Chunghwa Telecom Co (中華電信) resumed trading on the Taiwan Stock Exchange yesterday after completing a capital reduction, with shares rising 2.66 percent for the day. The benchmark TAIEX dropped 1.48 percent.
Chunghwa Telecom, the nation’s largest telecom operator in terms of assets, suspended trading of its shares from March 3 until Thursday on the main bourse, as the company cut its capital by 16.5 percent to reward shareholders with higher earnings per share.
To strengthen its financial structure, Chunghwa Telecom’s board decided on Dec. 26 last year to cut the firm’s capital by NT$19.18 billion (US$567 million) to NT$96.97 billion.
Via the capital reduction, which transferred batches of 1,000 old shares into 835.32 new common shares, Chunghwa Telecom would return NT$1.65 in cash per share to shareholders, according to the company’s earlier stock exchange filing.
The price of the company’s new stock was quoted at NT$63.75 when trading opened and soon hit its upper limit at NT$68.2 in early-morning trading, before pulling back to close at NT$65.50, Taiwan Stock Exchange data show. The shares ended at NT$54.90 on March 2.
The 2.66 percent increase in the share price yesterday tracked gains on the main bourse over the past two weeks, SinoPac Securities Corp (永豐金證券) said in a client note yesterday. The TAIEX rose 13.78 percent between March 3 and Thursday, the stock exchange’s tallies show.
But SinoPac said it was still cautious about the stock’s limited upside momentum in the near term, given its higher price-earnings ratio.
The brokerage offered a “hold” recommendation on the stock, the note showed.
UBS AG also yesterday cut its rating on Chunghwa to “neutral” from “buy,” on concerns that the stock might struggle to make substantial gains in the near term.
But Chunghwa earned an “outperform” rating at Credit Suisse, as the foreign brokerage believes the Taiwanese telecom operator may initiate another capital reduction, or a cut of 10 percent, to further benefit its shareholders, it said in an investment note.
Thus far, Chunghwa has not disclosed whether it would carry out another capital reduction exercise.
SinoPac Securities said in its note that Chunghwa had ample cash in hand, estimated at about NT$80 billion, and its board may decide by the end of next month whether to implement another capital reduction plan.
“High cash yields and capital reduction remain the near-term catalysts,” SinoPac said in the note.
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