Tue, May 07, 2013 - Page 14 News List

Ginko stock falls on first-quarter earnings results

By Kevin Chen  /  Staff reporter

Ginko International Co (金可國際), a leading maker of contact lenses and lens-care solution, has seen its shares drop more than 10 percent after its first-quarter results came in weaker than expected.

Shares closed 4.24 percent lower at NT$497 yesterday on the Taiwan Stock Exchange, underperforming the broader market’s 0.42 percent rise.

Shares had surged by about 71 percent prior to a closing price of NT$557 on Thursday last week, the second-highest in the company’s history, but have declined 10.77 percent since then after investors were surprised at the firm’s lackluster first-quarter results and have become worried about its bottom line for this quarter.

First-quarter earnings per share (EPS) were NT$2.91, down 0.7 percent quarter-on-quarter, but up 5.8 percent year-on-year, the company said in its stock exchange filing on Thursday.

Gross margin was 61.4 percent and operating margin was 25.8 percent in the first quarter, the filing showed. They were both lower than levels seen in the previous quarter and one year ago.

Revenue in the first quarter increased 1.5 percent sequentially and 15.4 percent annually to NT$1.03 billion, company data showed.

Ginko attributed the softening margins to higher expenditures and labor costs associated with its five new production lines last month, as well as production transition into disposable lenses from extended-wear lenses.

Credit Suisse strategist Jeremy Chen (陳建名) said Ginko’s first-quarter EPS missed his forecast by 8 percent and the company’s gross margin and operating margin were both below his forecasts of 63 percent and 30.5 percent respectively.

“We see risks of a slower-than-expected second quarter as Ginko indicated that its five new production lines are running at 50 percent due to the low seasonality,” Chen said in a note to clients yesterday.

“In addition, it may take a few months for Ginko to receive import permission from the Chinese government to allow them to export contact lenses from Taiwan to China,” he said.

Chen expected Ginko’s gross margin to gradually improve this quarter after it starts in-house production of color lenses, but he cut full-year EPS projection by 5 percent to NT$15.9 and lowered his target price on the stock to NT$515 from NT$540 to reflect Ginko’s disappointing first-quarter results.

Ginko operates Formosa Optical (寶島眼鏡) in Taiwan and manufactures Hydron (海昌) and Horien (海儷恩) brand contact lenses in China.

The company is the largest contact lens and solution maker in China, where it competes with Johnson & Johnson, CIBA Vision and Bausch & Lomb.

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