Wintek completes GDR

Taiwan''s largest manufacturer of small screens taps the GDR market.

Wintek, the world's fifth largest producer of small LCD screens for mobile phones and PDA's, returned to the GDR market yesterday (November 4). A $104.8 million deal represented the company's first international capital markets transaction since November 2002 when it raised $58 million via Nomura.

This time round JPMorgan was lead manager of a 20 million unit deal - one unit equals five shares. The transaction was marketed at $5.12 to $5.41 and priced at $5.24.

This represents an 8% discount to the stock's NT$38 close in Taiwan. At first sight, the discount appears fairly steep.

However, this can be explained by the fact that the deal is relatively dilutive (15%) and the stock has outperformed the domestic market. Year-to-date it is up 36.13% and 84.87% on a 12 month basis.

Observers believe the rally still has some way to run since the stock is trading at only 7 times 2004 earnings and 6.4 times 2005, compared to a sector average of about 9 times.

A total of 40 investors participated and fund managers say the order book closed about three times covered. By geography, Asia took 60%, Europe 30% and offshore US 10%.

Part of the rationale for the deal was to expand the group's international shareholder base. Most of the original GDR's are said to have been converted back to domestic stock and pre deal international investors owned roughly 10% of total share capital.

Proceeds are also being used to transform two of the company's six production lines from monochrome to colour technologies. At the end of the third quarter, monochrome screens accounted for 52% of sales compared to 31% for colour screens and 12% TFT-LCD.

Unlike larger panel producers, Wintek is expected to continue registering strong net income growth during the fourth quarter. October sales were up 11.2% on the previous month to stand at NT$3.6 billion and NT24.8 billion year-to-date.

Wintek is the world's fifth largest producer behind Samsung SDI, Royal Philips Electronics, Seiko Epson and Sharp.