Tue, Jun 24, 2008 - Page 12 News List

Taiwan Ratings raises Chi Mei Optoelectronics' rating

IMPROVED OUTLOOK An analyst said the LCD firm's position had been helped by its enhanced product portfolio, expanding business scale and general market environment

By Lisa Wang  /  STAFF REPORTER

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-largest liquid-crystal-display (LCD) panel supplier, had its outlook rating raised to stable by Taiwan Ratings Corp (中華信評) yesterday, thanks to improving market conditions and strong profitability.

Taiwan Ratings, the local rating arm of Standard and Poor’s Rating Services, upgraded its outlook on the ‘twA-’ long-term credit rating on Chi Mei to “stable” from its “negative” rating last May.

Chi Mei’s expanding business scale, enhancing product portfolio and improving market environment are likely to keep its profitability strong over the next two to three quarters, Taiwan Rating analyst Raymond Hsu (�?M) said.

“The rating change reflects our expectation that better market conditions and Chi Mei’s continued gain in market share will enable the company to further strengthen its cash flow generation ... over the next few quarters,” Hsu said.

“We don’t expect new capital spending on a next-generation plant next year to affect the company’s financial structure, as revenues will also increase at the same time,” Hsu said by telephone.

The upward rating revision matches Hsu’s comments earlier this month that the credit quality of local LCD manufacturers would continue to improve over the next three to four quarters.

Chi Mei made NT$49.5 billion (US$1.6 billion) in net income in the three quarters ended March 31 next year because of improving market conditions and its timely capacity expansion, Taiwan Rating said.

Strong profitability helped the company improve its ratio of net debt to capital to 38.2 percent as at March 31 this year, from 42.4 percent at the end of 2006, it said.

That will also enable Chi Mei to reduce its leverage, despite persistent pricing pressures and a NT$100 billion capital expenditures plan for this year, Taiwan Ratings said.

Chi Mei’s global market share is expected to rise this year from 12.5 percent last year and 11.4 percent in 2006, backed by capacity expansion from its sixth-generation and 7.5-generation plants, it said.

Taiwan Ratings also affirmed its long-term ‘twA-’ and short-term ‘twA-2’ corporate credit ratings on Chi Mei.

Chi Mei shares fell 1.86 percent to NT$36.85 on the TAIEX yesterday, while rival AU Optronics Corp (友達光電) fell 0.98 percent to NT$50.6.

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