TPK Holding Co (宸鴻), one of Taiwan’s leading touch-panel makers, saw its shares climb yesterday morning after Daiwa Securities raised its recommendation on the stock on Monday, dealers said.
The buying also reflected hopes that TPK will benefit from the launch of Apple Inc’s Apple Watch, which is expected to hit the market in March, they said.
TPK shares jumped 6.53 percent yesterday to NT$204, outperforming the TAIEX’s 0.85 percent gain.
“It was no surprise that Daiwa Securities’ upward revision of its rating for TPK shares led investors to pick up the stock soon after the market opened,” Marbo Securities Investment Consulting Co (萬寶證券投顧) analyst Chang Chih-cheng (張智誠) said. “It seems market sentiment toward the stock has been improving.”
In a research note released on Monday, Daiwa Securities said it had raised its recommendation for TPK shares to “outperform” from “sell” and upgraded its target price on the stock to NT$220 from NT$142.
The Japanese brokerage said TPK is expected to secure more Apple orders, because it will ship touch panels for Apple Watch production.
The move would also bring TPK back into the Apple supply chain, which could bolster the touch-panel company’s shipments and earnings growth.
“Many investors have agreed with Daiwa Securities in terms of Apple Watch expectations,” the Marbo analyst added.
“Many are upbeat that the Apple Watch will become the new anchor for TPK’s earnings and help the company climb out of the slump it went through last year,” he said.
“If the Apple Watch is to hit the market in March as expected, it means that TPK’s sales should show a lift this month. We have to pay attention to the company’s upcoming sales report,” Chang added.
Daiwa Securities said that after a slow year last year, TPK is expected to return to a growth pattern this year. Led by a new management team, TPK could post NT$13.8 in earnings per share this year, up sharply from an estimated NT$0.9 for last year, the brokerage said.
“Investors have high hopes for the company’s new management after Michael Chung [鍾依華] became president [in November last year],” Chang said.“Many investors have been willing to pay a premium for the stock because of Chung’s participation.”
Chung previously worked at Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, and he is perceived as an aggressive executive who can help turn TPK around.
Amid escalating competition from Chinese firms and Taiwan-based panel makers, such AUO Optronics Corp (友達光電) and Innolux Corp (群創), that have made inroads in the touch panel field, TPK has faced severe pressure from falling product prices, Chang said.
As a result, in the first nine months of last year, TPK posted NT$0.64 in earning per share, down sharply from NT$25.28 recorded during the same period in 2013.
“Despite optimism over [the expected release of] Apple Watch, I do not think that investors should ignore that the fierce competition remains in place,” Chang said.
“TPK shares could encounter stiff technical resistance at about NT$215 in the near future,” he said.
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