Investors are having second thoughts about one of Taiwan’s hottest stocks over the past month.
Swancor Holding Co Ltd (上緯) has slumped nearly 10 percent since the middle of this month after doubling in value in the preceding month on bets it would benefit from government plans to build wind farms in the seas around Taiwan.
The government expects its wind-power plan to attract more than NT$960 billion (US$32.4 billion) in investment as part of President Tsai Ing-wen’s (蔡英文) pledge to phase out the nation’s nuclear reactors in favor of renewable sources of power.
The government is to announce a decision this month on which groups would develop wind farms with a total capacity of 5.5 gigawatts by 2025.
Swancor, which has a joint venture with Macquarie Group Ltd to develop wind farms, soared more than 100 percent in the weeks after the Ministry of Economic Affairs announced the plan on March 22.
China Steel Structure Corp (中鋼結構) and CSBC Corp, Taiwan (台灣國際造船), which have also been linked to potential wind-power projects, rose as much as 84 percent before slumping at least 11 percent since the middle of this month.
While the companies remain among the top performers on the benchmark TAIEX over the past month, investors are starting to wonder whether the stocks are overvalued.
Swancor’s price-to-earnings ratio is about 66, more than four times that of the TAIEX’s average. China Steel Structure has a price-to-earnings multiple of more than 120, while CSBC has reported losses for the past two years.
“The stocks have soared on dreams they will benefit from the government policy,” said Huang Wen-ching (黃文清), vice president of Taipei-based Taishin Securities Investment Advisory Co (台新投顧). “Now they will have to come up with earnings numbers that support those dreams.”
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