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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (19281)	6/15/2004 10:46:09 AM
From: - with a K	Read Replies (1) \| Respond to of 78478

I am holding AUO and still like the prospects and position in an growing, competitive market. There were a number of news items that lead to the sell-off, IMO: pending LG Phillips IPO, the Sharp lawsuit, downgrade by Deutsche Bank, lowering prices of flat TV screens (only a small part of AUO's business), and the fact that most Asian stocks fell on the concern China's central bank may raise interest rates to cool economic growth. I am disappointed in the timing of my last buy and I would add here if I didn't have a full position. A forward PE of 5.6 just seems too low, even for a cyclical company in an emerging market. The dividend will be paid July 12; currently a 2% yield. Per Yahoo, 4 analysts expect an average of $3.05 next year, up significantly from when I did an earlier FV calculation. News: "9:52AM AUO a compelling opportunity - CIBC 16.47 -1.31: CIBC says the recent price consolidation after strong 1Q gains provides investors with a compelling opportunity. Earnings expectations remain intact; valuation of 5.4x the firm's new CY04E EPS is attractive and fundamentals have changed little. The firm believes catalysts should include completion of AUO's secondary offering, better visibility on 2H demand, and multiple expansion on growing confidence in the sustainability of FPD profit growth into and beyond CY05." ******** Unfortunately, Taiwan has long been a fragile society lacking a sense of security. It is unusually sensitive to rumor and intimidation. This is reflected in the stock market. Oddly enough, it is always the government that people blame for any fall in the market. They never blame Beijing. taipeitimes.com ****** In Asia, Stocks Are Left Out of the Party By PHILLIP DAY and HAE WON CHOI Staff Reporters of THE WALL STREET JOURNAL June 14, 2004; Page A2 SEOUL, South Korea -- Higher oil prices, rising interest rates and fears that China's powerful economy could experience a sharp slowdown have led some investors and economists to turn bearish on all of Asia -- even as it racks up the best economic results in years. First-quarter growth was impressive across the region. Most of Southeast Asia is growing faster than 7%, while northeast Asian economies are leveraging China's feverish expansion to record solid results themselves. Japan has just notched its best two consecutive quarters of growth since the boom days of the 1980s. Last week, the International Monetary Fund predicted Asian growth would average 7% this year. But as Asian economies have expanded this year, stock markets have fallen sharply. Investors seem to be looking past the good news and worrying about what could go wrong. "It seems to me that investors are overreacting," says Kwon Tae Shin, South Korea's deputy finance minister for international affairs. ****** Cody Willard Buying Some AUO 6/14/04 1:19 PM ET I've bought some AUO on today's further bashing. You don't wanna trade off irony, but I loved the fact that DB's downgrade report last week was titled "As Good As It Gets." LOL. The stock is currently at about a 5 P/E. I'm keeping it pretty small so far. I don't know what fair value would be, but I'm giving it a long-side, Haefele-esque (of Street Insight fame) shot here. Net long AUO ********* taiwanresearch.com 2) AUO plans to expand its G6 fab capacity to 150,000 substrates of motherglass per month, setting its sights on the No. 1 spot currently held by Samsung. Currently, only Sharp has a G6 fab in mass production, LG. Philips' G6 fab will begin mass production in the end of this year, and AUO's G6 could start mass production in 1Q05. Therefore, after expansion, AUO's G6 fab will have the largest capacity in the world. Samsung has a G7 fab set to begin mass production in 2Q05; however, the G7 fab yield rate will ramp up very slowly given a longer learning curve for larger-size motherglass and new technology. 3) AUO will begin to move equipment in next year for an extra 60,000 substrates of motherglass capacity slated to begin production in 2Q06. Therefore, we expect growing oversupply risk in 2006. In 2005, we believe G6 fab yield rates will remain low in the first half of the year, eliminating the chance of oversupply at least in 1H05. 4) Our top pick remains AUO in the TFT LCD panel sector due to the company's relatively cheap valuation (6.5x times forecast EPS) and its product mix that includes smaller panel products as well, which can diversify its risk and give AUO higher gross margin (we believe small-sized panels will enjoy rising shipment levels driven by handset used TFT LCD panel demand. VALUATION MEASURES Market Cap (intraday): 7.77B Enterprise Value (15-Jun-04)³: 8.20B Trailing P/E (ttm, intraday): 9.75 Forward P/E (fye 31-Dec-05)¹: 5.57 PEG Ratio (5 yr expected)¹: 0.06 Price/Sales (ttm): 2.06 Price/Book (mrq): 2.49 Enterprise Value/Revenue (ttm)³: 2.18 Enterprise Value/EBITDA (ttm)³: 6.05 FINANCIAL HIGHLIGHTS Fiscal Year Fiscal Year Ends: 31-Dec Most Recent Quarter (mrq): 31-Mar-04 Profitability Profit Margin (ttm): 21.50% Operating Margin (ttm): 21.71% Management Effectiveness Return on Assets (ttm): 18.86% Return on Equity (ttm): 30.96% Income Statement Revenue (ttm): 3.77B Revenue Per Share (ttm): 8.119 Revenue Growth (lfy)³: N/A Gross Profit (ttm)²: 273.55M EBITDA (ttm): 1.36B Net Income Avl to Common (ttm): 810.45M Diluted EPS (ttm): 1.744 Earnings Growth (lfy)³: N/A Balance Sheet Total Cash (mrq): 553.76M Total Cash Per Share (mrq): 1.21 Total Debt (mrq)²: 989.91M Total Debt/Equity (mrq): 0.319 Current Ratio (mrq): 1.277 Book Value Per Share (mrq): 6.828