Thu, Aug 08, 2013 - Page 14 News List

Elan share buyback fails to lift up stock

By Kevin Chen  /  Staff reporter

Elan Microelectronics Corp’s (義隆電子) latest share buyback did not boost its stock price as investors expected and its stock fell by the maximum daily limit yesterday to post its fourth consecutive session of decline.

The touch-panel controller chip manufacturer began repurchasing common shares on the open market yesterday and will continue to do so until Oct. 6, in the company’s 12th share buyback scheme in three years.

Elan shares have pulled back 36 percent from a high of NT$80 on May 6, amid investor concern about the company’s sluggish growth momentum this quarter, which has been muted by weak demand for touchscreen notebook computers.

The stock dropped 6.91 percent to NT$51.2 yesterday.

In a filing to the Taiwan Stock Exchange on Tuesday, Elan said its board of directors had agreed to buy back up to 20 million shares, or 4.62 percent of total outstanding shares, for between NT$40 and NT$65 per share.

The company is expected to spend NT$2.52 billion (US$83.9 million) on the buyback plan and will transfer the shares to its workers in a bid to “boost employee morale,” the filing said.

The scheme is not expected to financially burden the Hsinchu-based company, which had NT$7.48 billion in current assets, including NT$4.29 billion in cash and cash equivalents, at the end of March, its balance sheet showed.

Last month, Elan’s consolidated revenue was NT$620.56 million, down 15.79 percent month-on-month and 9.76 percent year-on-year.

Cumulative revenue totaled NT$4.65 billion in the first seven months of the year, up 13.05 percent annually.

Net income in the second quarter was NT$487 million, which translates into earnings per share of NT$1.13. That compares with a net income of NT$394 million, or NT$0.94 per share, in the first quarter and NT$286 million, or NT$0.74 per share, in the second quarter last year, company data showed.

While the current quarter is traditionally a busier season for Elan, the company told investors on Tuesday that it expected revenue would decline by between 4 and 6 percent this quarter from NT$2.16 billion last quarter.

As low-margin tablet controller chips are Elan’s major growth driver and high-margin notebook touch controller chip shipments are likely to fall by 10 percent this quarter from last quarter, Elan said its gross margin could fall to between 46 percent and 47 percent from 47.43 percent last quarter.

“We consider this guidance as broadly in line with our recent downward revision” for the notebook industry’s outlook, Deutsche Bank analyst Jessica Chang (張幸宜) said in a note yesterday.

However, Chang said the company’s fundamentals remain strong in terms of its customer base and business partners, and that Elan’s notebook touch controller chip business would likely pick up from next month and on to next year.

Credit Suisse Group AG analyst Jerry Su (蘇厚合) agreed, saying in a separate note that the company should see double-digit growth in the fourth quarter after its clients complete inventory adjustments and it secures more touch controller chip orders for low-cost notebooks and two-in-one devices.

However, Wang Wen-wen (王文雯), an analyst at Jih Sun Securities Investment Consulting Co (日盛投顧), said Elan’s revenue guidance of a 4 percent to 6 percent drop this quarter is much lower than her forecast of a 15 percent increase.

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