Electronics-Components Firms In Taiwan Offer Bright Hopes
For investors in the sometimes-volatile electronics industry, it might make sense these days to pay more attention to companies that make components for personal computers and phones, rather than to the manufacturers who assemble them.
Shares of big electronics manufacturers, including powerhouses like Flextronics International and Jabil Circuit, have been in the doldrums lately as corporate-technology spending has lagged. Analysts say that some smaller component-makers -- many of them based in Taiwan, where global phone makers are increasingly outsourcing production -- could offer brighter prospects.
Strong recent performers include Taiwan's Merry Electronics, which makes speakers and acoustic systems for phones, and Taiwan Green Point Enterprises, which has about 11% of the market for plastic phone casings. Green Point's customers include Motorola and joint venture Sony Ericsson, according to Merrill Lynch.
Merry's shares are up about 37% since the start of 2004, and investment bank CLSA Asia-Pacific Markets expects the company's net profit to more than double this year to 805 million New Taiwan dollars, or roughly US$24 million. Green Point, despite growing competition, is expanding capacity by 30%. Its stock has climbed nearly 47% since Jan. 1 and, in CLSA's view, has room to rise much more.
"One of the attractions for these companies is that they're under the radar," says Ming-Kai Cheng, CLSA's Tokyo-based head of technology research.
More important, Mr. Cheng says that while big contract manufacturers, including Taiwan computer makers Compal Electronics and Quanta Computer, face increasing pressure on profit margins, smaller companies like Merry and Green Point aren't getting squeezed as much.
That's partly because the computers and cellphones manufactured are increasingly becoming inexpensive, commodity-like products. But another key factor, according to Mr. Cheng, is that the Taiwanese component makers generally don't have to hold large inventory for quick-turnaround orders. The big assemblers of computers and cellphones, on the other hand, must have potentially needed parts on hand so they can rapidly assemble products demanded by customers such as Dell, Hewlett-Packard or Siemens.
Carrying extensive inventory crimps profits, and a backlog of components can balloon when demand for products eases. That's a major concern in assessing technology stocks these days, says Mr. Cheng, adding "If you don't run an inventory risk naturally, you're a little bit more attractive [as a stock] already."
Worries over possible inventory buildups at the big contract manufacturers have made some investors wary of those stocks in recent months, analysts say. Another large electronics manufacturer, Toronto-based Celestica, warned on Sept. 15 of expected profit and sales shortfalls, sending its shares down almost 14% in a day.
Of course, Merry and Green Point aren't immune from inventory issues or other technology market problems, including a slowdown in the growth of cellphone shipments.
"Some component makers obviously offer a good [investment] opportunity," says Ross Teverson, an investment director and fund manager with Standard Life Investments in Hong Kong. But excessive inventory at big assemblers can eventually filter down to component makers, he notes. The big manufacturers will stop buying so many components if they have too much inventory. That could drive down prices for components and erode profits for companies making them.
Indeed, J.P. Morgan analyst Johnny Chan noted in an August report that inventory write-downs stemming from canceled orders explain why Green Point recorded a nonoperating loss of NT$87.9 million in its second quarter ended June 30. Still, he points out that the company logged a 7.7% quarter-to-quarter increase in net profit, and more than doubled its year-earlier earnings.
The analyst slightly raised his earnings estimates for this year and next year, and now expects Green Point to earn NT$1.64 billion in 2004, compared with about NT$1.10 billion last year. He forecasts 2004 revenue at almost NT$9.5 billion.
Mr. Chan rates Green Point "neutral," partly because of concerns about how long it will take orders from new customers to ramp up, according to his report. His price target is a modest NT$96, which the Taiwan-traded stock reached Monday. (The Taipei market was closed yesterday for a holiday.) Both CLSA and Merrill Lynch call Green Point a "buy." CLSA's 12-month price target is NT$135 while Merrill's is a lofty NT$150.
CLSA's Mr. Cheng says that another industry trend that could buoy component makers is the growing outsourcing of cellphone production to Taiwan. With profits coming under pressure, huge European and Japanese phone manufacturers will increasingly look to Asian companies -- most likely those in Taiwan -- to design and make the gadgets, Mr. Cheng contends.
That's exactly what has happened with laptop computers over the past few years, with about 70% of all laptops now manufactured by Taiwanese companies, according to CLSA. Big assemblers of laptops businesses include Compal and Quanta, which have strong design capabilities.
If phone production is "outsourced to the same types of guys -- Quanta, Compal -- they need to buy components locally," says Mr. Cheng, a development that would bode well for Taiwanese component companies.
Already, companies such as Merry boast higher profit margins than most big PC and phone assemblers. Robert Cheng, a Taipei-based CLSA analyst, says Merry's recent shift into acoustic systems for cellphones, for example, has let it almost double its gross profit margin to more than 40%. That's one reason "these guys are doing so well," he says.
