Telecommunications equipment supplier Microelectronics Tech-nology Inc (臺揚) yesterday adjusted its financial target upward as a result of higher than expected demand for broadband equipment and returns from its investments.
The maker and supplier of microwave technology products used for satellite broadcasting, communications and telecommunications raised its year 2000 revenue target by 31.3 percent to NT$4.92 billion and its pretax profit by 37 percent to NT$1.08 billion, the company told the Taiwan Stock Exchange.
The Securities and Futures Commission requires all listed companies to revise financial forecasts if pre-tax profit is expected to record a 20 percent difference from the original forecast.
Despite the readjustment upward and the positive outlook, shares in Microelectronics fell almost limit down yesterday. The stock, in which foreign investors hold a 12.3 percent stake, fell 6.49 percent to NT$72.
The revenue adjustment was in line with analysts' expectations, but the higher-than-expected pre-tax profit led some to believe that the company would have to sell off some of its investments.
"Their original revenue target was a little conservative, so the new figure is quite reasonable," said Louis Liou, a researcher at Taiyu Securities Co, who had predicted before the announcement revenue for the year of NT$4.8 billion.
Microelectronics had already earned NT$3.36 billion in revenue, or 90 percent of its original target, during the first three-quarters of the year. Its pretax profit of NT$733 million during the same period came to 93 percent of the original target.
However, the new profit target is much higher than Liou had expected. "Revenue from broadband equipment has grown a lot, but not so much that they can raise profits this much," he said. "They'll have to sell some investments," said Liou, who had predicted a pre-tax profit of NT$800 million and an earnings per share of NT$2.56.
Microelectronics' investments include stakes in fiber optic network service provider Global Crossing Ltd, listed on the New York Stock Exchange, and NASDAQ-listed Netro Corp, a provider of broadband wireless access solutions for Internet and telecom service providers.
But Microelectronics denied that its readjusted pre-tax profit will benefit from sales of investments. With regard to operations-generated profit, an official at Microelectronics said that wireless broadband equipment demand has been very strong.
Output and sales of new products such as local multi-point distribution services, a point-to-multi-point broadband wireless access system, and other radio-frequency equipment with high profit margins have grown considerably this year.
"Its production composition has moved to high profit margin products," said Jones Chu, deputy manager of research at International Securities. Meanwhile, demand for its older products has remained strong.
As for non-operating profits, "We have received revenue from charges from our consulting services," the official at Microelectronics said. The profit margin from such consulting services should be quite high because of the low operating costs, analysts said.
Nevertheless, after posting an earnings per share for the first three quarters of NT$2.01, an EPS of over NT$3 for the year still looks steep.
"About NT$2 will come from the sale of investments," said International Securities' Chu.
To compare favorably with this year's numbers, that trend may have to continue next year.
Both Microelectronics and analysts expect the company to post solid revenue growth next year as prospects for its wireless broadband equipment products look strong. Profits from operations should contribute about NT$1 to earnings per share next year, said Chu. "They will need to sell investments to raise earnings per share," said Chu. But with many of its investments in the US, "The difficulty is knowing what earnings per share will be if the US stock markets fall next year," said Chu.
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