Mon, Jul 14, 2014 - Page 14 News List

Primax shares surge on Tymphany deal hopes

By Kevin Chen  /  Staff reporter

Shares in computer and handset peripheral products maker Primax Electronics Ltd (致伸) last week reached their highest level in nearly 22 months, driven by investors’ expectation that the firm’s cooperation with Tymphany HK Ltd will yield significant benefits for the manufacturer of computer and handset peripheral products this year and the next.

Taipei-based Primax’s purchase of a 70 percent stake in speaker and digital audio equipment maker Tymphany, which was completed in January, will help it expand its business scope to include both video and audio electronics from the PC field, analysts said.

In addition, strong demand for the company’s cellphone camera modules from Chinese smartphone manufacturers such as Xiaomi Corp (小米), Lenovo Group Ltd (聯想) and Coolpad Group Ltd (酷派), is expected to become another revenue driver for Primax, they said.

Shares of Primax, which also counts Apple Inc, Dell Inc, Hewlett-Packard Co, HTC Corp (宏達電), Amazon.com and Canon Inc among its customers, rose 6.47 percent last week, outperforming the broader market, which dropped 0.15 percent in the week.

The stock closed at NT$49.35 on Friday in Taipei trading, the highest level since the company relisted on the Taiwan Stock Exchange in October 2012.

Last week, Primax said that tis sales for this quarter could hit a new record, driven by sales of camera modules for mobile devices and digital audio electronics for home appliances.

The company’s sales for last quarter rose 17 percent quarter-on-quarter and 32 percent year-on-year to NT$13.58 billion (US$452.8 million).

In the first six months of the year, Primac’s cumulative sales totaled NT$25.18 billion, an increase of 20 percent from the previous year, the company said in a statement on Monday last week.

“We believe that Primax is on track to transform itself from a pure PC peripherals vendor to a high-margin audio system maker. The market is underestimating its growth and the synergies to be gained from the Tymphany acquisition” Barclays Capital Securities Taiwan Ltd analysts led by Aaron Wu said in a client note on Friday.

The British brokerage said that sales at Tymphany could outgrow the overall audio market given its solid base of customers, which includes Beats Electronics LLC, Bose Corp and Bang & Olufsen, and contribute as much as 12 percent of Primax’s overall sales this year.

Wireless speaker and other audio products by Tymphany, whose acoustic technology has its roots in Denmark’s transducer engineering heritage, are also margin accretive to Primax, Barclays said, forecasting the latter’s gross and operating margins to improve to 13 percent and 5 percent next year respectively, compared with from 9 percent and 5 percent last year.

As a result of an improved product mix, more high-end camera module shipments and strong prospects in the digital home market, Primax’s earnings could post 43 percent compound annual growth from this year to 2016 and its return-on-equity may more than double to 21 percent next year from 10 percent last year, the brokerage forecast.

Primax posted a net profit of NT$668.55 million last year, with earnings per share of NT$1.55. In the first quarter this year, net profit increased 40.4 percent year-on-year to NT$322.79 million, or NT$0.75 in earnings per share.

Fubon Securities Co (富邦證券) has revised upward its earnings per share forecasts for Primax to NT$4 for this year and NT$4.78 next year from previous estimates of NT$3.69 and NT$4.11, citing the potential upside from its wireless speaker business.

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