STATS ChipPAC Buy Calls
UBS Investment Research
UBS Investment Research says it has raised its rating for STATS ChipPAC to “buy” from “neutral” and increased its target price for the stock to 1.60 sgd from 1.05 sgd because it believes the company is recovering. “We believe STATS is an attractive margin recovery story, and think current restructuring can deliver a doubling in earnings in 2007,” UBS said in a note. “We believe current initiatives to rationalize the product portfolio can boost earnings before interest and tax margins from an 2006 estimate of 9.4 pct to 13.0 pct in 2007,” it said. UBS expects STATS ChipPAC’S net profit to be 67.73 mln usd this year, the company having made a net loss of 26.31 mln usd last year, and to grow to 141.79 mln usd next year and then to 180.22 mln usd in 2008. It believes that STATS ChipPAC is trading a significant discount to its peers in Taiwan, and sees scope for the valuations to narrow. At 9.39 am, STATS ChipPAC was up 0.07 sgd or 5.88 pct at 1.26, on brisk volume of 7.68 mln shares.
Credit Suisse
Credit Suisse said it raised its target price for STATS ChipPAC to 1.66 sgd per share from 1.36 while keeping its “outperform” call on the stock to reflect its earnings upgrade for the firm. The brokerage has raised its earnings estimate for the firm by 7-8 pct for 2007 and 2008 on the back of increased gross margin assumptions. It noted that the news that private equity firm the Carlyle Group is in talks to acquire Taiwan’s Advanced Semiconductor Engineering Inc (ASE) for 5.46 bln usd was also positive for the industry as well as the company. “If ASE gets delisted, we believe STATS is the natural second choice for investors looking for back-end exposure. This should help drive a re-rating, especially as STATS’ fundamental improvements begin to show through,” Credit Suisse said in a note. At 2.27 pm, STATS ChipPAC was down 0.04 sgd or 3.23 pct at 1.20 on brisk volume of 15.54 mln shares.
OCBC Investment Research
OCBC Investment Research says it has raised its rating for STATS ChipPAC to “buy” from “hold” and increased its fair value for the stock to 1.16 sgd per share from 1.05 sgd because of the outlook for the company. The company reported today a net profit of 18.5 mln usd for the third quarter, reversing the net loss of 1.01 mln usd it made a year earlier. Sales rose 31.8 pct year-on-year to 397.11 mln usd and margins increased on the back of reduced operating costs. In the fourth quarter, the firm expects revenue to rise 1-6 pct quarter-on-quarter. OCBC Investment Research analyst Carey Wong said in note: “Growth drivers are expected to come from the recovery in the PC segment as STATS would be embarking on two new gaming-related programs, although it noted that the communications segment could still see some customers making inventory adjustments.” He added: “While the recovery is nowhere as robust as the traditional double-digit ramp-up, we think that there may not be a big seasonal slowdown in [the] first quarter [of] 2007 either.” OCBC Investment Research has revised upwards its estimates of STATS ChipPAC’s net profit for this year by 8.8 pct to 72.4 mln usd and for next year by 13.2 pct to 91.2 mln usd. At the end of morning trading here, STATS ChipPAC stock was down 0.005 sgd or 0.51 pct at 0.98, on volume of 2.41 mln shares.