电子产品零部件生产企业前景看好
对于间或动荡的电子行业的投资者来说，或许这些天应该把更多注意力投向个人电脑和手机零部件生产商，这也许比关注组装这些零部件的制造商收获更大。
由于企业技术支出增长迟缓，伟创力国际(Flextronics International)、Jabil Circuit等大型电子产品制造商的股票近来一直萎靡不振。分析师认为，一些规模更小的零部件生产商的前景也许会更光明。许多这类企业总部设在台湾，台湾已逐渐成为全球手机生产商的外包基地。
最近表现较强劲的股票包括台湾的美律实业(Merry Electronics)和绿点高新科技(Taiwan Green Point Enterprises)。美律实业主要从事手机扬声器和音响系统的生产。绿点高新科技则在手机机壳市场占据11%的份额，据美林(Merrill Lynch)称，其客户包括摩托罗拉(Motorola)和索尼爱立信(Sony Ericsson)。
美律实业的股价自今年年初以来上涨了大约37%。投资银行CLSA Asia-Pacific Markets预计，该公司今年的净利润将增长一倍以上，至新台币8.05亿元，约合2,400万美元。而尽管竞争日趋激烈，绿点高新科技正在将产能扩大30%。其股价自年初以来飙升了近47%，在CLSA看来，它仍有很大上涨空间。
CLSA驻东京的科技股研究负责人Ming-Kai Cheng表示，这些股票的一大魅力是它们所受冲击较小。
他说，更重要的是，在台湾电脑厂商仁宝电脑(Compal Electronics)、广达电脑(Quanta Computer)等大合约制造商利润率压力不断加大的同时，美律实业和绿点等较小企业的状况要稍好一些。
其中的部分原因在于，电脑和手机正在逐渐成为价格低廉的普遍商品。但是Cheng表示，另一个关键因素是台湾的零部件生产商订单更新迅速，无需持有大量库存。而另一方面，电脑和手机的大型组装企业手头则必须存有必要的零件，这样才能随时应对戴尔(Dell)、惠普(Hewlett-Packard)或西门子(Siemens)等客户需求。
大量的库存损害了组装企业的利润，而当产品的需求减缓时，就会造成零件积压。Cheng说，这是最近市场对科技股的一个主要担忧。他补充道，如果这些公司不存在库存风险，它们的股票会更有魅力。
分析师表示，对大型合约生产商库存可能激增的担忧使得部分投资者最近几个月来对这些股票退避三舍。另一家大型电子产品生产商、总部位于多伦多的Celestica曾在9月15日警告说，预计公司利润和销售额将会弱于预期。这番言论导致该股当日下挫近14%。
当然，美律实业和绿点也未能免遭库存或其他科技市场问题的困扰，如手机发货量增长放缓等。
Standard Life Investments驻香港的投资主管兼基金经理特沃森(Ross Teverson)称，一些零部件生产商的股票显然蕴含著良好的投资价值。
但他指出，大型组装厂商的库存过剩最终可能会殃及零部件生产商的利益，因为如果库存太多，它们将会停止购买零部件。这可能会推低零部件价格，进而损害其生产企业的利润。
JP摩根(J.P. Morgan)分析师Johnny Chan在8月份的研究报告中称，因订单取消造成的库存冲销是绿点在截至6月30日第二财政季度出现新台币8,790万元非运营亏损的主要原因。不过，他指出，该公司净利润较前季增长7.7%，比上年同期增长了一倍以上。
他略微上调了对绿点今明两年的收益预期，目前预计该公司今年净利润16.4亿元，高于去年的11亿元；收入95亿元左右。
Chan将绿点的评级定为中性，部分原因是他对其新客户的订单多久才会增加心存担忧。他将该股目标价位定为96元，相当于该股周一的交易水平。（台湾股市昨日因假日休市。）CLSA和美林对绿点的评级均为买进。CLSA将其12个月目标价位定为135元，而美林则定在150元。
CLSA的Cheng说，有望提振零部件生产商的另一个行业趋势是，投入到台湾的手机生产外包活动与日俱增。迫于利润压力，大量的欧洲和日本手机生产商将会越来越多地将产品设计和生产业务转给亚洲公司，台湾企业更是备受青睐。
这一点从过去几年手提电脑领域的状况可见一斑。CLSA的资料显示，全球大约70%的手提电脑是由台湾公司生产的。大型组装企业包括仁宝电脑和广达电脑等，它们都拥有强大的设计能力。
Cheng表示，如果将手机生产外包给同类公司──仁宝电脑和广达电脑──它们就需要在本地采购零部件，这将使台湾零部件企业大为受益。
目前，美律实业等公司的利润率已经超过了多数大型个人电脑和手机组装企业。CLSA驻台北的分析师Robert Cheng表示，美律实业最近转型生产手机的音响系统，这使其毛利率增长近一倍，达到40%以上。这也是这类公司表现出众的原因之一。
