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Johnny Chen
(886 2) 2175 7059 13 November 2008
B N P P A R I B A S – M A R K E T O U T L O O K
Solar energy’s growth outlook will be hurt by cutbacks in European ZTE 763 HK 17.20 3,062
Samsung Elec. 005930 KS 474,500 60,692
governments’ subsidies and rising inventories.
Source: BNP Paribas estimates
last survivor standing as it’s the only player capable of spending on Source: BNP Paribas estimates
Exhibit 1: US Debt Payment As % Of Disposable Income Exhibit 2: US Consumer Spending Is Coming Down
(%) (y-y %)
15 6
5
14
4
13 3
2
12
1
11
0
10 (1)
1986 1991 1996 2001 2006 2011 1991 1994 1997 2000 2003 2006
Sources: ALFRED; BNP Paribas Sources: Bureau of Economic Analysis; BNP Paribas
Judging by the consensus 2009 earnings growth forecast for US and Asian tech
companies, one would have to conclude that tech analysts are still expecting the
current recession to be short-lived, similar to the last two recessions in 1991 and 2001.
However, with both housing prices and equities tumbling significantly, the ‘wealth
effect’ on consumer spending is likely to be more pernicious and protracted than the
two previous recessions. More importantly, the risks remain high that the de-leveraging
process could turn into a vicious loop between the real economy and financial
institutions if consumer and corporate loan defaults start to rise again, causing fragile
financial institutions to turn even more cautious in lending.
Exhibit 3: 2008 And 2009 Consensus EPS Growth For World Semi And Asia-Ex-JP IT Sectors
(%)
World Semiconductors sector Asia-ex-Japan IT sector
40
32
30
20 14
10
(10)
(20)
(22)
(30) (25)
2008 2009
2 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
As an example, US GDP at USD3.5t is still about 3.8x the size of China’s at USD3.5t.
To offset every one percent of contraction in US consumer activities (making up for
about 70% of US GDP), a nine percent rise in Chinese consumer activities (~30% of
China’s GDP) is needed. For a country with high savings rate like China, a sharp
increase in spending could be quite challenging in an environment where consumer
sentiment is weakening.
In addition, aside from China, which has been running a huge trade surplus against the
US, most other major emerging economies are seeing depreciation in their currencies.
Given that most tech products are made outside of these emerging economies and
transactions are normally denominated in US dollars, the imported price of tech
products have – in effect – been rising rather than declining.
Exhibit 4: Relative Performance Against USD For Brazilian, Indian, And Russian Currencies-
Past Four Months
(%)
Brazilian Indian Rupee Russian Ruble
5
(10)
(25)
(40)
01-Jul 01-Aug 01-Sep 01-Oct 01-Nov
Finally, certain consumer technology products, most noticeably mobile phones, have
reached very high penetration rates in emerging economies. We would expect
replacement demand to decline as people hold onto their old devices rather than
purchase new ones. This trend should favour tech products, which have low
penetration rates and acceptable prices, such as low-cost notebook PCs.
3 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
(%)
PC Handset
120
108
78
80
58
43
40
20
17 16
8
0
Asia/Pacific Latin America Eastern Europe Worldwide
Our preference among different sectors is based on five factors – growth potential,
valuation, operating leverage, consensus 2009 earnings growth expectations, and
financial leverage.
Secular growth potential – Sectors that can grow the top line by 20%+ in the current
environment are likely to see above-average returns in their share prices. Sectors
relying more on new demands instead of replacement demands should have a better
chance to achieve high growth rates, as the replacement cycle will inevitably
lengthened during the downturn. High-priced consumer items such as TFT TVs may
also see depressed demand. We see low-cost NB PC, LED, and smartphones as the
products having the most growth potential in 2009.
Operating leverage – Earnings for sectors with high operating leverage are the most
vulnerable in the downturn. The table below compares depreciation as a percentage of
COGS (cost of goods sold) for the 10 sectors. Foundries, TFT, DRAM, IC backend and
LED are most operationally leveraged. IC design, solar, hardware are the least
leveraged.
4 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
(%)
45 42
37
30
21 21 20
15
4
2 0 0
0
Foundry DRAM Packaging LED TFT Solar Handset PC ODM IC design
Financial leverage – Sectors with high gearing or long cash conversion cycles (CCC)
should be avoided during the downturn, particularly with lenders increasingly reluctant
to lend and equity and bond markets becoming difficult to access. The DRAM sector is
in the most serious trouble by far, while risks are also rising for TFT companies.
