Monday January 29, 12:32 am Eastern Time
Salomon cuts TSMC EPS estimates
(UPDATE: adds details, share performance)
TAIPEI, Jan 29 (Reuters) - U.S. investment bank Salomon Smith Barney said on Monday it was cutting its 2001 and 2002 earnings per share estimates for top microchip foundry Taiwan Semiconductor Manufacturing Co (TSMC) (NYSE:TSM - news).
Salomon analyst Andrew Lu cut his 2001 EPS forecast by 20 percent to T$4.90, a 14 percent drop from expected per-share earnings for 2000. He also cut the 2002 forecast by 13 percent to T$6.80.
Lu said in a research note he expected TSMC's capacity utilisation rate, which hovered above 100 percent of rated capacity for most of 2000, to fall to 85 percent in the first quarter of this year and 79 percent in the second quarter.
TSMC, the world's biggest foundry or made-to-order chipmaker, was also expected to trim capital expenditure by 20 percent to US$3.1 billion, he said.
Lu said TSMC was trading at a 50 percent premium to arch rival United Microelectronics Corp (NYSE:UMC - news) based on its price to earnings ratio, and did not look cheap.
However, he maintained an outperform rating on TSMC and a T$110 price target for its Taiwan-listed shares and US$26 target for its American Depositary Shares.
``For long-term investors, we would suggest accumulating TSMC over the next six months on pullbacks, especially if the stock falls toward the trough valuation of T$60-65,'' Lu said.
``Trading oriented accounts should sell TSMC into recent strength,'' he added.
By 0510 GMT, TSMC shares were down T$2.50, or 2.45 percent, at T$99.50, while the broad TAIEX (^TWII - news) index was down 0.34 percent.
Dutch tech sector leader Philips Electronics is one of TSMC's largest shareholders.
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