First Asian ADR of 2003

The Taiwan tech company completes a two times oversubscribed ADR.

Taiwan integrated semiconductor and packaging company, ASE yesterday priced an accelerated bookbuilt ADR. The deal opened at 3pm and was reported to be fully subscribed after an hour, although the book remained open until 9pm (Asian time) to give US-based clients a chance to place orders.

The $87 million ADR can claim the honour of being the first Asian ADR of 2003 and was two times oversubscribed. The sole bookrunner was Goldman Sachs. The offering was not, however, for new stock but for secondary shares sold by ASE subsidiaries with the proceeds designed to pay down debt.

ASE, which has a $1.8 billion market capitalization, and which traded this afternoon at NT$19.3 is well off its 52 week high of NT$29.1. However, rapid improvements in sentiment and a more favourable view of the tech sector seems to have driven investor demand.

The deal was priced at a 4.17% discount to the underlying, while the stock traded up 4.9% during the day. With the exception of TSMC's deals, the pricing comprised the tightest ADR discount from Taiwan since 2000. Distribution was divided between Asia (40%), Europe (30%) and the US (30%). The deal will markedly help the liquidity of the company's ADR programme. Prior to the deal only 9.5 million ADRs were outstanding, but the float increased to 32.76 million after this deal.

Better news may have attracted some investors. ASE recently reported that its April sales were up 16% on the year to NT$4.3 billion. The company has given second quarter guidance that its utilization rate will rise to 75% for packaging and 65% for testing and based on its current order book will see a gradual improvement in month on month sales in the second quarter.

By product segment, ASE has seen continued strength in the consumer segment (eg DVD, gamebox) and stability in the PC segment (eg graphics and chipsets). Wireless remains delicate. But the company expects gross margin to trend back up to 18% in the second quarter. The company expects full year capex to be between $400-500 million and according to UBSW research, "ASE expects to see a sequential rise in its quarterly revenue in Q3 and Q4 as the outsourcing trend remains on track."

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