ASYS. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]