Quanta suffers Taiwan tech decline

Taiwanese notebook manufacture cuts GDR sale as stock falls.

Quanta Computer completed a reduced GDR offering after New York's close on Thursday raising $141.06 million pre-greenshoe. Backed by lead manager Morgan Stanley, the company sold 50 million primary shares and 10 million secondary shares, with the addition of nine million secondary shares in the greenshoe. There is a ratio of five shares per GDS unit.

While the lead is said to have had a full order book at less than a 5% discount to spot, the three main selling shareholders decided to pull back because of an 11% decline in Quanta's share over the course of the marketing period. Founder Barry Lam completely withdrew his shares, while president CC Leung and executive vice president Michael Wang, both decided to scale right back.

Nevertheless, the lead was still able to price flat to the stock's NT$80 close on Thursday. Year-to-date, Quanta is up 57.28% and re-bounded on Friday to close at NT$81.5. However, it is now some way down from its year-to-date peak of NT$96 on October 29 and had the deal come just one month ago, few doubt that it would have had hit any road bumps.

Books are said to have closed 1.3 times oversubscribed on the full deal size and about three times covered on the reduced size. Roughly 70 accounts participated, with a geographical split that saw 37% allocated to Asia, 26% to Europe, 20% to the US and 18% other.

At current levels, Quanta is said to be trading at a 20% premium to Compal compared to a peak of 40%.

"Quanta is probably at its lowest level for some time," says one specialist. "It normally trades at a bigger premium to Compal, because its ROE and ROIC are always so much higher."

Quanta's share price decline outpaced the Taiwan market, which fell 3.5% over the course of last week, while the Nasdaq was down 5%.

The company is now trading at 14 times 2004 earnings. Quanta is Taiwan's largest notebook producer, but is also diversifying its revenue stream by moving further into handset and TFT-LCD's. In 2004, the company estimates that 24% of its total revenue will come from other products.

Co-leads on the GDR were Barits Securities and CLSA.