Shares of MStar Semiconductor Inc (晨星半導體), a Hsinchu-based fabless integrated circuit (IC) designer, rose sharply in morning trading yesterday after the company announced a share buyback plan, dealers said.
In a filing with the Taiwan Stock Exchange before the market opened, MStar said its board had approved a plan to buy back 10 million shares at a range of NT$200 (US$6.79) to NT$300 between Monday and March 18. The amount of the shares to be bought back will represent 2.06 percent of the company’s outstanding shares.
In morning trading, MStar rose by the maximum allowed 7 percent to NT$223.50 with 2.9 million shares changing hands, while the benchmark TAIEX was up 0.65 percent at 9,046.09. At the close of trading, MStar stayed at NT$223.50, stock exchange data showed.
The share repurchase plan will make MStar the first foreign company with its primary listing on the local bourse to buy back its shares.
MStar was established in Taiwan in June 2002 and registered in the Cayman Islands in 2007. The company operates primarily in Hsinchu, and most of its products are sold to China, South Korea and the US.
MStar has been listed on Taiwan’s stock exchange since Dec. 24, but after a brief honeymoon with investors, the stock faced heavy selling, dragging its share price far below the listing price of NT$300.
While the company said the share buyback aimed to protect its “creditworthiness and shareholder value,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said the plan reflected MStar’s intent to shore up its share price.
“MStar has sound fundamentals, but downward pressure on its shares has been heavy as many retail investors who held the stock long before the listing rushed to realize their gains,” Hsu said.
Hsu said that after the recent sell-off, investor confidence had been seriously dampened, and the stock became technically weak.
“The share buyback plan is expected to improve market sentiment on the stock,” he said.
Hsu said the market expects MStar to post earnings per share of between NT$15 and NT$18 for this year, up from an estimated NT$13.8 for last year.
“Based on the 2011 earnings forecast, the stock’s fair price is in a range between NT$270 and NT$300,” he said.
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