InvestIdeas

BROKER CALL - HK-listed ASM Pacific upgraded to 'overweight' - Morgan Stanley

HONG KONG (XFN-ASIA) - Morgan Stanley upgraded ASM Pacific Technology to "overweight" from "equalweight" and raised its target price on the stock to 63 hkd from 54.7 after the company's first-quarter results.

"While first quarter revenues and EPS were down quarter on quarter as expected, bookings were higher than our forecasts and it appears that growth is likely to resume in second quarter," the brokerage said.

ASM announced earlier this week a net profit of 298 mln hkd for the first quarter, up from 192 mln a year earlier.

Morgan Stanley noted that first quarter results and second quarter guidance demonstrate that ASM is now less immune to the semiconductor cycles, and that growth in lead frame and LED business will likely offset some of the weakness in the core semi equipment business.

The brokerage raised its 2008, 2009 and 2010 earnings per share (EPS) forecasts for the company to 3.42 hkd, 3.75 and 3.98, respectively, from 3.04 hkd, 3.32 and 3.53.

"We would expect sequential revenue growth and more light on the growth of new businesses to drive shares higher," it said.

At 2.30 pm, ASM shares were up 3.15 hkd or 5.75 pct at 57.9.

Not vested anymore.

HONG KONG (XFN-ASIA) - ASM Pacific Technology Ltd's first-half to June results:

Sales - 2.93 bln hkd vs 2.37 bln
Net profit - 674.59 mln hkd vs 546.4 mln
EPS - 1.73 hkd vs 1.41
Interim div - 90 hk cents vs 70 cents
Special div - 50 hk cents vs 60 cents

ASM Pacific Technology spending

ASM Pacific Technology (0522) plans to spend HK$320 million for capital expenditure this year.

The company is building a third research center in Chengdu, Sichuan, which will be completed in the second half.

"We are confident the semiconductor industry would continue to move forward healthily despite potential impact from the global economic slowdown,''chief executive Lee Wai-kwong said.

"We predict growth of 4 to 6 percent by the end of the year, although it is becoming more difficult to predict market trends. Visibility for the second half remains at zero.''

STAFF REPORTER

DJ MARKET TALK: ASM Pacific Down 5.4%; CS Tips Difficult 1H

1105 [Dow Jones] ASM Pacific (0522.HK) down 5.4% at HK$22.60, year-to-date low of HK$21.25 likely tested in near term, after posting 23.3% decline in FY08 net profit to HK$974 million, with 4Q barely profitable at HK$32 million.

Credit Suisse notes order backlog down 57% on quarter to $53 million with depressing book-to-bill ratio of 0.33 at end 2008, pointing to difficult 1H. Adds back-end equipment market contracting in manner of, or worse than, post-tech bubble downturn;

"ASM is struggling not to incur its first-ever quarterly loss in 1Q09." Cuts ASM's FY09-10 earnings forecast by 22%-28%; keeps Underperform call, but tweaks target price to HK$16.50 vs HK$15.20

DJ MARKET TALK: ASM Pacific Best Bid HK$21.05; BOCI Cuts To Sell

0943 [Dow Jones] At pre-open ASM Pacific (0522.HK) best bid at HK$21.05, ask at HK$21.90 vs last close of HK$21.80; stock may slide more today, adding to 8.8% post-results drop yesterday. BOCI cuts stock to Sell from Hold, target price to HK$11.00 vs HK$28.50; slashes FY09 earnings forecast by 84%, FY10's 46% due to "dismal" industry outlook; believes demand will remain soft for rest of current year, with company indicating even weaker 1Q09 performance relative to 4Q08, which barely profitable

DJ MARKET TALK: ASM Pacific Off 10.9%; UBS Downgrades To Sell

1427 [Dow Jones] STOCK CALL: UBS cuts ASM Pacific (0522.HK) to Sell from Buy after stock +50% in a month; advises investors to take profits, as difficult to justify current HK$34 share price on FY10 EPS of HK$1.18 (FY09: 12 HK cents), equity FCF/share of HK$1.31 (FY09: 95 HK cents).

