reports
Brighter outlook helped by stable sales growth
​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 shipments’ 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.
2017 growth story intact
​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 s...
1Q17F sales likely to hold up despite weak seasonality; brighter outlo...
​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.
Likely 4Q16 miss on rising expenses in Taiwan; but China’s outlook r...
​Stock trading: Its recent share price weakness may be attributed to the 4Q16 results miss on higher than expected operating expenses in Taiwan. Having talked to mgmt, we still expect steady 2016F sales/operating profit growth of 8.9%/10.8% YoY despite headwinds on higher expenses. Due to China’s stronger than expected growth recovery, we are more positive on Sakura China being the driving force since room exists for channel expansion and product-mix optimization as the contribution of high-...
U/G Positive 2017F outlook supported by growth of new markets & client...
​Upgrade to BUY & lift TP to NT$80: Given stronger microwave component segment growth, we turn positive on UMT’s 2017F outlook and raise our 2017F sales/earnings estimates notably by 11%/36% (or up 14%/29% YoY), with EPS of NT$5.7. In the short term, we believe December sales will hit a new high, with 4Q16 sales/earnings likely to reach record highs and EPS up to NT$1.7. We expect the company to regain sales/earnings growth momentum in 2017F, which will help boost investors’ interest in th...
Leader in oncology drug pharmaceutical efficacy analysis; earnings gro...
​Resume coverage with a BUY rating: Crown Bio focuses on developing platforms for pharmaceutical efficacy analysis of oncology and diabetes drugs. It is also the leader in the Patient-Derived Xenograft (PDX) field. We believe the trends of target therapy and precision medicine will continue to drive the company’s growth. We expect sales in the next 3-5 years to continue >30% YoY growth annually, and operating leverage will maintain annual net profit growth at >50% YoY. Crown Bio made a turna...
2017F optical communication orders a major factor for operational grow...
​Reiterate BUY and raise our TP to NT$59: We believe operations have bottomed in 3/4Q16 and are likely to see QoQ growth in 1Q17F. For its LD/VCSEL epiwafer business, the company currently has three clients, and we expect these clients to become its biggest growth driver in 2017F if epiwafer shipments go smoothly. We also expect GM to benefit from better product mix thanks to higher sales exposure to optical communication products. After resuming trading on October 7 following its capital redu...
Improving earnings outlook in 4Q16/2017F
​Upgrade to BUY: We were conservative on Nan Ya previously due to its weak core businesses in 3Q16. However, mgmt indicated that the worst for core business has passed with positive guidance for 4Q16/1Q17. We also see good signs for both core business & investment income. As such, we raise our earnings forecast and set our target multiple at 1.9x 2017F BVPS (vs. 1.5x previously), deriving our new TP of NT$82.
Re-rating potential on improving profitability
​Reiterate BUY and lift TP to NT$42: We remain positive on China Life given 1) robust recurring income growth thanks to having the highest recurring yield with more extra overseas investment quota and stronger asset growth vs peers; and 2) declining F/X hedging costs in 2017F driven by USD appreciation. Although we expect falling bond values to lower China Life’s BVPS by NT$8.4 (~30% of 2017F BVPS) in the short term, they are unlikely to impact China life’s EV and RBC. Considering the comp...
Standing out thanks to stronger profitability
​Reiterate BUY and lift TP to NT$60: The US 10-year bond yield increase is steeper than our expectation, reflecting that the US government is likely to issue more bonds in the future. We have thus changed our view and expect the bond yield to rise +80 bps to 2.5%, from our previous expectation of +30 bps (1.7%). Accordingly, we raise Fubon FHC’s earnings by 7% and lift our TP to NT$60 based on a higher P/EV multiple of 0.8x (from 0.7x) for Fubon Life, to reflect better profitability. Overall...