Based on these five criteria, we come out with our preference among the 10 tech
sectors, also highlighting companies we like or dislike within each sector. The
preference is summarized in the table below:
5 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
PC – Shares of major PC vendors and ODMs continue to fall sharply along with the
rest of tech. However, we continue to like notebook PC-related plays because
valuation is extremely attractive and the growth outlook, while not great, remains better
than other consumer-related tech products, due to still low penetration rate of notebook
PCs in emerging markets. Notebook-related companies in general have low operating
and financial leverage. Consensus expectation for 2009 earnings growth has been
recently lowered, though further revision is still possible.
Fabless – Neutral on this sector. No catalyst as most product-end markets will have
lacklustre growth, if any, in 2009. Valuation remains attractive only for Realtek and
Novatek. Issue for MediaTek is whether its customers can further increase handset
penetration rates in emerging markets outside of China despite the economic downturn.
Most IC design companies are cash rich and should be able to offset some pricing
declines by extracting wafer price concessions from the foundries. Earnings
expectation risk is medium.
Foundry – The sector basically reflects overall tech demand because of the diversity
of its customer base, particularly TSMC. Biggest risk is still high 2009 earnings
expectation for TSMC even after recent adjustments. High operating leverage means
significant drop in fab loading will bring larger-than-expected drops in margins. M&A of
smaller foundries with weak balance sheet is increasingly likely.
Solar – Our channel checks suggest that demand for solar cells is turning weaker
worldwide, due to cutbacks in governments’ subsidies – especially in Europe.
Inventories have been rising and the spot-wafer price has more than halved from the
peak level. Strong supply growth over the past year suggests that pricing could be
under further pressure. The situation may be improved if governments worldwide
increase subsidies on renewable energy as part of overall fiscal stimulus package, as
US president-elect Obama has promised to do.
LED – Valuation has become more attractive and with the LED penetration rate in
notebook PC likely to rise in 2009, we believe risk and reward of investing in LED
companies has turned more neutral. Competition from AUO’s and CMO’s LED
business unit could take time because AUO and CMO are likely to turn more
conservative in expanding their new LED business amid a sharp TFT downturn.
IT services – This sector stands out as having the highest direct revenue exposure to
financial institutions worldwide. Our Indian IT analyst Abhiram Eleswarapu estimates
that 40% of TCS’ sales come from financial institutions, 30% for Infosys, and 20-25%
for Wipro and Satyam. One would have thought that the high sales exposure would
lead to a very conservative forecast for IT service providers’ 2009 earnings growth.
However, the growth expectation at about 10% y-y is higher than all other tech sectors
6 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
in aggregate. Downward revision risk is therefore high especially with sector valuation
remaining at 13x P/E of a high 2009 EPS.
DRAM – Consolidation should take between second-tier Taiwanese players and Elpida.
However, a consolidation may not help solving the chronic oversupply problem. With
PC demand likely to be skewed toward less memory-intensive notebook and netbook
in 2009, memory requirement could fall, exacerbating a devastating oversupply
situation.
In total, Taiwanese banks have loaned approximately USD13b to the three major local
DRAM makers, we believe the Taiwan government will not likely jeopardize financial
institutions by having DRAM makers declare bankruptcy. In a recent legislative
session, cabinet members from Ministry of Economic Affairs were asked by legislators
on ways to avoid DRAM companies’ bankruptcies. It appears that, besides providing
the short-term lending to DRAM makers to maintain their daily operations, the longer-
term solution government seeks is to consolidate the industry, either among local
DRAM makers or tie-up with one of large foreign players.
We believe the most sensible solution is to have Powerchip, or both Powerchip and
ProMOS, merge with Elpida in Japan. Elpida has aggressively targeted an increase in
its share in the DRAM market, while maintaining an impressive technology portfolio.
Elpida already has a 50:50 12-inch fab joint venture with Powerchip and had
expressed interests to invest in ProMOS early this year when ProMOS needed the
funding. One of ProMOS’ big shareholders, UMC, has a strong relationship with Elpida,
evidenced by HeJian’s DRAM cooperation with Elpida in China. As much as ProMOS’
and Powerchip’s management would like to retain the independence, time could be
running out for independence to be an option. We believe a two-way or three-way
merger would also require government funding supports (by Taiwanese and Japanese
governments) as Elpida’s own balance sheet is quite weak as well.
If consolidation occurs and the number of DRAM players globally shrink, will this help
DRAM industry’s long-term profit outlook? We remain sceptical as DRAM industry’s
past consolidations have not led to a less competitive and less volatile environment. In
fact, over the years, losses accumulated have probably widened as the capex required
for advanced technologies continue to climb fast while DRAM prices remain distressed
most of the time. There is no sign these trends will change over the next few years.
