TPK shares see small decline on fourth-quarter data


CNA

TAIPEI — Shares of TPK Holding Co. Ltd., one of Taiwan’s leading touch panel makers, were slightly lower yesterday morning due to the company’s lower-than-expected earnings for the fourth quarter, dealers said.

Still, the stock’s relatively low valuation attracted bargain hunting, helping the company’s share price recoup most of its early losses, they said.

As of 11:28 a.m., TPK shares had fallen 0.1 percent to NT$490.50 (US$16.57), off an early low of NT$465.00, with 5.86 million shares changing hands. The benchmark weighted index was up 0.84 percent at 7,988.00.

“The touch panel supplier told an investor conference that it assigned large provisions to cover losses from investments in non-core businesses, which squeezed its bottom line,” Grand Cathay Securities analyst Jeff Chang said.

“I suspect many investors were relieved to some extent, seeing it as simply a one-time blow unrelated to the company’s core business,” Chang said. “When the stock fell sharply right after the market opened, bargain hunters emerged.”

TPK announced Tuesday net profit of NT$1.53 billion, or NT$5.97 per share, for the fourth quarter after assigning NT$1.52 billion in provisions for the losses from investments in non-core businesses.

For 2011 as a whole, the company’s net profit per share was NT$46.12, up 109.9 percent from a year earlier.

According to Chang, fourth quarter earnings per share were lower than his earlier estimate of NT$9, while the 2011 EPS was below his early forecast range between NT$50 and NT$51.

In the fourth quarter, TPK’s gross margin fell about 2.5 percentage points from a quarter earlier to 13.9 percent.

“The weakening margin reflected increased shipments of touch panels for cellphone use, which commanded a lower profit margin in the past quarter,” Chang said.

He estimated that cellphone touch panels accounted for about 60 percent of the company’s total sales in the quarter.

“But I expect TPK’s gross margin will recover by 0.5-1.0 percentage points in the first quarter on an increase in shipments of touch panels used in tablet computers, which enjoy relatively higher margins,” the analyst said.

Chang was referring to the launch of Apple’s iPad 3, which is expected for March. TPK is one of the companies in the Apple supply chain described as “Apple concept stocks.”

Chang said investors should be aware of a slow-season effect in the first quarter, when TPK expects its sales to fall by 10-13 percent from the previous quarter.

“The 10- to 13-percent fall in sales is in line with market expectations,” Chang said. “But if it turns out that sales are better than expected because of the launch of the iPad 3, the stock will attract buying interest.”