Ginko International Co (金可國際), a leading maker of contact lens and lens-care solution, said its board had approved a proposal to distribute a NT$5 cash dividend per share based on last year’s earnings, which were 38 percent higher than the previous year’s earnings, thanks to strong sales in the Chinese market.
The board also gave the green light to invest 60 million Chinese yuan (NT$285.96 million) in to constructing new manufacturing facilities for its Chinese subsidiary Haichang Contact Lens Co (海昌隱形眼鏡), according to filings submitted to the Taiwan Stock Exchange on Friday.
The company’s proposed cash dividend, if approved by shareholders on June 25 of this year, will be more than double the NT$2.3 it paid out the previous year.
With the company’s share price closing at NT$436 in Taipei trading on Friday, its proposed cash dividend of NT$5 translates into a dividend yield of 1.15 percent, which will be higher than the previous year’s 0.69 percent yield when its share price averaged NT$332.1.
Ginko operates Formosa Optical (寶島眼鏡) in Taiwan and manufactures Hydron (海昌) brand contact lenses in China. The company is the largest contact lenses producer in China with a market share of 35 percent, with its major rivals including Johnson & Johnson, CIBA Vision and Bausch & Lomb. In Taiwan its competitor is St Shine Optical Co (精華光學), a maker of Ticon (帝康) brand contact lenses.
Last year, the company saw its net income increase 38.11 percent to a record level of NT$1.05 billion (US$35.4 million) compared with NT$761.45 million in 2011.The company’s earnings per share were NT$12.09 last year, up from NT$9.52 the previous year, while revenue rose 22.12 percent to NT$3.81 billion, from NT$3.12 billion a year ago, according to the company’s financial statement.
During a recent interview with the Taipei Times, Ginko chairman Tsai Kuo-chou (蔡國洲) said that the company hoped to increase sales by double digits this year, after it set up two new production lines in China and three new production lines in Taiwan in the fourth quarter of last year.
The company is expected to start mass production on these lines in the second quarter of this year to help to expand its manufacturing capacity, Tsai said in the interview on Jan. 3.
“The capacity increase in China is aimed at both clean-wear products and color lenses, and the new capacity in Taiwan is geared toward high-end products for the Chinese market in the fourth quarter of this year. They had hoped to do this in the third quarter, but suffered delays due to a longer-than-expected product license application process,” Fubon Securities Investment Services Co (富邦投顧) analyst Chloe Wu (吳家瑋) said in a note on Friday.
Despite that contact lens penetration in China remains low and the contact lens business poses higher entry barriers for new players, Ginko faces the challenge of margin pressure due to price competition and the delayed launch of new high-end products this year, Wu said.
Therefore, the Taipei-based investment adviser maintained a NT$430 target price on Ginko’s shares, which have surged 34.57 percent so far this year, and downgraded the stock to “neutral” from “add.”
“Though we do not alter our positive view on the contact lens market development in China over the long run, we believe Ginko’s current share price is fair considering its business outlook for the next two years,” Wu said.
For this year, Fubon predicted that the company would make a net income of NT$1.295 billion, or earnings per share of NT$14.39, with a revenue of NT$4.9 billion.
Additional reporting by Crystal Hsu
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