Epistar share buyback leads to share rally after positive earnings outlook

Staff Writer, with CNA

Fri, Dec 30, 2011 - Page 12

Shares in Epistar Corp (晶元光電), a local LED wafer and chip manufacturer, posted gains yesterday after the company announced a share buyback plan in a bid to support its share price, dealers said.

Led by Epistar, other LED firms also steamed ahead amid improved sentiment over their earnings outlook after the company received rush orders and expressed hope that its bottom line would be boosted accordingly for the fourth quarter of this year.

Epistar rose 0.62 percent to close at NT$64.70, with 8.43 million shares changing hands, while Formosa Epitaxy Inc (璨圓光電) rose 0.81 percent to end at NT$18.75 and Edison Opto Corp (艾笛森光電) added 0.85 percent to NT$59.

Epistar announced on Wednesday that it would buy back 10 million shares from the open market at a price ranging from NT$51 to NT$76, from yesterday to Feb. 28.

The company said the repurchased shares would be -transferred to its employees.

Dealers said trading in LED sector shares has appeared active in recent sessions as a result of bargain hunting.

“The share buyback plan boosted interest in Epistar shares today,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said. “However, I prefer to focus on the industry’s fundamentals which remain weak.”

Although Epistar has received recent rush orders, this demand could be temporary as product prices are still falling, he added.

“With pricing remaining weak, I do not think the rush orders will serve as a major boost to the company’s profitability,” Hsu said. “After enthusiasm about the share buyback plan fades, it remains to be seen whether the stock will continue its upswing trend.”

Because the cost of LED sector production remains high, its bottom line would continue to be squeezed without an explosion in demand, Concord Securities (康和證券) analyst Kerry Huang said.