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Taiwan Equity Insight
Date:
Morning Briefing
Dec. 29, 2009
Previous day close: TWSE Index 8,057.49 OTC Index 144.00 NTD/USD* 32.295
There is only 3 trading days left in 2009 and we remain optimistic toward TAIEX due to window-dressing
House
by ITC and groups as QFII kept buying lately, index maybe keep going up slightly as long as daily volume
View
is less than NT$180bn and moderate increase on long-margin. Looking into sector, we are remain bullish
view on DRAM, panel and LED. We like Epistar (2448 TT), Innolux (3481 TT), Novatek (3034 TT), Inotera
(3474 TT). As to non tech, sector rotated into construction, asset plays and financials. We prefer asset
and financial at this level and suggest to pay attention on asset and financial instead of construction, we
like Taiwan Fertilizer (1722 TT), Fubon (2881 TT), Yuanta FHC (2885 TT) and Shin Kong FHC (2888 TT).
SKFH
Company
• Yulon Motor (2201 TT): Maintain BUY recommendation
Updates - MasterLink Research keeps optimistic on Yulon's Luxgen brand which came to the market 4 months ago and
in line with robust demand, has decided to add 200 workers contrary to most global carmakers' lay-off trend.
- Luxgen has been welcomed not only in Taiwan but also in the Middle East and although the company is still
below breakeven point, we believe the current turnaround in the economy will eventually lift the auto market in
Taiwan as we saw in previous recovery cycles (1991 ~ 2002).
- ECFA will indeed benefit Yulon Motor as we may see Chinese auto maker DFM placing ODM orders in
Taiwan and maybe Yulon directly selling cars in Mainland China.
- Luxgen brand also plans to launch an EV model in Q3-2010 especially for Middle East and Mainland China.
- Yulon has also valuable land assets that provide the stock a premium that we can't ignore given the current
favorable environment.
- We estimate Yulon will deliver NT$ 1.51in 2009 and maintain our BUY rating and TP of NT$ 51.0
• Simplo (6121 TT): Reiterate TRADING BUY
- Media speculates today that Simplo and peer Dynapack (3211 TT) will be key battery suppliers of Apple's
highly-expected tablet PC although both firms have a policy of not commenting market rumors.
- MasterLink Research remains positive on Simplo that although Apple maintains high confidentiality, Simplo
should indeed have good chances to participate in such project given its superior quality, economies of
scale and close relationship with global hardware makers.
- We remain optimistic on NB growth for 2010 and therefore, Simplo should continue having the upper hand on
the NB battery pack market. Plus, EV market exposure should be an important catalyst for the company in the
long-term as China's subsidy policy may indeed boost the market in coming years.
- We forecast 2009 EPS of NT$ 10.62 and NT$ 12.95 for 2010 and maintain our NT$ 195.0 TP.
• Cheng Shin Rubber (2105 TT): Keep TRADING BUY rating
- As rubber and tire markets maintain momentum, MasterLink Research believes Cheng Shin will
indeed keeps its GM above ~20%.
- Tire maker Nankang (2101 TT) has announced higher tire ASPs for all models ranging from 6% ~ 16% while
Bridgestone has increased tire prices in the US around 5% as raw material prices increased previously as well.
- We foresee Cheng Shin's ASPs upgrades in 2010 in installments and although Q4-2009 and Q1-2010 could
see some revenue weakness, we remain more optimistic than the Street on next year's earnings growth as we
estimate NT$ 8.19 EPS for 2009 and NT$ 8.72 for 2010. Thus, we maintain our TRADING BUY rating.
Dec 29, 2009 Bloomberg: MLKS
MasterLink Securities Morning Briefing
SKFH
News Tech
• Prime View (8069 TT) will cooperate with LGD for e-paper, LGD will invest in Prime View US$ 30.50
mn, dual side will enhance the relationship for technology, capacity, capital and procurement.
• Cyntec (2452 TT) will acquire Apple iTablet passive component order, Cyntec is the main source for
80% supply; meanwhile, Taiflex (8039 TT) is also main source to supply FCCL, market expects rev will
grow 30% YoY in 2010.
• Realtek (2379 TT) anticipates rev QoQ in Jan 2010 will grow in two-digital, the firm also emphasizes
inventory of 802.11n chip keeps healthy level and no shortage concern.
• Gemtek (4906 TT) announced yesterday to ally with On-Ramp Wireless to produce Ultra-Link
Processing (ULP) which relates to smart grid concept, market expects the comp. can get the order from
North America.
• Yageo (2327 TT) plans to enhance capacity up to 20% in 1H2010 to compete other Japan and Korea
peers, as long as growth of NB, mobile and TV are in line with expectation say 20% YoY in 2010,
additional capacity will be digested well.
• Asustek (2357 TT) announced is going to simplify the division of Asustek and Pegatron, which is
expected to be listed on same day.
Hynix announced to revise up capex of 2010 to US$1.27bn from US$0.7bn, which is closed to Inotera's •
(3474 TT) level of US$1.385bn, being the 3rd largest capex among DRAM makers after Samsung and
Inotera.
Non-Tech
• TYC (1522 TT) announced the first 11 months before-tax EPS NT$ 1.92, the com. indicates there is
storm in US and Euro market now increasing demand and anticipates high season will expend into
1Q2010.
SKFH
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Dec 29, 2009 Bloomberg: MLKS