On track to reach a positive interest spread
​Reiterate BUY and lift TP to NT$54: Cathay’s share price is highly correlated to the interest rate trend, which we attribute to its lowest overseas fixed income duration of ~9 years. This implies it has more space to shift its investment portfolio to higher bond assets yields when the bond yield curve steepens upwards. We also expect Cathay Life to return to a positive interest rate spread quicker vs mgmt’s expectation, within 5 years. We raise 2016/17F earnings by 8%/2% and lift our TP t...
Light at the end of the tunnel
​Initiate coverage with a BUY rating and TP of NT$77: The overriding market sentiment on the property sector has clearly picked up in recent weeks, supported by the introduction of 1) favorable house tax reform in Taipei; and 2) urban renewal incentives. The clear taxation outlook and continued low interest rate environment suggests property trading volume is likely to bottom out in late-2017F. In the recovering property market, we believe Chong Hong will outgrow peers on the back of its solid...
Choppy share movement, but we see opportunities
​Stock trading: Similar to many small/mid-cap stocks in recent days, its share price has been rather volatile, and investors’ reaction to any news flow has been quite fierce. There has been some negative market talk related to PTI, such as Micron building in-house back-end capacity, Walton (8110 TT; NR) gaining more allocation from PTI, and the PTI/Tsinghua deal falling apart, etc., but we see these as non-events, and we suggest investors add positions on any share pullback. The ramp up of i...
Phase III trial data barely qualified; maintaining drug approval sched...
​Reiterate BUY but cut TP to NT$232: PharmaEssentia released phase III clinical trial results of P1101 for treating Polycythemia Vera (PV) on Dec 5. P1101 met the primary endpoint, but 52-week trial results are not superior to the control arm (Hydroxyurea, HU), increasing difficulty in marketing. The company and AOP will apply for drug approval in 2017 as planned, and a Conti-PV trial is being undertaken to observe drug efficacy and adverse events (AE) on patients after two-three years of trea...
U/G Near-term outlook reassuring, while US macro likely bottoming out
​Upgrade from Hold to BUY: Previously we were cautious that Eclat would likely miss its guidance and market expectations again, even after downward revisions post 3Q16 earnings, given weak Oct sales declined 18% YoY, vs. guidance for flat 4Q16F revenue YoY. However, our recent check with mgmt makes us more confident on the 4Q16F revenue and earnings outlook, and we believe a likely ceasing of consecutive downward revisions is positive for the share price. In addition, we believe US macro is li...
Brighter 2017F outlook for orders & GM
​Reiterate BUY and lift our TP to NT$91: We continue to like Sercomm, with its position in the networking industry remaining solid, and given its exposure to the IoT & smart home segments. Following our channel checks, we are more positive on Sercomm’s order and GM outlook. As such, we raise our 2017F sales/earnings estimates by 3%/14%, implying growth of 6%/22% YoY, with EPS up to NT$7.1. We expect 1Q17F sales/earnings to decline only by 3%/11% QoQ despite low seasonality, thanks to new cli...
Standing out on the back of strong ROE
​Reiterate BUY and lift TP to NT$52: We remain positive on Fubon as 1) Fubon Life’s recurring income can increase under a Fed rate hike policy; 2) Fubon Bank will have less provision pressure for TRF in 2017F, as exposure to TRF has fallen to 10% of that in 2015. We expect bond and equity value to fall due to volatile bond/equity markets, lowering Fubon FHC’s BVPS by NT$1.3 (3% of 2017F BVPS), which we view as controllable. We lift our TP to NT$52 from NT$49, as we raise TFB’s 2017F P/B ...
Macro likely bottoming out; new clients’ revenue to drive sales grow...
​Upgrade from Hold to BUY: Makalot’s share price has fallen by 17% since we highlighted its lukewarm 2017F outlook in our Oct 17 note. However, we deem market expectations are already low, and observe US macro conditions are likely bottoming out, which indicates that end-demand may rebound. Some US channel stores saw stronger Oct sales vs. Aug/Sept, and many of their inventory changes YoY seem healthier vs. revenue changes. Makalot (after mid Nov) raised its 2017 revenue growth expectations ...
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