Tower Semiconductor has preceded its third-quarter earnings report next week with some positive messages for the market, announcing Wednesday that it has raised NIS 44.1 million in a private equity placement in Tel Aviv and scoring its first Chinese contract.
"Investors have been following its [Tower's] revenue growth and are showing more confidence in the company," said Ramesh Misra, an analyst at C.E. Unterberg Towbin. "They are focusing on the operational aspect of the company's operation. And while I wouldn't read too much into the immediate financial effects of the contract wins, they do provide visibility for the company."
Misra said he is expecting revenue growth of 18 percent to around $32.6m. in Tower's earnings release, scheduled for Tuesday, while its net loss would narrow to $37m. from the $44m. it reported for the second quarter.
He believes Tower's end of year revenue growth may reach between 85% and 90% over last year and that the momentum should continue into 2007.
"We are estimating revenues of around $307m. next year, up from $192m. forecast for this year, which is significant growth," Misra said. "This seems hard, but considering that this was achieved using existing equipment lines at the Fab 2 facility and production will be given a boost with the addition of its 0.13 micron geometries which will become more important for the company in 2007, I think this growth target is attainable and not overly aggressive."
Continuing its recent financing run, Tower said it raised NIS 44.1m. through orders received from Israeli investors for 58,150 equity units, each consisting of 100 ordinary shares and 50 warrants, at a price of NIS 759 per unit. The placement represents 3% of Tower's share capital.
The company will use the funding to finance growth of production capacity at its Fab 2 plant.
This follows an announcement by Tower in September that it reached a financing agreement with Bank Leumi and Bank Hapoalim to swap 30% of its debt, or $158m., for stock. In a separate agreement, 19% shareholder Israel Corp. said it would invest $100m. in the company in exchange for around 66 million new shares.
The company also has won some key orders in the last month including a long-term order from International Rectifier Corp. and broadband network provider Ikanos Communications Inc. for undisclosed amounts.
Meanwhile, sources close to the company confirmed reports Wednesday that Tower won its first Chinese contract to produce a product for the wireless market at its Fab 2 using 0.13.18-micron geometries. The deal was expected to be worth up to $20m. to the company over the next two years.
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