Thu, Apr 19, 2007 - Page 12 News List

Analysis: ASE shares rally following aborted takeover

EXPANSION AID The wafer shipments of contract chipmakers could grow by 20 percent in the second half, which would benefit chip testing and packaging services


The Carlyle Group's withdrawal from the purchase of Advanced Semiconductor Engineering Inc (ASE, 日月光) could pour cold water on the nation's efforts to lure foreign capital, but the latest development would allow the market to determine the Taiwanese chip packager's true value, analysts said.

Shares of ASE yesterday rallied 3.17 percent after the world's biggest chip packager rejected the NT$182 billion (US$5.48 billion) bid from the US private equity consortium led by Carlyle Group.

ASE shares opened up at their 7 percent daily-limit before retreating to close at NT$42.3 on the Taiwan Stock Exchange yesterday.

In a filing with the stock exchange on Tuesday night, the Kaohsiung-based company said it was dissatisfied with the renewed offer of NT$39.5 a share by Carlyle.

"Some of our customers have shifted their investments back to ASE from rival Siliconware Precision Industries Co (SPIL, 矽品精密) following the collapse of buy-out talks," said Bill Lan (藍新仁), a fund manager at Allianz Global Investors (Taiwan) Ltd (德盛安聯).

The reason was that investors' concerns about a potential management reshuffle and uncertainty over ASE's future outlook had evaporated, Lan said.

The absence of ASE was likely to boost smaller rivals such as SPIL, Merrill Lynch said in a report issued Tuesday before ASE's announcement.

Yesterday, SPIL's stock price declined by almost 7 percent to NT$65.9. Foreign investors have increased their holdings in SPIL to 74.71 percent, from 49.36 percent earlier this year.

Tiffany Chen (陳瑋倫), a semiconductor analyst with KGI Securities (中信證券), said she is considering putting ASE back on her "buy" list as the stock could benefit from the reviving semiconductor sector and catch up competitor SPIL now that the takeover talks had fallen through.

"The stock price of ASE has been held back over the past months. As the uncertainty has cleared, it is time to buy ASE," Chen said.

She expected a 20 percent upside for the ASE shares by the year-end.

Chen said Carlyle's withdrawal may slow foreign private equity fund groups' activities in Taiwan and thereby return stability to the sector.

JP Morgan analyst Roland Shu (徐振志) said he has retained an "overweight" rating on ASE on the back of a recovering semiconductor industry. Shu set the target price at NT$47.

Shu said the takeover would only have been acceptable if Carlyle had raised the offer to a premium of 18 percent to 20 percent of the market price.

Growing demand and limited capacity would boost equipment usage and profits for chip packagers and testers, including ASE, in the second half of the year, Shu said.

The wafer shipments of contract chipmakers, led by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), may expand by 20 percent year-on-year in the second half, which would benefit chip testing and packaging service providers.

Merrill Lynch projected ASE's revenues would increase 10 percent during the April to June period.

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