Shares of Star Travel Corp. jump on first day of OTC market trade


TAIPEI — Shares of Star Travel Corp., one of Taiwan’s leading travel agencies, jumped on the first day of trading on the over-the-counter (OTC) market on an upbeat mood about its share price movement after the listing.

However, due to the skyrocketing share price, it is possible for the stock to encounter profit taking pressure over the next few sessions, they said.

Star Travel shares closed up more than 200 percent from its issue price of NT$21 (NT$0.71) at NT$64.00 with 4.81 million changing hands, while the OTC index ended down 0.76 percent at 116.49 points.

Unlike its counterparts which have been traded on the main board and on the OTC market, a newly listed stock is not confined by a maximum 7-percent limit in price gains or losses for its first five days on the listing.

“Judging from the strong interest, I think the stock experienced a honeymoon period with investors who were eager to see further upside in its share price,” Grand Cathay Securities analyst Mars Hsu said.

Star Travel issued 4.5 million new shares for the listing to raise about NT$94.5 million as working capital and will use part of the funds to improve its financial structure.

“The NT$21 listing price was kind of fair in terms of its profitability but after the strong showing, the stock appeared very expensive,” Hsu said.

“I am afraid that investors will rush to lock in profit over the next few trading sessions,” he said.

According to its prospectus, Star Travel returned to a profit in 2010 by generating NT$68.38 million in net profit with earnings per share of NT$2.55, compared with NT$29.8 million in net loss recorded in 2009.

In the first nine months of last year, the company posted NT$1.05 in net profit per share.

Hsu said he expects Star Travel will record NT$1.5-NT$2 in earnings per share for 2011 and the 2012 EPS is likely to stand at around NT$2.

“It is impossible for Star Travel to make a big leap in earnings as the company generates most of its revenue from low-priced tourism packages which have squeezed its bottom line,” Hsu said.