Even with fewer players in the market, each of the surviving firms will compete
aggressively to gain market share.
7 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
BBG Share Target Mkt Rep — growth — — Rec P/E — – Div yield – –— ROE –— — P/BV — equity
code Rec price price cap curr ‘08E ‘09E ‘08E ‘09E ‘08E ‘09E ‘08E ‘09E ‘08E ‘09E ‘08E
(LC) (LC (m) (%) (%) (x) (x) (%) (%) (%) (%) (x) (%)
Foundry
TSMC 2330 TT Hold 43.2 45 34,096 TWD (4.8) (25.2) 10.9 14.6 6.9 6.9 22.1 14.0 2.0 2.0 (6.6)
UMC 2303 TT Hold 8.4 8.8 3,362 TWD (93.4) 359.6 116.4 25.3 9.1 — 0.4 2.1 0.5 0.5 (10.6)
Vanguard 5347 TT Buy 8.5 13.95 442 TWD (53.7) 16.2 7.3 6.2 20.1 9.7 8.5 9.5 0.6 0.6 (13.0)
Chartered Semiconductor CSM SP Hold 0.2 0.23 389 USD — — — — — — (6.2) (19.7) 0.3 0.3 88.0
SMIC 981 HK Red 0.2 0.36 372 USD — — — — — — (3.8) (1.4) 0.1 0.1 16.9
IC backend
Advanced Semiconductor 2311 TT Hold 11.4 15.3 1,940 TWD (28.3) (8.2) 7.1 7.8 15.3 9.5 11.8 10.7 0.8 0.8 42.1
Siliconware Precision 2325 TT Red 29.9 23 2,867 TWD (47.2) (25.1) 10.0 13.4 15.9 7.5 14.4 11.5 1.5 1.5 (21.4)
Phoenix Precision 2446 TT Red 8.5 15 177 TWD (51.7) 32.0 9.6 7.2 6.6 6.1 5.3 6.8 0.5 0.5 28.2
Nanya PCB 8046 TT Red 78.7 68 1,482 TWD (19.3) (31.7) 7.1 10.3 15.8 11.5 18.5 13.2 1.4 1.4 (17.6)
Powertech Technology 6239 TT Hold 50.9 47.12 978 TWD (10.6) (17.1) 4.8 5.8 4.8 6.2 32.5 22.0 1.4 1.2 37.8
Memory
Samsung Electronics 005930 KS Hold 474,500.0 610,000 60,692 KRW (10.3) 0.0 11.9 11.9 1.5 1.5 12.5 11.6 1.4 1.3 (14.4)
Hynix Semiconductor 000660 KS Buy 11,150.0 21,000 3,848 KRW — — — 7.1 — — (44.0) 13.3 1.0 0.9 81.0
Powerchip Semiconductor 5346 TT Red 3.8 3.16 908 TWD — — — — — — (53.5) (99.0) 0.5 1.5 151.4
Nanya Technology 2408 TT Red 5.7 4.75 804 TWD — — — — — — (65.4) (145.6) 0.8 5.3 202.1
ProMOS 5387 TT Red 2.0 1.69 416 TWD — — — — — — (49.3) (105.8) 0.3 1.0 152.8
IC design
MediaTek 2454 TT Hold 250.5 312 7,963 TWD (34.2) 13.4 11.7 10.3 7.8 5.1 24.4 25.1 2.7 2.5 (53.5)
Realtek 2379 TT Buy 42.0 66 579 TWD 8.5 8.0 9.3 8.6 5.5 6.0 11.9 11.9 1.1 1.0 (29.5)
Novatek 3034 TT Hold 33.8 46 586 TWD (44.4) (8.7) 4.3 4.7 26.6 15.2 27.1 26.6 1.3 1.3 (30.5)
Sunplus Technology 2401 TT Red 13.5 10.2 235 TWD (72.1) 3.4 13.1 12.7 19.3 5.4 4.4 4.3 0.6 0.5 (2.9)
Richtek Technology 6286 TT Red 141.0 140 561 TWD (24.7) 8.5 12.5 11.5 1.3 1.5 33.7 33.0 4.2 3.5 (23.6)
Spreadtrum Communications SPRD US Red 1.2 1 57 USD (83.1) (51.2) 14.1 29.0 — — 1.9 0.7 0.2 0.2 (67.6)
Ralink Technology 3534 TT Buy 91.0 119 288 TWD (30.1) 11.1 10.2 9.1 5.6 3.9 27.1 27.4 2.8 2.3 (60.8)
