Chipbond shares plunge on acquisition concerns

By Kevin Chen  /  Staff reporter

Sat, May 04, 2013 - Page 14

Chipbond Technology Corp (頎邦科技) yesterday saw its shares plunge as investors worried that a plan to acquire a flexible integrated-circuit substrate supplier could dilute the value of their stock.

Shares in Chipbond, the nation’s largest LCD driver chip packaging and testing firm, fell 5.44 percent to NT$74.7 yesterday, underperforming the TAIEX’s 0.08 percent rise.

On Thursday, Chipbond said in a statement its board had approved a plan to acquire unlisted Simpal Electronics Co (欣寶電子) through a 100 percent share swap to secure material supplies.

Simpal is one of the world’s top five substrate makers for the chip-on-film (COF) package process used for large driver IC applications, with its competitors including Chang Wah Electromaterials Inc (長華電材).

Chipbond said the acquisition would enable it to secure film for its customers given strong demand for chips for ultra-high-resolution TVs.

Under the terms of the share swap, Chipbond will issue 51.68 million new shares for the merger, in which the company will exchange one of its shares for 3.1 Simpal shares.

The two companies, both based in Greater Kaohsiung, are expected to complete the deal on Oct. 1, subject to regulatory approval, the statement said.

“Based on Chipbond’s current paid-in capital, the dilution effect of the deal is about 9 percent,” Fubon Securities Co (富邦證券) analyst Calvin Shao (邵琮淳) said in a note yesterday.

However, Shao said he remains positive about the merger because through the deal Chipbond would be able to secure key materials for ultra-high-resolution TV chips, as well as helping it reduce costs through vertical integration.

UBS Securities also welcomed the deal.

“We believe Chipbond will be one of major beneficiaries of the panel resolution upgrade trend in smartphones, tablets PCs, NB [notebooks] and TVs,” UBS analyst Samson Hung (洪希民) said in a note yesterday. “Chipbond could offer more one-stop shopping packages to its customers and a streamlined COF procurement process, which should also add value to its customers.”

However, Credit Suisse was less positive about the deal and its synergy benefits.

“We believe it will take time for Chipbond to turn Simpal around and that its earnings will become more volatile during slower seasons,” Credit Suisse analyst Jerry Su (蘇厚合) said in a note yesterday.

Simpal reported a profit of NT$1.4 million last year.

UBS maintained a “buy” rating on Chipbond with a target price of NT$80, Credit Suisse retained its “neutral” rating, but raised its target price to NT$68 from NT$60, while Fubon kept its “add” rating.

Meanwhile, Chipbond yesterday reported first-quarter net profit of NT$737.66 million, up 53.05 percent from NT$481.98 million a year earlier. Earnings per share were NT$1.22 in the first quarter, compared with NT$0.79 one year ago, according to the company's filing to the Taiwan Stock Exchange.

The company's consolidated revenue increased 15.35 percent year-on-year to NT$3.85 billion in the first quarter from NT$3.34 billion, but both of its gross margin and operating margin declined to 23.66 percent and 16.68 percent, from year-earlier levels of 26.62 percent and 19.36 percent, respectively, the filing showed.