Wintek re-opens Taiwanese GDR market

Nomura completes the first GDR from Taiwan in over six months.

A 14 million unit offering was priced at New York's close Wednesday raising $53.7 million for a manufacturer which makes small LCD screens used in mobile phones and PDA's. Pricing came at $3.835 representing a 20% discount to the stock's NT$33.2 close, or a 16% discount to a 20-day moving average.

With one unit equating to five shares, the company issued a total of 70 million new shares equal to 16% of its enlarged share capital. Yuanta Securities was co-lead with Barits Securities and ING as co-managers. There is also a 10 million share greenshoe.

The company used a recent rally in its share price as the springboard to launch a deal, which has been two years in the making. ABN AMRO initially had the mandate and pre-marketed a 40 million share GDR offering in Septmember 2000, at a time when Wintek's share price was trading around the NT$110 level. However, the deal failed to get off the ground following a sudden downturn in the Taiwanese tech sector and this summer the mandate was handed to Nomura.

For the Japanese securities house, the deal is an important one. According to Dealogic figures, it has now overtaken Goldman Sachs as the biggest lead manager of Taiwanese GDR's since the market's inception in the early 1990's.

For investors, the main question would have been whether the recent bull run in the company's stock price can continue. The stock is now up 20.70% year-to-date compared to a 15.95% decline in the Taipei weighted index. But, observers say the company is still trading on a price to book valuation of only 1.6 times forward earnings against a historic low of 0.8 times and high of 10 times.

Books are said to have closed two times oversubscribed after an accelerated 12-hour marketing period. About 40 investors participated, of which the vast majority were new to the stock and three put in orders for more than 10%. By geography, the book split Asia 50%, Europe 40% and the US 10%.

The equity story is being driven by a turnaround in profitability during the third quarter and push into China where the company established manufacturing facilities last year. In the past, analysts say Wintek's fortunes were closely tied to its largest customer Motorola. Now however, China's largest mobile manufacturer TCL has displaced Motorola as the company's largest client and recently it also added the PRC's other top two manufacturers to its client list as well.

Proceeds from the deal are being used to fund the expansion of its higher margin colour screen display facilities. For the first nine months sales are up 26% year-on-year to NT$5.1 billion ($146.5 million). During the second quarter, the company posted a net loss of NT$47 million, but this was overturned by an NT$84 million profit in the third.

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