TFT
LG Display 034220 KS Hold 24,000.0 30,000 6,456 KRW 33.7 — 5.1 — — — 18.8 (10.6) 0.8 0.9 (3.4)
AU Optronics 2409 TT Hold 22.3 30 5,779 TWD (35.5) — 5.0 — 10.4 5.1 12.1 (5.1) 0.6 0.7 33.3
Chi Mei Optoelectronics 3009 TT Hold 11.6 16 2,582 TWD (54.8) — 5.0 — 3.9 3.5 7.9 (13.4) 0.4 0.5 81.3
EMS/ODM
Hon Hai Precision 2317 TT Hold 67.3 78 15,204 TWD (17.9) (7.3) 7.6 8.2 3.8 4.4 16.1 13.5 1.2 1.1 (4.2)
Wistron Corp 3231 TT Buy 28.4 38 1,312 TWD 3.2 (0.1) 5.8 5.8 8.2 8.2 20.3 18.0 1.1 1.0 33.2
Compal Electronics 2324 TT Buy 22.8 25 2,732 TWD (5.1) (8.8) 6.8 7.5 10.3 9.0 16.4 14.3 1.1 1.0 (27.0)
Quanta Computer 2382 TT Hold 37.2 34 4,136 TWD 9.1 (19.7) 6.7 8.3 7.8 8.9 20.4 15.3 1.3 1.3 (33.8)
Foxconn Int'l 2038 HK Buy 2.7 6 2,464 USD (45.3) 44.0 6.2 4.3 — — 11.1 13.8 0.6 0.6 (14.6)
BYD Electronic 285 HK Red 2.8 3 808 RMB (29.2) (4.5) 7.1 7.5 — — 14.1 11.4 0.9 0.8 (29.0)
Samsung SDI 006400 KS Red 67,800.0 72,000 2,405 KRW — — — — 0.9 0.9 (3.7) (2.9) 0.7 0.7 3.1
Humax 028080 KS Red 7,030.0 10,000 148 KRW 30.8 31.3 9.4 7.1 2.1 2.1 5.0 6.3 0.4 0.4 13.2
PC
Acer Inc 2353 TT Buy 49.2 56 3,962 TWD (10.4) 9.3 10.3 9.5 6.7 6.5 15.8 16.4 1.6 1.5 (14.0)
ASUSTeK Computer 2357 TT Buy 43.0 58 5,556 TWD (11.2) (1.4) 7.2 7.3 5.1 5.9 13.4 12.2 0.9 0.9 (20.0)
Simplo Technology 6121 TT Buy 87.0 146 553 TWD 10.7 15.3 7.8 6.7 5.1 5.8 25.2 24.6 1.8 1.5 (38.9)
8 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
Components
AAC Acoustic Technologies 2018 HK Buy 3.6 6.3 581 RMB 23.3 15.3 5.8 5.0 — — 23.4 21.7 1.2 1.0 (33.0)
Sunny Optical 2382 HK Buy 0.6 0.8 71 RMB (62.4) 13.4 5.7 5.0 3.5 4.0 6.4 6.8 0.4 0.3 (36.6)
LED
Epistar Corp 2448 TT Red 30.5 30.4 577 TWD (59.8) 3.2 19.0 18.4 3.9 3.6 4.2 4.3 0.8 0.8 (7.9)
Everlight Electronics 2393 TT Red 47.3 43.7 486 TWD (39.3) (19.2) 12.5 15.4 6.2 4.2 12.1 9.3 1.5 1.4 (12.7)
Seoul Semiconductor 046890 KS Buy 10,300.0 19,000 393 KRW (0.6) 133.4 29.1 12.5 0.4 0.4 9.7 19.9 2.7 2.3 (29.0)
Solar
Gintech Energy 3514 TT Red 101.5 195.1 461 TWD 215.6 (25.7) 7.2 9.6 9.9 8.9 30.0 21.0 2.1 2.0 56.4
Motech Industries 6244 TT Hold 85.8 121.4 652 TWD (22.0) 2.9 8.6 8.3 7.0 5.8 17.9 17.0 1.5 1.4 (22.1)
Sino-American Silicon Prod 5483 TT Hold 70.0 162.1 422 TWD 9.9 (11.8) 6.9 7.9 12.9 10.0 32.1 27.0 2.2 2.1 32.2
Solargiga Energy 757 HK Buy 2.3 4.02 458 RMB (51.5) 28.4 7.0 5.5 3.6 5.5 33.3 25.4 1.5 1.3 (50.3)
Others
Uchi Technologies UCHI MK Buy 1.0 2.03 104 MYR (26.7) 4.2 6.4 6.1 15.7 16.3 32.6 33.6 2.1 2.1 (87.4)
SEMCO 009150 KS Red 39,000.0 25000 2,275 KRW (27.1) 63.9 36.8 22.5 1.3 1.3 4.1 6.5 1.5 1.4 18.0
