Greenbackd

The always superb Manual Of Ideas has nine new additions to its list of activist targets. Companies on the list must have a “strong balance sheet that could be recapitalized or liquidated to achieve activist value creation; and insiders must own less than 20% of the shares, implying an inability to exercise voting control over the company:”

• Semiconductor equipment provider Axcelis Technologies (ACLS) joins the list in first place, based on a ratio of “net net” current assets to market value of 1.3x, making ACLS a Ben Graham-style bargain stock. We calculate “net net” current assets as current assets minus total liabilities. A ratio of 1.3x suggests that the liquidation value of ACLS may exceed the company’s market value, potentially attracting the interest of activist investment funds.
• Biotech drug developer Myriad Pharmaceuticals (MYRX) joins the list in second place, as the company has net cash of $169 million versus market value of $135 million. Insiders own virtually no shares of the company, making Myriad vulnerable to activist shareholder action.
• Communications equipment provider Radvision (RVSN) joins the list in 12th place. Radvision shares recently tumbled to a market value of $115 million, only $8 million above the company net cash balance. The stock price decline came on the heels of Cisco’s announcement that it would aquire video conferencing company Tandberg. Radvision provides such technology to Cisco, with the latter Radvision’s largest customer.
• Specialty steel product maker Universal Stainless & Alloy (USAP) joins the list in 30th place. The shares trade at 0.8x price to tangible book value, and the company has 19% of its market value in net cash. “Net net” current assets account for two-thirds of USAP’s market value, making the company a potentially interesting recapitalization candidate.
• Biopharma company Progenics Pharmaceuticals (PGNX) joins the list in 34th place. The shares trade within 10% of their 52-week low, reflecting the stock’s lack of participation in the recent stock market rally. With a market value of $155 million and more than $100 million of net cash, the shares could attract the attention of activist investors familiar with the biopharma industry.
• Cancer drug discovery firm Infinity Pharma (INFI) joins the list in 36th place. While the company is losing money as it advances its drug development pipeline, management has stated that the company has sufficient liquidity through 2013. INFI has a market value of $152 million versus a net cash position of $150 million.
• Zoran Corp. (ZRAN), a provider of digital solutions for application in the digital entertainment and imaging markets, joins the list in 42nd place. The company recently posted strong sequential revenue growth in key business segments and returned to positive cash flow generation. With 63% of the market value in net cash, the company may be in a position to aggressively repurchase shares, thereby boosting shareholder value on a per-share basis.
• Semiconductor equipment company Rudolph Technologies (RTEC) joins the list in 43rd place. The company’s Q2 revenue growth exceeded guidance, but investors continue to shun the stock. RTEC has one-third of its market value in net cash and nearly two-thirds in “net net” current assets.
• Finally, fabless semiconductor company Sigma Designs (SIGM) joins the list in 44th place. With one-half of market value in net cash and an enterprise value-to-revenue multiple of 0.9x, the shares appear quite cheap. The company may be in a position to boost shareholder value by using excess liquidity to repurchase shares or pay a one-time cash dividend.

We’ve been following Axcelis Technologies Inc (NASDAQ:ACLS) since January 8 this year (see our post archive here) because it is an undervalued asset play with an activist investor, Sterling Capital Management, holding 10.7% of its outstanding stock. ACLS has completed the sale of its 50% interest in SEN Corporation, its joint venture with Sumitomo Heavy Industries, Ltd. (SHI) to SHI for proceeds of $122.3 million. ACLS received around $35.9M in cash after applying $86.4M of the proceeds to meet obligations to the holders of the company’s 4.25% Convertible Senior Subordinated Notes, upon which ACLS defaulted in January. Our position in ACLS is up 120% to $1.32, which gives the company a market capitalization of  $137M. We’re not quite as bullish on ACLS as the Manual of Ideas. We last estimated ACLS’s liquidation value at around  $113.6M or $1.10, because we think that cash burn is a significant issue for ACLS. At the current rate of cash burn, we estimate the company has around six months before its liquidation value is around $0.60, and around a year before it’s worthless. That said, Citi thinks ACLS could be worth $3 (for what that’s worth):

Citi upgrades Axcelis Technologies Inc (Nasdaq: ACLS) from Hold to Buy. Price target lowered from $5.50 to $3.

Citi analyst says, “Following the collapse of its merger talks with Sumitomo Heavy Industries (SHI) and subsequent ~70% decline in stock price, we think the stock is now trading below liquidation value. So, while we are far from bullish on business prospects and we acknowledge that there’s risk to ACLS’ ability to raise much-needed cash in the next several months, we think the company will be able to raise sufficient capital w/o going to the public markets.”

Axcelis Technologies, Inc. (Axcelis) designs, manufactures and services ion implantation, dry strip and other processing equipment used in the fabrication of semiconductor chips.

[Full Disclosure:  We do not have a holding in ACLS. 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.]