Taiwan Ratings Corp (
"Taiwan Ratings is deeply concerned about BenQ's higher-than-expected net debt level arising from a lengthening cash conversion cycle and continued operating losses," the local arm of Standard & Poor's said in a statement released yesterday. This was despite the mobile phone maker's slightly lower losses, the statement read.
BenQ's net debt level rose to NT$16.1 billion (US$503 million) as of the end of last month, up from NT$5.2 billion on Dec. 31, Taiwan Ratings said.
"The resolution of the CreditWatch status depends mainly on the successful turnaround of BenQ's handset operations by the end of this year," the statement read.
The company's rating would be lowered further if the handset manufacturer failed to reduce its operating losses to NT$4 billion in the second quarter of this year, if its liquidity deteriorated substantially, or if its net debt rose above NT$20 billion, the statement added.
On Monday BenQ posted a net loss of NT$4.99 billion in the first quarter, down from a loss of NT$6.02 billion for the final quarter of last year.
The mobile phone maker incurred losses for the second straight quarter after it took over Siemens AG's ailing handset unit last year.
BenQ was upbeat about its second-quarter performance as it predicted a 30 percent increase in unit shipments and a 10 percent rise in average selling prices from the previous quarter as new high-end products came to market.
"We agree that the new models give BenQ an opportunity to recover market share, but the real test will be in terms of cost control," Macquarie Securities said in its latest research note released yesterday.
However, the Australian brokerage retained an "underweight" recommendation for BenQ with a target price of NT$23.18, due to the firm's less than rosy financial outlook.
Shares of BenQ dropped 0.94 percent to close at NT$27.05 on the Taiwan Stock Exchange yesterday.
Given a second straight quarter of disappointing earnings, BenQ's goal of breaking even by the fourth quarter seems difficult to attain, Macquarie said, suggesting that investors adopt a long-term position and wait for tangible evidence of meaningful cost restructuring.
Meanwhile, BenQ said it plans to raise as much as NT$35 billion in funds to help finance its operations. Its board approved plans to raise as much as NT$15 billion by selling preferred shares in a private placement, NT$10 billion through syndicated borrowing from banks, and NT$10 billion via the issue of convertible bonds, BenQ said in three separate statements to the Taiwan Stock Exchange late on Monday.
It plans to issue 500 million preferred shares with a tentative issuing price of NT$30 per share, and the NT$10 billion convertible bonds will have a term of five years with a zero coupon rate.
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