Me­di­aTek shares ex­tend losses amid weak sen­ti­ment, low sales

The China Post - - LOCAL -

Shares of Me­di­aTek Inc. ( ), one of Tai­wan’s lead­ing in­te­grated cir­cuit de­sign­ers, fell again Tues­day morn­ing as pes­simism lin­gered from the com­pany’s lower-than-ex­pected sales guid­ance is­sued last week, deal­ers said.

The selling also re­flected fears that for­eign in­sti­tu­tional in­vestors will con­tinue to cut their hold­ings of Me­di­aTek shares af­ter many for­eign bro­ker­ages cut their tar­get prices for the stock, they said.

As of 11:49 a.m., shares of Me­di­aTek had fallen 6.86 per­cent to NT$278.50 ( US$8.81) with 20.70 mil­lion shares chang­ing hands. The weighted in­dex on the Tai­wan Stock Ex­change was down 0.38 per­cent at 8,490.78.

Me­di­aTek shares en­coun­tered heavy pres­sure soon af­ter Tai­wan’s stock ex­change opened, sus­tain­ing the down­ward mo­men­tum seen a day ear­lier when the stock fell the max­i­mum 10 per­cent and hit a 30-month low of NT$299.00.

“Af­ter the stock fell be­low NT$ 300 yesterday, it be­came very frag­ile tech­ni­cally,” Ta Ching Se­cu­ri­ties an­a­lyst Andy Hsu said. “It was no sur­prise that selling con­tin­ued to­day, and there are few signs the stock will soon find tech­ni­cal sup­port.

“In­vestor con­fi­dence

in

the stock has been se­ri­ously hurt by Me­di­aTek’s sales forecast for the third quar­ter and the cut in its es­ti­mate for smart­phone chip ship­ments in 2015,” Hsu said.

At an in­vestor con­fer­ence held on July 31, Me­di­aTek said its con­sol­i­dated sales in the third quar­ter could range be­tween NT$51.7 bil­lion and NT$55.5 bil­lion, up 10-18 per­cent from a quar­ter ear­lier.

Q3 Con­sol­i­dated Sales 20%

Lower Than Ex­pec­ta­tions

That was about 20 per­cent lower than mar­ket ex­pec­ta­tions, which were high be­cause the third quar­ter is the tra­di­tional peak quar­ter for the global IC in­dus­try.

Me­di­aTek trimmed its forecast for 2015 smart­phone chip ship­ments to 400 mil­lion units from 450 mil­lion units pre­vi­ously, and it cut its pro­jec­tion for ship­ments of chips used in tablet com­put­ers by about 10 per­cent to 45 mil­lion units.

The IC de­signer also ex­pected its con­sol­i­dated sales for 2015 to fall 5-10 per­cent from 2014.

“Based on these fore­casts and the moves to cut its ship­ment pre­dic­tions, I think that 2014 was a peak for the world’s smart­phone busi­ness, in par­tic­u­lar for the An­droid camp. Me­di­aTek can­not iso- late it­self from such a slow­down in 2015,” Hsu said.

Fac­ing Es­ca­lat­ing Price

Com­pe­ti­tion

“Me­di­aTek is fac­ing es­ca­lat­ing price com­pe­ti­tion, in par­tic­u­lar from ri­val Qual­comm Inc. That’s why the Tai­wanese firm has suf­fered a de­cline in its profit mar­gin,” Hsu said.

Ac­cord­ing to Me­di­aTek, its sec­ond quar­ter gross mar­gin fell 1.4 per­cent­age points from the first quar­ter to 45.9 per­cent, and the third quar­ter fig­ure is ex­pected to fall fur­ther to range be­tween 42.5 per­cent and 45.5 per­cent.

Hsu said for­eign in­sti­tu­tional in­vestors have been net sellers of Me­di­aTek shares since March, and their selling has been stepped up in re­cent ses­sions amid con­cerns over Me­di­aTek’s sales out­look.

Ac­cord­ing to Hsu, for­eign in­sti­tu­tional in­vestors sold a net 55 mil­lion Me­di­aTek shares be­tween March 9 and Aug. 3, con­tribut­ing to a 35 per­cent de­cline in the stock’s value.

Sev­eral for­eign bro­ker­ages have cut their tar­get prices for Me­di­aTek shares, with one set­ting a tar­get as low as NT$225.

“If the stock fails to end above NT$280 to­day, it could con­tinue to trend lower and test the NT$240 level in the near fu­ture,” Hsu said.

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