Yuanta - Everlight Electronics (2393) Trading at trough P/B but ROE is well above trough

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Yuanta

EUR 55.04 For Business Accounts Only

Trading at trough P/B but ROE is well above trough

Everlight is trading at a trough P/B of 1.1x but with an 11% ROE and 7% cash yield. Back in 2012, it also traded at 1.1x P/B but with only a 4% ROE. Amid weak market sentiment, we believe share price risk is clearly to the upside from here (on P/E it is trading at only 10x 2016F EPS). Our revised BUY TP of NT$60 is now based on 1.4x (previously 1.6x) 2016F BVPS mainly to reflect a lower index level /market risk appetite (see valuation section for details).â€‹

08/05/2016 7 EN

Underlying

Everlight Electronics

Everlight Electronics is principally engaged in the manufacture and sale of optoelectronic components. Co. operates its businesses through three segments: light emitting diode (LED), light crystal display (LCD) and other. The LED segment provides LED lamp, LED backlighting, digit/dot matrix display, low/middle/high power LED, surface mount device LED, infrared LED, LED customized module, photo sensor module, photo transistor, photo coupler and optoelectronic integrated circuits. The LCD segment provides LCD panel and liquid crystal module. The other segment is engaged in the sale of raw materials for electronic products, masks and electro-phoretic displays.

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TW0002393006 Taiwan Stock Exchange Chinese Taipei

Provider

Yuanta

Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.

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Ford Equity International Rating and Forecast Report

Ford Equity International Research Reports cover 60 countries with over 30,000 stocks traded on international exchanges. A proprietary quantitative system compares each company to its peers on proven measures of business value, growth characteristics, and investor behavior. Ford's three recommendation ratings buy, hold and sell, represent each stockâ€™s return potential relative to its own country market.. The rating reports which are generated each week, include the fundamental details behind each recommendation and reflect the fundamental and price data as of the last trading day of the we...

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Yuanta

Cheap valuation with emerging new growth opportunities

â€‹Everlight is trading at a trough P/B of 1.2x but with 11% ROE and 6% cash yield. In 2012, it traded at a P/B of 1.1x but with only 4% ROE. We believe potential rush orders into 2H16 (as ASP started to show stabilization) and its increasing presence in infrared (IR) & automotive LED are the key catalysts to watch. Our TP is still based on 1.4x 2016F BVPS, which is at a steep 35% discount vs. its 2009-14 avg. P/B, despite the ROE being the same at 11% (see valuation section for details). On P/E, it is trading at only 12x 2016F EPS vs. its historical range of 15-20x.

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Brighter outlook helped by stable sales growth

â€‹Reiterate BUY with a TP of NT$174: CCI posted weak 3Q16 earnings due to Samsung Note 7 termination. However, we believe the worst is over, and 4Q16F earnings should return to normal. We reiterate BUY on CCI given the handset heat-pipe trend and our expectation of its server shipmentsâ€™ stable growth in 2017F. We also forecast strong 2016/17F EPS of NT$10.29/12.42, up 32%/21% YoY. Our TP of NT$174 is derived from 14x (unchanged) 2017F EPS of NT$12.42, implying 19.1% upside.

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2017 growth story intact

â€‹Reiterate BUY but cut TP to NT$195: TCI reported strong 4Q16 sales of NT$886 mn, hitting a record quarterly high in its traditional peak season. Mgmt expects 4Q16 GM of ~42%, staying at a high level post a positive GM surprise in 3Q16. We therefore raise 4Q16/2016 EPS by 16.8%/4.3% to NT$2.04/7.1 to reflect a better than expected high season. Jan sachet product sales could be relatively weak, as some production lines may be halted for 3-5 days for new capacity to move in; we thus trim 1Q17F sales by 1.5%. We also trim 2017F EPS, by 1.4%, given the lighter January sales and with its S8 funct...

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â€‹Mgmt is more positive on its 2017F outlook. We believe it faced a bottleneck in 2016, but that its competitiveness is intact. We expect 2017F sales to return to the 2015 level on growth drivers including switch, IPC, high-end 3x3/4x4 wireless products and consolidated sales from its subsidiary, Emplus.

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January 5, 2017 January 5, 2017 8 EN

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Trading at trough P/B but ROE is well above trough

EVERLIGHT ELECTRONICS sees a downgrade to Slightly Negative on account of less fundamental stars

Ford Equity International Rating and Forecast Report

Cheap valuation with emerging new growth opportunities

Brighter outlook helped by stable sales growth

2017 growth story intact

1Q17F sales likely to hold up despite weak seasonality; brighter outlook for 2017F

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