Citigroup Inc reiterated its preference for Siliconware Precision Industries Co (矽品精密), the nation’s second-biggest chip tester and packager, as the negative factors that affected the company’s earnings in the first quarter will be cleared in the second quarter, it said in a client note released on Thursday.
The US investment bank’s analyst Andrew Lu (陸行之) said falling gold prices since the middle of last month would help ease Siliconware’s cost burden, while an increase in packaging orders from major customers such as MediaTek Inc (聯發科) and Realtek Semiconductor Corp (瑞昱半導體) was likely after these companies recently revised upward their business outlook for the first half of the year.
Gold, which accounts for 16 percent of Siliconware’s cost of goods sold (COGS, also known as cost of sales), dropped to US$905 per ounce on Thursday in New York trading after hitting a record high of US$1,033.90 an ounce on March 17.
Siliconware may report a 16 percent decline in sales in the first quarter from the previous quarter as a result of the appreciation of the New Taiwan dollar, high gold prices, stock bonus spending and lower orders from customers, Citigroup said.
Siliconware forecast a decline of between 10 percent and 13 percent in first-quarter sales from last quarter.
Earnings per share are expected to drop to NT$0.77 in the first quarter, from NT$1.57 in the previous quarter, Citigroup said.
But the Taiwanese company may benefit from an expected recovery in its flash-card assembling and packaging business in the second quarter following a low season in the first quarter, Lu said in the note.
In addition, as Siliconware has agreed to distribute dividends of NT$4.6 per share to its shareholders this year, it also represented an attractive dividend yield of 8.1 percent for investors, he said.
On March 20, Siliconware’s board approved a cash dividend of NT$4.5 per common share and a stock dividend of NT$0.1 to its shareholders, totaling NT$321.3 million (US$10.56 million), a filing to the Taiwan Stock Exchange released that day showed.
Citigroup expects Siliconware to deliver a growth of between 8 percent and 10 percent in second-quarter sales from the first quarter, with an EPS of NT$1.04, the note said.
Lu maintained a buy rating on Siliconware, with a target price of NT$72, which reflects a 32.6 percent upside from its closing share price of NT$54.3 on Thursday. The local stock market was closed yesterday for a national holiday.
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