Everlight results cheer investors

WORD Of WARNING::The firm’s shares closed up 1.29 percent yesterday, but Primasia Securities sounded a note of caution, saying a reliance on China could cap profitabilty

By Kevin Chen  /  Staff reporter

Wed, Mar 26, 2014 - Page 14

Everlight Electronics Co (億光) shares moved higher yesterday after the nation’s top LED chip packager on Monday reported better-than-expected earnings per share of NT$3.51 for last year.

The shares also rose as investors welcomed the company’s proposal to distribute a cash dividend of NT$3 per common share, the highest level in three years with a payout ratio of 85.47 percent.

Everlight’s shares closed at NT$78.5 yesterday in Taipei, up 1.29 percent from the previous session and compared with the benchmark TAIEX 0.98 percent gain.

The cash dividend represents a yield of 3.82 percent, which is higher than interest rates of between 1.31 percent and 1.46 percent on one-year to three-year fixed savings offered by local banks.

The payout plan still has to be approved at the company’s annual shareholders’ meeting on June 11, the company said in a filing to the Taiwan Stock Exchange.

“In LED, investors know that solid earnings are a prized item as much of the stock valuation is based on somewhat distant future earnings. Everlight continues to be one of the three most profitable listed LED companies globally and its fourth-quarter results were outstanding,” Yuanta Securities Corp (元大證券) analyst Andrew Chen (陳治宇) said in a client note yesterday. “Similarly, a high cash dividend is also a prized item in LED, as many companies do not generate adequate earnings in the short-run.”

On Monday, Everlight said its consolidated earnings more than doubled to NT$1.47 billion (US$48 million) from NT$542.5 million in 2012.

The nearly 170 percent annual increase in net income last year was due to the proliferation of general LED lighting. It also reflected the contribution of the company’s German lighting subsidiary, WOFI Leuchten GmbH.

The earnings per share of NT$3.51 last year was higher than analysts’ forecasts of between NT$3.43 and NT$3.46, and it compared with NT$1.3 posted in 2012.

With revenue increasing to NT$24.73 billion last year from NT$19.07 billion the previous year, gross margin improved by 1.74 percentage points to 25.01 percent from 2012 and operating margin enhanced by 2.4 percentage points to 8.13 percent over the same period, company data showed.

Given the upbeat outlook for LED lighting, Yuanta forecast Everlight’s revenue would grow 17.54 percent to NT$29.06 billion this year and expand another 14.96 percent to NT$33.41 billion next year, while earnings per share could increase to NT$4.24 this year and NT$5.12 next year.

However, Primasia Securities Co (犇亞證券) still had some concerns about Everlight’s long-term growth prospects.

Primasia analyst Filia Lin said in a separate note that Everlight’s rising sales contribution from LED lighting products, which have a relatively lower gross margin of below 20 percent, could cap the firm’s improving profitability.

“The company focuses more strongly on China’s LED lighting market, which will deliver slower growth than either Europe or the US,” Lin said yesterday. “Furthermore, several ongoing lawsuits with Nichia also remain a concern and we do not expect the patent war will end in the near future.”

Since 2006, Japan’s Nichia Corp has filed 28 patent suits against Everlight in Taiwan, the US, Japan, Germany and China, while Everlight has four patent suits against the Japanese firm — in Taiwan, Germany and China.