Far EasTone shares slide after making TAIEX debut

Douglas Hsu, chairman of Far Eastern Group, second left, and Far EasTone Telecommunications Co president Jan Nilsson, left, lead Far Eastone's management team in celebrating the company's listing on the Taipei Stock Exchange yesterday. Far Eastone shares fell by NT$0.15 on their first day of trading. PHOTO: WANG YI-HONG, TAIPEI TIMES

Far EasTone Telecommunications Co (遠傳電信), the nation's second-largest mobile carrier, which made its debut on the main board of the Taiwan Stock Exchange yesterday, saw it shares drop slightly due to the main stock market's weaker performance.

Far EasTone shares, previously traded on the over-the-counter GRETAI Securities Market (櫃台買賣中心), dropped NT$0.15 yesterday to end the day at NT$40.5 on turnover of NT$208.788 million (US$6.5 million).

Far EasTone is the third telecom operator to be traded on the main bourse, following the state-run Chunghwa Telecom Co (中華電信) and Taiwan Mobile Co (台灣大哥大).

Asked about the company's lower-than-expected stock price on the first day, Far EasTone chairman Douglas Hsu (徐旭東) said the TAIEX's weaker performance could be one reason.

The TAIEX dropped 1.1 percent yesterday to close at 6,127.24.

Since price fluctuations are natural market responses, investors shouldn't worry too much, Hsu said.

Analysts said that since the news that Far EasTone would move to the main board had been circulating for a while, interested investors had already bought its shares, making the first day of the public offering less inviting.

"I don't think there will be an obvious `honeymoon' effect on the stock, but in the long run, telecom shares should be able to resist share price drops even when the TAIEX falls," said Jonathan Liao (廖俊傑), an analyst with SinoPac Securities Corp (建華證券).

Overseas investors' shareholdings in Far EasTone have climbed to more than 30 percent, compared with their single-digit holdings last year.

Liao said shares of Far EasTone and Chunghwa Telecom are favorable long-term investments, based on their high cash dividends.

Chunghwa Telecom, the nation's largest telecom services provider, declared a cash dividend of NT$4.7 per share for last year, while Far EasTone's dividend was NT$3. Both achieved a dividend yield of around 7 percent to 8 percent.

An analyst with Yuanta Core Pacific Securities (元大京華證券), however, was more cautious about Far EasTone shares in the long term, saying that there is not much room for prices to rise.

"Telecom operators will all face challenges in October when high-speed third-generation [3G] services and the number portability policy are likely shake up the industry," Lu Chia-lin (呂家霖) said. "Next year, their stocks will experience more downs than ups."

Far EasTone's board met yesterday and approved the company's audited financial report for the first half of the year.

The firm reported pre-tax income of NT$9.53 billion for the first half of the year, a 16.29 percent increase from a year ago. After-tax earnings-per-share were NT$2.02, achieving 106 percent of the forecast. Consolidated total revenue and consolidated service revenue were NT$35.57 billion and NT$31.31 billion, respectively, an increase of 9.98 percent and 2.94 percent over the same period last year.