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Giant and Merida shares surging as oil prices skyrocket

Shares in Giant Manufacturing Co (捷安特), the world’s largest maker of bicycles, hit a record high in Taipei trading yeterday on speculation that surging oil prices would prompt more consumers to switch to pedal power.

Giant rose 1.8 percent to NT$89.2 (US$2.94), after earlier adding as much as 3.9 percent to NT$91, its highest intra-day level since the shares debuted in 1994.

Merida Industry Co (美利達), the nation’s No. 2 maker of bikes, gained 1.3 percent to NT$71.7.

DIRECT CORRELATION

“As oil prices rise, bike makers continue to benefit,” said Lily Huang, who counts Merida among the NT$900 million in equities she helps to manage at National Investment Trust Co in Taipei.

“There’s been a direct correlation between the two prices,” she said.

Sales at Taichung-based Giant doubled in April to NT$1.1 billion, taking revenue growth for the first four months of the year to 47 percent, compared with a 23 percent increase for all of last year.

Merida, based in Changhua, has posted a 2.5 percent gain in sales this year.

EUROPEAN DEMAND

Demand growth allowed Giant to raise prices in Europe last month, said Elizabeth Lin, who rates Giant a “buy” in coverage for Deutsche Bank in Taipei and has no rating for Merida.

China and Australia are among the strongest growth markets for Giant, she said.

As the world’s largest publicly listed bike manufacturers, finding peer valuations for Giant and Merida is difficult, Lin said.

Giant’s shares have historically traded at about 10 times to 11-times earnings, a situation that is set to change as the global demand for bicycles picks up, Lin said.

“Fuel prices are a catalyst for demand, but now it’s become cool to own a bike,” Lin said in an interview yesterday. “In the future, the trend will go beyond oil prices.”
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