Shares of TPK Holding plunge on cautious Q3 outlook
July 26, 2014, 12:00 am TWN
TAIPEI -- Shares of TPK Holding Co. (宸鴻科技) took a dive Friday morning after the touch panel maker gave cautious guidance for the third quarter of the year, which is usually a peak period for the global electronics business, dealers said.
While TPK reported an improvement in its second quarter results, many investors continue to worry that rising competition from China and major Taiwanese flat panel suppliers will erode its bottom line in the future, dealers said.
As of yesterday, shares of TPK had fallen 6.92 percent, the maximum daily decline, to NT$222, with 3.83 million shares changing hands. Taiwan shares closed down 88.25 points, or 0.92 percent, at 9,439.29 Friday on turnover of NT$106.16 billion (US$3.54 billion).
“TPK's sales forecast for the third quarter did disappoint the market. It's no wonder the stock faced heavy downward pressure soon after the local market opened,” MasterLink Securities analyst Tom Tang said.
At an investor conference Thursday, TPK forecast flat quarterly growth, or at best a 5 percent sequential increase, of its consolidated sales for the third quarter, citing decisions by its customers to postpone the launch of their new products.
The company projected consolidated monthly sales of about NT$10 billion for July and August, little changed from June when the figure dropped 0.6 percent from a month earlier to NT$10.82 billion.
September Sales Growth Picks Up
Sales growth, however, could pick up in September, TPK said, forecasting a break-even operating margin in the third quarter on higher operating costs.
“The forecast was counter to market expectations that TPK would see explosive sales growth in the third quarter. It turned out that the touch panel maker's sales are projected to remain in the doldrums this quarter,” Tang said.
Tang said TPK's improved second quarter results were eclipsed by the weak third-quarter forecast.
For the April-June period, TPK posted NT$323 million in net profit, up by a quarterly 150.2 percent. Its second quarter earnings per share stood at NT$0.98, up from NT$0.39 in the first quarter. The company attributed the improved results to higher-than-expected tablet computer and notebook computer shipments.
“In addition to the disappointing third quarter guidance, concerns over escalating competition from China will undermine TPK's bottom line down the road,” Tang said, referring to emerging China touch panel makers such as Shenzhen O-film Tech Co. (深圳歐菲光科技)
“Meanwhile, major Taiwanese panel makers, including AU Optronics Corp. (友達光電) and Innolux Corp. (群創光電), have entered the touch panel market, posing an even greater threat to TPK,” Tang said. “I am not optimistic about TPK's outlook under such unfavorable circumstances.”
He said investors should remain alert to possible selling in TPK shares by foreign institutional investors amid uncertainty over the company's earnings outlook, which could continue to place pressure on the stock.
From June 18 to July 24, foreign institutional investors sold a net 12.5 million TPK shares, according to Tang.
As of Thursday, foreign investors still held more than 60 percent of TPK's outstanding shares and there is much room for them to unload more of the stock, he said.