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June 23, 2017

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Shares of Lextar jump after stake acquisition by Cree

TAIPEI -- Shares of Lextar Electronics Corp. (隆達電), one of Taiwan's leading light-emitting diode chip suppliers, soared Wednesday morning after the company announced that U.S.-based Cree Inc. had agreed to acquire a stake in the Taiwanese company, dealers said.

The buying also reflected optimism that peak-season effects in the third quarter will strengthen the profitability of local LED product makers, such as Lextar, they said.

As of yesterday's session, shares of Lextar had added nearly 7 percent, the maximum daily increase, to NT$30.50 (US$1.02), with 4.91 million shares changing hands. The weighted index on the Taiwan Stock Exchange ended up 91.63 points, or 0.97 percent, at 9,485.59.

"The deal demonstrated Taiwan's competitive edge in the global LED market, and that's why Cree was willing to take a stake in the Taiwanese firm," KGI Securities analyst Phil Chu said.

"It was no surprise that buying in Lextar shares emerged to push the stock up 7 percent soon after the local market opened, and momentum will likely continue," Chu said.

He said there were still outstanding orders from investors to buy more than 11 million Lextar shares.

Cree — one of the United States' leading LED vendors — and Lextar will also enter into a long-term LED chip supply agreement as well as a royalty-bearing licensing agreement for some of Cree's LED chip and component intellectual property.

"So although the share acquisition price represented an only 5 percent premium over Lextar shares' Tuesday closing level, investors have high hopes that the supply and technology sharing agreements with Cree will boost Lextar's long term competitiveness," Chu said.

"The acquisition price of NT$30 will not become a cap on Lextar's share price.

"Due to the deal with Cree, I expect Lextar shares will rise an additional 10 percent before the stock moves to the nearest technical resistance at around NT$33," he said.

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