Tue, Aug 01, 2006 - Page 12 News List

Sunplus' target lowered on visibility concerns

By Lisa Wang  /  STAFF REPORTER

BNP Paribas Securities yesterday lowered its target price for Sunplus Technology Co (凌陽科技), one of the nation's biggest suppliers of chips for consumer electronics, by 30 percent because of stagnant demand for new chips for mobile phones and televisions.

As the visibility of the chipmaker's growth momentum was limited, BNP Paribas reiterated its "hold" rating for Sunplus.

The company's "future growth prospects remain clouded by uncertainty," said Eric Chen (陳慧明), a semiconductor analyst with BNP Paribas in Taipei, in the report released yesterday.

Chen axed the 12-month target price for Sunplus to NT$33 from NT$49. He also cut 4 percent off the earnings forecast for Sunplus to NT$2.86 billion (US$87.31 million) for this year from NT$2.97 billion.

"We believe revenue contribution from its handset integrated circuits (IC) and liquid-crystal-display (LCD) TV ICs will be limited this year," Chen said.

Sunplus is undergoing restructuring as it planned to extend its presence in high-margin chips used in mobile phone and LCD TVs, while spinning off the low-margin business of making control chips for LCD panels last quarter.

Investment consultant Merrill Lynch was also concerned about Sunplus' restructuring efforts, blaming sagging demand for its new products behind the disappointing third-quarter guidance.

"We would not recommend investors buy the stock at this moment given the low visibility for its new products," said Merrill Lynch analyst Jonah Cheng (程正樺) in his report released yesterday.

The company told investors that revenue would only grow by single-digit percentage points this quarter from the second quarter, which was much lower than the 18.9 percent quarter increase during the past six years, Cheng said.

Besides, risk and uncertainty mounted as Sunplus' partner in designing handset platform, TTPCom Communications Plc, accepted a buyout plan offer from a subsidiary of Motorola Inc last week, Cheng said.

In the short term, "increasing inventory is a big concern," he said.

Sunplus' inventory turnover rose to 87 days last quarter from 75 days during the first three months of the year.

Cheng revised his earnings projection down for Sunplus by around 10 percent to NT$3.41 per share for next year. But he raised the earnings slightly by 1.7 percent for this year to NT$3.54 a share.

Sunplus said last Friday that net income nearly doubled to NT$809 million in the second quarter compared to NT$439.67 million a year ago.

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