Taisalt privatization seen as successful, but growth difficult

Taiwan Salt Co (Taisalt, 台鹽), which started listing on the local bourse early last month, has seen its shares rise almost 50 percent, but market watchers said they have a mixed outlook for the company.

Taisalt shares have risen to NT$28.80 from NT$19.28 per share, or an increase of 49.4 percent, since the company started trading on the TAIEX on Nov. 18. During the same period, the TAIEX has dropped 2.9 percent from 6,044.77 on Nov. 18 to 5870.17 yesterday.

The company, which sells its products under the Taiyen brand, officially completed privatization on Nov. 13 after the government released 59.35 percent of its shares to the public.

"There is little room for Taisalt shares to go up further," said Juvin Chou (周曉萍), a stock analyst with Capital Securities Corp (群益證券). "What the former state-run company has shown over the past two weeks was largely a reflection of political factors."

Taisalt chairman Cheng Po-ching (鄭寶清), a former Democratic Progressive Party lawmaker, was appointed by the Chen Shui-bian (陳水扁) administration to lead the company in March last year.

Taisalt has reported profitable sales of its skincare products, but its poor market reach may cause it to lose out to rivals such as Formosa Petrochemical Corp (台塑石化), Taiwan Sugar Corp (Taisugar, 台糖), and Taiwan's largest food company, Uni-President Group (統一集團), Chou said.

"So far, Taisalt only has over 100 outlets or department store counters nationwide, which is not enough to compete with over 3,000 7-Eleven stores," Chou said.

Taisalt admitted that marketing is its biggest weakness.

"We have contracted Tait Marketing & Distribution Co (德記洋行) to distribute our products, but the sales figure is far from being satisfactory," Taisalt's general manager, Chiu Wen-an (邱文安) told the Taipei Times.

In the first 10 months of this year, Taisalt reported NT$3.2 billion in sales, up from NT$2.8 billion in the previous year, due to a good market response to its collagen-rich line of skincare products, Chiu said. Sales of these Taisalt products have grown tenfold from NT$40 million in June to NT$400 million at the end of last month, he added.

The company's pre-tax revenues reached NT$670 million during the same period, an increase of 6.4 percent from its original forecast of NT$630 million.

Another analyst expects Taisalt shares to rise as high as NT$35 per share by the end of the year.

"The company's bullish sales figures is the main reason driving up its shares," said Daniel Kao (高憲容), an analyst at Marbo Securities Consultant Co (萬寶證券).

"If Taisalt does not have to pay NT$700 million in pensions to employees who were forced into early retirement in 1976 and 1982, I think the company will be even more profitable this year," Kao said.