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Flat-panel makers' shares a good buy now: analysts

"I did see some slowdown in June and July due to typical seasonal factors, but demand for screens for computers and TVs will be very strong for the rest of the year."

Ross Young, president of the Austin, Texas-based DisplaySearch

Investors may consider adding shares in flat-panel makers to their long-term investment portfolio ahead of a run-up expected in August or September, market analysts said yesterday.

"Now is the time to buy flat-panel display shares for investors considering long-term equities investment," said Frank Wang (王安亞), vice president of Credit Suisse First Boston's Taipei branch, on the sidelines of a seminar sponsored by market researcher DisplaySearch.

Shares in liquid crystal display (LCD) makers are expected to tumble 10 percent within the next 30 to 45 days before stock prices of the flat-panel group pick up from their recent downward spiral in late August, or early September, due to clear industry visibility, Wang said.

A key factor that could bring down the share prices will be AU Optronics Corp's (友達光電) proposed stock sale overseas, Wang said.

The top Taiwanese LCD maker plans to raise as much as US$847 million by selling additional American Depositary Receipts (ADR) in the third quarter, which coincides with the ADR issuance of its South Korean rival, LG.Philips LCD Co.

"It is worth noticing whether AU Optronics' proposed ADR issuance can divert American investors' interest from LG.Philips LCD by selling shares at a better price," Wang said.

On the TAIEX, AU Optronics dropped 3.6 percent to NT$54, while Chi Mei Optoelectronics Corp (奇美電子) fell 5.2 percent to NT$54.5.

AU Optronics shares fell 8 percent to NT$54 during the first 10 days of June, while Chi Mei Optoelectronics shares dropped 14 percent to NT$54.5 over the same period.

Wang, however, said he was still upbeat about the industry.

"Panel demand will be strong in the third quarter," he said.

Andy Yeh (葉銘隆), an analyst with Grand Cathay Securities Investment Trust Co (大華投信), agrees with Wang's outlook for flat-panel shares.

"For those investors looking for high returns, if they buy flat-panel stocks at this point, the risk will be much lower," Yeh said.

AU Optronics will be the first pick as the company has greater resistance to an expected price decline for big-sized screens for TVs in the second half of the year, he explained.

Throwing his support to the industry, Ross Young, president of the Austin, Texas-based DisplaySearch, said the demand-and-supply situation will be very healthy in the remainder of the year as supply constraint of key components will curb the growth of panel output.

"I did see some slowdown in June and July due to typical seasonal factors, but demand for screens for computers and TVs will be very strong for the rest of the year," Young said.

Commenting on the price trend of TV panels, Young said there is a lot of room for a price decline.

"But Sharp Corp's pricing strategy will be a determining factor for how big the drop will be, as the Japanese company will have to digest 4 million screens for TVs this year," he said.

DisplaySearch has projected that some 100 million TVs, which accounts for 6 percent of the total TV market, will convert to flat screens from heavy cathode-ray-tube sets this year.
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