Shares of Taiwanese TV chip designer MStar Semiconductor Inc (開曼晨星) surged 10 percent on their debut after raising NT$96.6 billion (US$3.2 billion) in an initial public offering (IPO), a smaller gain on their first day of trading than other recent IPOs.
MStar shares closed at NT$330, retreating from an earlier gain of more than 15 percent, compared with an offer price of NT$300.
MStar was the largest IPO on the local stock market since 2002.
The closing price compared with an increase of 30 percent for TPK Holding Co (宸鴻), which supplies touch panels to Apple Inc for the iPad tablet, on its first trading day on Oct. 29.
Gourmet Master Co Ltd (開曼美食達人), the operator of the 85°C (85度C) coffee chain, saw its share price increase 138 percent on its first day of trading on Nov. 22.
“The low shareholdings of MStar’s board members and the loss of key research talent ahead of the IPO prompted investors’ concerns about the sustainable growth of the chip company,” said Andrew Teng (鄧安瀾), an analyst with Taiwan International Securities Corp (金鼎證券).
MStar chairman Wayne Liang (梁公偉) and chief financial executive Lin Han-fei (林瀚飛), two of the company’s five board members, own less than 1 percent of the company. The remaining three board members are independent directors without any shareholdings in MStar.
Seeking investment targets in the tech-savvy stock market, “most Taiwanese are sophisticated tech investors and they know very well instability in the management team and in the research and development team could have a significant impact on a chip designer,” Teng said.
To soothe investors’ jitters, Liang assured them on Tuesday that the company’s management would be stable and the company would operate well under the surveillance of the independent board members, who are either experts in IT or in finance.
The company’s employees hold about 50 percent of the shares — in other words, their shareholdings were not big enough to challenge the board’s decisions, Liang said.
Evidently, Liang’s explanation was not a persuasive enough pitch for investors, despite the company’s good technological capability in the TV chip business, Teng said.
“It is likely that the company’s stock price has peaked at NT$347, its highest point on the first trading day,” Teng said.
In the first three quarters, MStar made NT$4.57 billion, or NT$11.33 per share, in net profit, according to the company’s prospectus.
Revenue amounted to NT$25.47 billion in the first nine months, with 96 percent coming from its TV chip business. The handset chip business, a new area MStar is exploring for growth, made up more than 3.6 percent.
MStar, which is registered in the Cayman Islands, but has operations in Hsinchu, competes with MediaTek Inc (聯發科), Broadcom Corp, STMicroelectronics NV and Texas Instruments Inc.
“MStar is emerging as one of MediaTek Inc’s rivals in the China market and the Taiwanese stock market showed enthusiasm toward the stock,” MasterLink Securities (元富證券) analyst Tom Tang said.
However, the strong interest in MStar stalled yesterday to some extent as the market was faced with stiff technical resistance, Tang said.
“In addition to the technical factors, investors began to consider whether MStar was too expensive compared with MediaTek,” Tang said.
Shares of MediaTek, the nation’s biggest handset chip designer, dropped 1.85 percent to NT$423.5 yesterday.
Tang said MediaTek, which is expected to post earnings per share of NT$32 for this year, was trading at a price-earnings ratio of 13 yesterday, while MStar was expected to post earnings per share of about NT$15 with a price-earnings ratio of 23.
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