Market researchers maintain positive rating for Lite-On

Analysts yesterday restated their "buy" ratings for Lite-On Technology Corp (光寶科技), the world's largest notebook adapter maker, foreseeing positive developments near the end of the year.

Citigroup Investment Re-search said in a report yesterday it had maintained its "buy/low risk (1L)" rating for Lite-On, based on its high yield from cash dividends and capital reduction.

"We expect the stock to stay in the trading range until the second half because of lack of catalysts," Citigroup analyst Kirk Yang (楊應超) said in the report.

He said the target price of Lite-On remained at NT$53 (US$1.6).

Shares of Lite-On rose yesterday 0.2 percent to close at NT$42.75 on the Taiwan Stock Exchange.

The company -- which also makes light-emitting diodes (LED), enclosures and imaging products -- released financial results for last year on Thursday.

Its net income was NT$8.4 billion, down from NT$8.7 billion a year ago, while consolidated revenues also dropped to NT$163.8 billion from NT$162.8 billion.

However, the operating profit margin rose to 4.7 percent from 4.0 percent, reaching a record high, it said.

For this year, Lite-On said its operating margin would hit 5 percent, which suggests strong sequential margin improvement towards the year's end.

"Overall, progress is being made by Lite-On in its efforts to focus on value-added products," said Vincent Chen (陳豊丰), an analyst at CLSA Ltd, which puts Lite-On's target price at NT$51.6 and maintains a "buy" rating.

These include new order wins for high-end power supplies for servers and telecoms, and its enclosure business has also moved from PCs to servers and game consoles, Chen said.

Its LED business is also set to see 10 percent to 15 percent growth this year, he added.

"We believe downside risk is limited for Lite-On given its capital reduction and regular dividends," he said.

Lite-On announced last November that it would cut its capital by 30 percent, or NT$8.73 billion, to boost returns on equity.

"Investors will receive NT$3 per share in special cash dividends from this event, plus regular cash dividends of more than NT$2 per share. These two combined translate to approximately a 12 percent cash dividend yield," Chen said.