Mon, Feb 12, 2018 - Page 15 News List

WPG predicts earnings slump

LOOKING UP:Despite the expected short-term decline, analysts see potential in the firm’s cloud and automotive electronics efforts, which might pay off in the long run

By Chen Cheng-hui  /  Staff reporter

Semiconductor components distributor WPG Holdings Co (大聯大) has projected that revenue and earnings for this quarter are to decline from last quarter due to weak seasonal demand and Lunar New Year holiday disruptions.

The company last week said its consolidated revenue would probably drop by 13.3 to 21.97 percent to between NT$108 billion and NT$120 billion (US$3.67 billion and US$4.08 billion) from last quarter’s NT$138.41 billion.

The company’s forecast was based on a predicted average exchange rate of NT$29 against the US dollar for this quarter, suggesting that the New Taiwan dollar’s appreciation might continue.

WPG distributes semiconductor components for more than 200 leading global brands, with products including components for computers, communication devices, consumer electronics, industrial products and vehicles.

China remained the company’s key market, accounting for 79 percent of its revenue last quarter, followed by Taiwan’s 9 percent, Southeast Asia’s 7 percent and 5 percent from other areas.

In a quarterly conference for investors held on Tuesday last week, WPG said gross margin for this quarter is likely to stay between 4.1 and 4.3 percent, compared with 4.05 percent last quarter, and its operating margin might slide to between 1.75 and 1.84 percent from 1.89 percent.

Net income is predicted to range from NT$1.18 billion to NT$1.39 billion, with expected earnings per share (EPS) ranging from NT$0.65 to NT$0.77, the company said.

While the earnings estimate is a decline from last quarter’s net income of NT$1.64 billion with EPS of NT$0.9, analysts said that they see an upside to WPG’s penetration into the cloud server and automotive electronics markets, which might catalyze its earnings in the long run.

For all of last year, revenue dropped 0.8 percent annually to NT$532.46 billion due to the NT dollar’s appreciation, but operating margin increased to the highest level in six years, 1.87 percent, thanks to product mix improvement and operating expenses control, which helped expand its net income 37.4 percent to NT$7.3 billion, with EPS of NT$4.9.

Meanwhile, WPG’s smaller competitor WT Microelectronics Co (文曄) also projected that revenue for this quarter would decline to between NT$48 billion and NT$51 billion from NT$59.84 billion last quarter due to seasonal factors and clients’ inventory adjustments.

Gross margin is likely to range between 4.4 and 4.6 percent, compared with 4.1 percent last quarter, while operating margin is predicted to be between 2 and 2.2 percent, up from 1.81 percent, the company told investors on Thursday last week.

WT Microelectronics rounded out last year with net income of NT$2.52 billion, up 48 percent year-on-year with EPS of NT$5.26, while revenue increased 31.41 percent to NT$189.42 billion.

The company is expected to continue its growth pattern, given its high exposure to some of the most fascinating themes in the tech industry, Yuanta Securities Investment Consulting Co (元大投顧) analyst George Chang (張家麒) said.

“Based on our estimates, this year will mark the third consecutive year that WT can post 25 to 30 percent top-line growth, which is truly amazing,” Chang said in a note on Thursday.

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