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Macquarie Securities bullish on TPK shares after stock falls

TAIPEI--Macquarie Securities has urged investors to to look closely at shares of touch panel supplier TPK Holding Co., calling it a potential bargain after the stock nearly fell below the NT$220 (US$7.33) mark.

In a research note issued Friday, Macquarie said TPK shares have fallen more than 20 percent since mid-June amid worries that escalating competition would erode its bottom line, but the decline has opened up a buying opportunity for investors.

The recent sell-off prompted Macquarie to issue an “outperform” recommendation for TPK shares, and it said the stock was worth buying in the NT$200-NT$220 range.

On Friday, shares of TPK fell 7 percent, the maximum daily decline, to close at NT$222.00, with 3.82 million shares changing hands on the Taiwan stock exchange after the company gave a cautious sales forecast for the third quarter.

At an investor conference on Thursday, TPK said that because its customers have postponed their plans to launch new devices, the company expected flat quarterly growth, or at best a 5 percent sequential increase, in its third quarter consolidated sales.

The disappointing sales guidance sparked heavy selling as foreign institutional investors had previously expected TPK's consolidated sales for the current quarter to rise 10-20 percent from a quarter earlier on the back of peak season effects.

According to the Taiwan stock exchange, foreign institutional investors sold a net 1.39 million TPK shares Friday.

Although Macquarie said TPK shares presented a good opportunity for bargain hunters, the brokerage still lowered its target price for the touch panel supplier to NT$300 from NT$350.

The brokerage said the target price downgrade reflected cautious sentiment toward TPK after its disappointing third quarter sales forecast, adding that the company may receive fewer orders from Apple Inc. than expected.

Other brokerages did not share Macquarie's enthusiasm for the stock and expected it to fall further.

Citigroup Global Markets maintained its target price for TPK shares at NT$165, while Morgan Stanley and Daiwa Securities have left their target price of NT$155 unchanged. That target has been the lowest so far among the foreign brokerages that track TPK shares.

Meanwhile, IBT Securities Investment Consultant Co., lowered its forecast of TPK's earnings per share for 2014 to NT$4.18, from a previous estimate of NT$10.4. In 2013, TPK's EPS was NT$21.21.

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