Asetek A/S : Curing Hydrophobia - Asetek Market Update

It is an exciting time for Asetek. We have added a number of partners to our data center customer list and 2016 is shaping up to continue to that trend. In fact, Carnegie Investment Bank AB has released an updated report and 'Buy' guidance on Asetek. The report is more significant than typical analyst reports as Carnegie has served as Investment Bank to Asetek and is intimately familiar with Asetek's business, its technology and the risks of the liquid cooling segment in general.

In the report, Carnegie takes a conservative approach in viewing HPC as the relevant market near term for liquid cooling in the data center. Without including non-HPC Enterprise growth, Carnegie projects average revenue growth of 24% in 2015-18, leading to 165% EBITDA. In addition, they project an addressable HPC market (excluding retrofitting) passing USD400m in 2017.

In Carnegie's View:
Asetek will maintain its position in the desktop market and win multiple designs in the data center markets due to its strong patent portfolio. Carnegie also believes the direct-to-chip solution will be the prevailing liquid cooling technology for the mass market (i.e. opposed to immersion solutions).

Carnegie expects several new HPC OEM agreements over the next couple of years to drive growth, as developing an in-house solution without infringing patents seems unviable economically. Carnegie expects penetration of 5% within HPC by 2017e and 0.2% for the total server market. Adoption in the conventional, general purpose, server market, is all considered upside for Asetek.

The fundamental drivers for increasing adoption in the near term are 1) increasing demand for HPC in conjunction with higher rack density (see estimates on page 6); and 2) higher heat generating hardware commanding liquid cooling for optimal utilization.

The complete report is available here.