Approval of China deal gives boost to Forepi stock price
CNATAIPEI, Taiwan -- Shares of Taiwan-based LED chip supplier Formosa Epitaxy (Forepi, 璨圓光電) got a boost Friday after the government issued approval for a deal in which a Chinese counterpart will take an almost 20-percent stake in the Taiwanese manufacturer, dealers said.
September 1, 2013, 12:02 am TWN
As the acquisition price in the deal is set at NT$19.6 for a Forepi share, representing a premium over the stock's closing price Thursday, investors scrambled to buy into the stock soon after the local bourse opened, and strong buying continued into the end of the session, the dealers said.
Shares of Forepi rose 7 percent, the maximum daily increase, to close at NT$18.90 with 2.83 million shares changing hands. The weighted index on the Taiwan Stock Exchange ended up 1.31 percent at 8,021.89 points.
“Judging from the acquisition price, I think the stock's momentum will continue Monday,” Grand Fortune Securities analyst Chen Wei-tai said.
In a statement released by the Investment Commission Thursday, the commission said it has approved the deal for China-based San'an Optoelectronics (三安光電) Co. to acquire a 19.9 percent stake in Formosa Epitaxy.
Forepi will make a private placement to issue 120 million new shares to San'an. To acquire the stake, San'an will inject NT$2.53 billion into Forepi, making it the biggest institutional investor in the Taiwanese firm.
“To a loss-incurring company like Forepi, the large fund injection will no doubt improve its financial structure, giving the company a chance to make a comeback,” Chen said.
In 2012, Forepi incurred NT$814 million in net loss, or NT$1.25 in loss per share (LPS), extending a net loss of NT$288 million or NT$0.40 in LPS recorded in 2011, in reflection of a supply glut.
In the first six months of this year, Forepi continued to post a net loss of NT$243 million, or NT$0.45 in LPS.
“Forepi is expected to use the presence of San'an as a springboard to ship more products to the huge China market. Today's strong buying showed that many investors have embraced this hope,” Chen said.
However, he said that as the global LED market still faces an oversupply, it remains to be seen whether the stake acquisition by San'an will help Forepi climb out of the red any time soon.
Forepi said that due to the supply glut, its consolidated sales for the third quarter are likely to fall below the second quarter level of NT$1.45 billion, adding that the company will not feel any peak season effect for the July-September period.