Adds, on medium-term over-the-cycle EPS estimate of HK$2.00-HK$2.50, stock trading at 14X-17X P/E. "We think further upside is limited even if a sharp recovery is forthcoming," with risk-reward balance appearing lopsided. Keeps target price unchanged at HK$26.50. Stock tumbles 10.9% to HK$30.10 midday

DJ MARKET TALK: Goldman Ups ASM Pacific Target To HK$40 Vs HK$34

1200 [Dow Jones] STOCK CALL: Goldman Sachs raises ASM Pacific (0522.HK) target price to HK$40 from HK$34 on higher target P/B of 5.4X vs 4.5X previously; keeps Buy call. Says ASMP has seen order recovery spreading from China in February to Korea, Philippines, Taiwan in March, April; China's rural subsidy program has meaningfully stimulated demand for home appliances, benefiting ASMP given strong position in China.

Also, new Samsung/SEMCO LED JV has started to order equipment, while Taiwanese, Chinese LED companies likely to order in 2Q or 3Q09 to meet rising demand. Adds, recent copper price decline should aid margins of ASMP's lead-frame products. Stock jumps 12.3% to HK$37.55

DJ MARKET TALK: Citigroup Ups ASM Pacific Target 33.3% To HK$40

1216 [Dow Jones] STOCK CALL: Citigroup second major broker raising ASM Pacific (0522.HK) target price over past two sessions; increases target price to HK$40.00 from HK$30.00, follows Goldman Sachs raising ASM target, also to HK$40.00 vs HK$34.00 Friday, both keep stock at Buy.

Citigroup changes target P/B to 1.4X from 1.1X to reflect first semi backend bookings uptick since June 2007, less-than-expected OSAT (outsource assembly and test) 1Q09 sales decline, pass of semi trough in 1Q09. Citi advises investors to buy shares on dips, as despite stock having rebounded about 60% from February low, "we believe the market will increasingly be interested in backend equipment plays." Stock down 1.1% at HK$34.60 after rising 4.6% Friday

DJ MARKET TALK: BNPP Ups ASM Pacific Tech To Buy, Ups Target 140%

0911 [Dow Jones] STOCK CALL: BNP Paribas upgrades ASM Pacific Tech (0522.HK) to Buy from Hold despite company posting first-ever net loss in 1Q09 on 47% on-quarter sales drop. Notes however, end-1Q order backlog rose to US$59 million, book-to-bill ratio back to 1.12X. Adds, March China/LED-related order influx bodes well for China-oriented model; tips 2Q09, 3Q09 sales +56%, +23% on-quarter, respectively; notes share price tends to move in line with sales.

"ASMPT remains the preferred supplier to China packaging houses, given its solid one-stop shop services. Improved cross-strait tie may see more Taiwan backend investment in China is another plus for ASMPT."

Raises target price to HK$48.00 from HK$20.00 based on 7X 2009E P/BV, marking midpoint of historical range. Shares ended +8.3% at HK$39.00 yesterday.

DJ MARKET TALK: Goldman Cuts ASM Pacific Tech To Neutral From Buy

1014 [Dow Jones] STOCK CALL: Goldman Sachs cuts ASM Pacific Technology (0522.HK) to Neutral from Buy on view valuation fully reflects sharp order recovery in 2009, with 2011 P/E of 17X at high end of mid-cycle P/E range of 13X to 18X.

Raises target price to HK$48.00 from HK$46.00 based on 6X 2010E P/B vs previous 6X 2009E P/B. Adds, remains positive on company's competitive position, long-term growth outlook. Expects full valuation, moderating order growth could result in profit-taking in 2H09.

Recommends investors wait for better entry level. Shares +0.6% at HK$44.85; HSI +1.7%.