Wed, Apr 23, 2014 - Page 14 News List

Brokerages upbeat on FPCB makers

By Kevin Chen  /  Staff reporter

Foreign brokerages have grown optimistic about major Taiwanese suppliers of flexible printed circuit boards (FPCBs) ahead of Apple Inc’s new product launches later this year.

In their latest research notes issued on Monday, Citigroup Global Market said it is upbeat on Flexium Interconnect Inc’s (台郡) market share growth, while Barclays Capital Markets remains positive toward Zhen Ding Technology Holding Ltd’s (臻鼎) sales outlook.

“We expect Flexium’s market share gain to continue in 2014 and 2015 at the expense of Japanese peers thanks to its technology capability and cost competitiveness,” Citigroup analyst Roland Shu (徐振志) said.

In addition to support from Apple Inc’s new product plans, the company could see strong revenue growth throughout this year due to more FPCB content in tablets and smartphones compared with traditional notebooks and feature phones, Shu said.

Citigroup estimated that Flexium's revenue this year would rise 19.05 percent to NT$16.2 billion from NT$13.61 billion last year, and increase another 15 percent to NT$18.63 billion next year.

Net profit could reach NT$2.01 billion, or earnings per share of NT$8.29, this year and NT$2.25 billion or NT$9.26 per share next year, compared with NT$1.93 billion or NT$8.47 per share last year, the brokerage forecast.

Therefore, despite the company’s worse-than-expected revenue of NT$2.51 billion (US$82.8 million) in the first quarter and a likely muted sales outlook for the current quarter, Flexium still has a “buy” rating and a target share price of NT$112 at Citigroup.

As for Zhen Ding, Barclays Capital has kept its “overweight” recommendation on the stock and raised its 12-month target price by 11 percent to NT$105 in light of the company’s position as the No. 2 supplier of FPCBs to Apple over this year and next year.

The company will see sales growth accelerate in the final quarter of this year and the first quarter of next year, driven by FPCB demand for new iPhones and an increase in average selling prices, Barclays said.

“Moreover, we note the potential growth driver of wearable devices in the longer term,” Barclays analysts Dale Gai (蓋欣山) and Kirk Yang (楊應超) said in the note, following media reports that Zeng Ding is one of the potential FPCB suppliers for a prospective Apple watch product.

“The iWatch is likely to be launched in the second half of 2014, according to our checks with potential parts suppliers,” Barclays analysts said.

Based on Barclays’ estimates, the tangible addressable market for FPCBs in wearable devices could account for between 2 and 5 percent of Apple’s total FPCBs from next year to 2017.

That implies “a small but incremental growth driver for Zeng Ding’s sales,” the Barclays analysts said.

Flexium shares dropped 1.08 percent to NT$91.6 and Zhen Ding shares fell 1.41 percent to NT$91.2 in Taipei trading yesterday.

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