Innolux Corp (群創), the nation’s top LCD panel maker, plans to raise NT$10 billion (US$329.6 million) in working capital and loan repayments by selling up to 1 billion new shares.
The world’s third-largest LCD panel manufacturer, Innolux said in a Taiwan Stock Exchange filing on Monday that its board of directors approved a proposal to sell the new shares at NT$10 each, which would boost the firm’s paid-in capital by 10.98 percent to NT$101.09 billion.
The share sale, subject to shareholders’ approval in the second quarter, comes after the Miaoli-based company reported its first quarterly loss on Friday last week. Caused by a decline in TV panel prices and lower factory utilization, last quarter’s loss followed three consecutive quarters of profitable business.
During the October-to-December quarter last year, the company posted a net loss of NT$1.34 billion (US$44.16 billion), or NT$0.15 per share, falling short of market expectations.
Innolux is also considering the sale of NT$10 billion of rights issue through global depositary receipts later this year to improve its financial structure and to finance capital spending. As of Dec. 31 last year, the firm’s total debt was NT$200.3 billion, a decrease of NT$8.4 billion from three months prior. Its net debt-to-equity ratio declined to 81.7 percent in the fourth quarter last year from 87.6 percent the previous quarter.
However, analysts have concerns over whether Innolux can successfully raise NT$20 billion via new shares to meet debtor banks’ requirements and secure better loan terms.
“We believe the fundraising will remain an overhang, despite the average selling price potentially improving on more 4K2K [ultra-high-definition panels] and the industry witnessing a cyclical rebound in the second quarter and third quarter of 2014,” Credit Suisse Securities analysts Jerry Su (蘇厚合) and Derrick Yang (楊泓極) said in a note on Monday.
Innolux shares fell 1.87 percent to NT$10.5 yesterday, dragged down by the weakness of technology stocks on the local bourse and affected also by investors’ concern that the planned share sale could dilute the company’s earnings per share.
Innolux reported earnings per share of NT$0.57 for all of last year, compared with a net loss per share of NT$4 in 2012.
JPMorgan Securities estimated the proposed fundraising would imply another 10 percent equity dilution for Innolux, whose share price is already under pressure from a decline in panel prices and a loss of market share.
“Unless Innolux comes out with an effective differentiation strategy to counter the market share shift, investors’ interest could wane,” JPMorgan analysts Narci Chang (張恆) and J.J. Park said in a separate note.