Sat, Apr 14, 2018 - Page 12 News List

Sino-American Silicon shares soar as the firm announces stock undervalued

By Lisa Wang  /  Staff reporter

Sino-American Silicon Products Inc (SAS, 中美矽晶) saw its shares rally more than 8 percent yesterday after the solar wafer supplier said the stock was significantly undervalued, given the firm’s massive asset holdings.

The company deserves a fairer value as it owns a 51 percent share of silicon wafer maker GlobalWafers Co (環球晶圓), which has a market value of NT$109.94 billion (US$3.75 billion), SAS president Doris Hsu (徐秀蘭) told investors on Thursday.

Considering SAS’s stockholding of GlobalWafers, SAS is trading at a deep discount, Hsu said, adding that SAS had a lower market value of NT$70 billion than the assets it owns as the stock was overshadowed by its struggling solar business.

SAS has accumulated strong capital surplus of NT$24.2 billion, giving it leeway to pay shareholders a high cash dividend, Hsu said.

The company’s board last month approved the distribution of a cash dividend of NT$3 per common share.

SAS last year swung into a net profit of NT$1.04 billion, or earnings per share (EPS) of NT$1.8, thanks to lucrative gains from GlobalWafers.

The company said it plans to allocate capital surplus to fund the dividend payment.

“It is challenging to turn the solar business around, given the volatile pricing environment, but for SAS investors the company is capable of paying a good cash dividend,” Hsu said.

SAS shares yesterday soared 8.33 percent to NT$130 on the Taipei Exchange, bringing the company’s market value to NT$74.68 billion, while GlobalWafers shares jumped 3.79 percent to NT$493.

Jih Sun Securities Investment Consulting (日盛投顧) yesterday upgraded SAS to a “buy” rating with a target price of NT$142, valuing the stock at 21 times its estimated EPS of NT$6.83 this year.

“GlobalWafers is to post strong profits for 2018, which will help boost SAS’ profits and allow it to pay a good cash dividend,” Jih Sun said in a research note.

Taishin Securities Investment Advisory Co (台新投顧) also gave SAS a “buy” rating, with a 12-month target price of NT$140.

The company has tried hard to “lower its costs, but cannot catch up with the [rapid] decline in solar prices,” Hsu said.

Moreover, the solar industry is very volatile and linked to government policy, while long-term polysilicon contracts add pressure to the company’s already weak profitability, she said, referring to a common practice in the industry where solar wafer producers tend to purchase polysilicon, a key raw material, by signing eight to 10-year contracts at fixed prices.

To improve its profitability, SAS has actively expanded its solar plant construction over the past few years, Hsu said.

“The solar power plant business is a profitable business. It delivers good investment returns,” she added.

SAS this year plans to build more new power plants with capacities totaling 100 megawatts, she said.

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