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Merrill Lynch says outlook positive for Sino-American

Merrill Lynch & Co said yesterday it remained positive on its outlook for Sino-American Silicon Products Inc (SAS, 中美晶), despite the silicon wafer maker’s larger-than-expected foreign exchange (FX) losses in the first quarter.

Sino-American Silicon reported NT$72.72 million (US$2.4 million) in foreign currency exchange losses during the first three months of the year as a result of a strengthening NT dollar, the Hsinchu-based company said in a filing with the Taiwan Stock Exchange yesterday.

On Thursday, Sino-American chairman and chief executive officer Lu Ming-kuang (盧明光) had told reporters that the company’s foreign exchange losses could total between NT$70 million and NT$72 million for the first quarter.

“The impact of the FX [losses] does not alter our positive view on SAS,” Merrill Lynch analyst Lu Yeung said in a client note yesterday.

The NT dollar has appreciated 6.66 percent against the US dollar so far this year and closed at NT$30.284 yesterday in Taipei.

BOOST IN GROWTH

Lu said that Sino-American Silicon was expected to present “much accelerated growth in the second quarter of the year” as the company continues to ramp up its capacity at two local fabrication plants in Chunan Township (竹南), Miaoli County, and because it should see no shortage of polysilicon supplies for the year thanks to stable suppliers.

The Merrill Lynch analyst maintained a “buy” recommendation on Sino-American Silicon, which saw its share prices drop 3.8 percent to close at NT$202.5 on the GRETAI Securities Market yesterday.

Sino-American Silicon is the nation’s second-largest silicon wafer maker supplying materials for other companies to produce solar cells.

The firm’s first-quarter earnings per share (EPS) were NT$1.94 on NT$2.13 billion in quarterly revenues, the filing showed. That was higher than Merrill Lynch’s forecast of NT$1.91 in EPS and NT$1.83 billion in revenue for the quarter.

Gross margin was 28.64 percent in the first quarter, compared with 30.2 percent a year earlier.

The company said on Thursday it expected second-quarter revenue to increase 5 percent from the first quarter and second-quarter profit to grow 40 percent to 50 percent from the same period last year.

GROSS MARGIN

Gross margin is expected to climb to above 30 percent in the second quarter as fresh polysilicon supply contracts take effect this quarter.

The company’s full-year margin, however, is likely to stay in the 28 percent to 29 percent range, it said, as the NT dollar appreciates. Every rise of one NT dollar against the greenback will cut into revenues 3 percent and margin 1.5 percent.

In light of the sharp appreciation of the NT dollar, Credit Suisse Group downgraded its rating on Sino-American Silicon to “neutral’’ from “outperform,’’ Bloomberg newswire said, citing a report released yesterday.

Additional reporting by Jerry Lin
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