Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) announced plans on Monday to raise more than US$500 million in fresh capital through the issuance of new corporate bonds and common shares to fund the company’s expansion plans.
The proposed fundraising move still requires approval from the Financial Supervisory Commission and the company’s shareholders, ASE said.
The plans to raise new capital come as the Greater Kaohsiung-based company is preparing to increase advanced packaging and testing services for chips used in smartphones. The move would also be the largest fundraising activity in the domestic chip packaging and testing sector in a decade.
Analysts said ASE might offer packaging and testing for Apple Inc’s application processors next year, after working on Qualcomm Inc’s Snapdragon 800 processor and MediaTek Inc’s (聯發科) MT6572 chip this year. However, concerns about the company’s outstanding shares being diluted because of the fundraising could prompt a sell-off in the near term, they added.
Shares of ASE fell 0.59 percent to NT$25.35 on the Taiwan Stock Exchange yesterday, underperforming the broader market, which rose 0.06 percent.
ASE is the world’s biggest chip packager and tester, followed by Taiwan’s Siliconware Precision Industries Co (矽品精密), Amkor Technology Inc of the US and Singapore’s STATS ChipPac Ltd.
In a stock exchange filing issued on Monday, the company said its board had approved a plan to issue as much as US$400 million in five-year unsecured convertible bonds at a zero coupon rate to help fund purchases of raw materials.
ASE also proposes to offer between 128 million and 160 million new shares and plans to use the proceeds to purchase manufacturing facilities, but did not set an issue price for the new shares.
The company is likely to raise as much as NT$4.08 billion (US$136.6 million), based on Monday’s closing share price of NT$25.5.
Eighty-five percent of the new shares will be offered to the general public, while employees will be invited to subscribe to the remaining 15 percent, the company said.
ASE did not elaborate on the possibility of share dilution by the planned fundraising, saying that the final plan is subject to market conditions.
SinoPac Securities Investment Service (永豐投顧) estimated a share dilution of 7.6 percent if investors exchange all their five-year convertible bonds for company stock, with an negative impact of about NT$0.16 on the company’s earnings per share.
“Even so, the fundraising plan is positive to the company’s prospects as it is aims at expanding ASE’s high-end chip packaging and testing capacity,” SinoPac said in a client note yesterday.
ASE could report an 8.8 percent growth in sales this year to NT$230.1 billion from last year, with earnings per share of NT$2.28, compared with last year’s NT$1.75, SinoPac forecast.
However, Yuanta Investment Consulting Co (元大投顧) analyst Felix Hsu (徐凰原) remained cautious about the firm’s near-term outlook.
“ASE’s sales growth momentum is likely to slow in the second half of the year as it is losing some Qualcomm orders to Siliconware, while this fundraising could further dilute its profitability,” Hsu said in a separate note.
Yuanta estimated ASE would report earnings per share of NT$1.9.