Sat, Dec 27, 2003 page11

• Formosa Corp shares move fast

  UPWARDLY MOBILE The nation's second-largest oil refiner, the first energy stock on the TAIEX, is expected to keep on rising and may hit NT$50 per share within a week

  • By Joyce Huang / STAFF REPORTER
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  On its first trading day, shares of Formosa Petrochemical Corp (台塑石化) -- the nation's second-largest oil refiner -- yesterday moved up from NT$43 per share to close at NT$46, or its daily limit of 7 percent.

  "Formosa Petrochemical is the first energy stock [on the Taiwan Stock Exchange], which is expected to experience a price honeymoon period," said Mike Chow (周道中), a manager with Yuanta Core Pacific Securities Corp (元大京華證券).

  Most market watchers are bullish about the company's future stock performance, which they say is likely to climb to NT$50 per share in the near future.

  "NT$50 may be achievable as early as the year's end, or no later than early next year," Chou said.

  Chou said that Formosa Petrochemical is a very well-performing subsidiary of the blue-chip Formosa Plastic Corp (台塑集團), in which both foreign and local stock investors have showed confidence.

  Although foreign institutional investors such as Morgan Stanley had previously expressed interest in buying the company's shares, few actually put down their cash yesterday since most foreign institutional investors are still on Christmas vacations, Chou said.

  Formosa Petrochemical has raised its profit target from this year's NT$223 billion to NT$241 billion next year after reaping NT$188 billion in profits, or 85 percent of this year's profit target, as of October.

  The company, moreover, forecast that its earnings per share (EPS) may rise from this year's NT$2.3 to NT$3.04 next year.

  Formosa Petrochemical may further revise upward its profit target as early as the first quarter next year, said executive vice president Su Chi-yi (蘇啟邑).

  But Murphy Huang (黃耀德), an energy analyst at Prudential Securities Investment Trust Co (保誠投信), yesterday said that the company's self-proclaimed profit target is too conservative.

  "An EPS of NT$3.04 is definitely foreseeable," Huang said, adding that prices of ethylene next year, especially in the first quarter, will outperform those of this year.

  He said that Formosa Petrochemical's prospects should be worth investing in given its high profitability, output capacity and comparative competitiveness as measured against its Japanese and South Korean counterparts.

  After making investments in China, Formosa Petrochemical more or less reached an intended important position in greater China markets, which Huang said will be the major reason behind foreign investors' future buying rationale.

  Foreign investors have had a conventional preference for energy and raw material stocks in Asian markets, according to Huang.

  Both Huang and Chou, however, disagreed with market speculations that Formosa Petrochemical shares' upward movement may further boost shares of its peer companies, or the so-called "Formosa Trio (台塑三寶)," including Formosa Plastic Corp (台塑), Nan Ya Plastics Corp (南亞塑膠) and Formosa Chemicals & Fibre Corp (台塑化纖).

  Both of them said that each of the four subsidiaries has to improve its fundamentals to impress investors.

  Chou also said stock investors usually turn conservative at year's end and may not simultaneously invest in too many stocks.

  Liu Jen (劉任), an official at the China Credit Information Service Ltd (中華徵信所), yesterday attributed the company's stock performance to the group's success in operating a local petrochemical park -- the sixth naphtha cracking plant (六輕) in Mailiao, Yunlin County.
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