ASM Pacific 522 HK Buy 24.3 33.5 1,222 HKD (9.7) (40.3) 8.3 13.8 9.9 5.8 46.1 25.5 3.6 3.4 (37.2)
9 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
IC backend
Advanced Semiconductor 2311 TT TWD 11.4 1.5 1.1 (34.9) (22.8) 99,260 92,418 (1.9) (6.9)
Siliconware Precision 2325 TT TWD 29.9 3.1 2.8 (46.8) (9.5) 63,794 62,364 (3.6) (2.2)
Phoenix Precision 2446 TT TWD 8.5 0.8 1.0 (53.8) 20.2 13,365 12,923 6.5 (3.3)
Nanya PCB 8046 TT TWD 78.7 11.4 11.6 (18.2) 1.7 39,463 38,841 (1.8) (1.6)
Powertech Technology 6239 TT TWD 50.9 10.5 10.7 na 1.8 31,451 35,617 na 13.2
Memory
Samsung Electronics 005930 KS KRW 474,500.0 41,183.7 39,659.9 (16.8) (3.7) 75,401,335 81,304,370 (23.5) 7.8
Hynix Semiconductor 000660 KS KRW 11,150.0 (7,714.4) (297.7) (1,123.1) (96.1) 7,141,091 7,297,548 (17.4) 2.2
Powerchip Semiconductor 5346 TT TWD 3.8 (5.0) (3.3) 211.8 (33.4) 61,591 66,307 (20.6) 7.7
Nanya Technology 2408 TT TWD 5.7 (6.8) (4.3) 135.5 (37.5) 40,416 47,972 (25.7) 18.7
ProMOS 5387 TT TWD 2.0 (3.8) (2.1) 243.8 (45.3) 35,194 42,390 (26.5) 20.4
IC design
MediaTek 2454 TT TWD 250.5 21.0 23.9 (34.9) 13.8 94,042 104,017 16.6 10.6
Realtek 2379 TT TWD 42.0 3.3 4.3 2.0 29.6 17,866 18,468 13.0 3.4
Novatek 3034 TT TWD 33.8 7.1 5.6 (49.2) (20.1) 27,950 25,801 (22.7) (7.7)
Sunplus Technology 2401 TT TWD 13.5 0.9 0.8 (73.1) (11.4) 7,067 6,458 (64.9) (8.6)
Richtek Technology 6286 TT TWD 141.0 10.8 12.1 (20.6) 12.2 7,172 8,158 18.3 13.7
Spreadtrum Commun SPRD US USD 1.2 0.0 0.1 na 460.0 123 139 na 13.7
Ralink Technology 3534 TT TWD 91.0 8.9 9.0 (23.6) 1.0 4,909 5,504 27.7 12.1
TFT
LG Display 034220 KS KRW 24,000.0 5,221.3 1,643.9 39.0 (68.5) 16,115,949 16,069,911 12.3 (0.3)
AU Optronics 2409 TT TWD 22.3 4.8 (1.2) (30.0) (124.0) 454,958 365,085 (5.3) (19.8)
Chi Mei Optoelectronics 3009 TT TWD 11.6 2.5 (3.4) (50.6) (237.7) 335,151 287,113 10.8 (14.3)
EMS/ODM
Hon Hai Precision 2317 TT TWD 67.3 8.9 9.8 (16.7) 9.1 1,847,007 2,062,852 8.5 11.7
Wistron Corp 3231 TT TWD 28.4 5.1 5.4 10.6 7.7 429,293 522,250 49.7 21.7
Compal Electronics 2324 TT TWD 22.8 3.4 3.4 (5.6) 0.7 430,088 470,081 (13.7) 9.3
Quanta Computer 2382 TT TWD 37.2 5.4 5.1 3.9 (5.3) 844,372 886,996 8.6 5.0
Foxconn Int'l Holdings 2038 HK HKD 2.7 0.1 0.1 (39.8) 1.6 11,086 12,290 3.3 10.9
BYD Electronic Int'l 285 HK HKD 2.8 0.6 0.7 (3.8) 22.9 9,994 14,692 73.3 47.0
Samsung SDI 006400 KS KRW 67,800.0 2,462.2 4,035.0 (117.6) 63.9 5,011,238 4,837,192 (2.7) (3.5)
Humax 028080 KS KRW 7,030.0 740.2 1,286.3 220.4 73.8 600,275 667,441 (18.5) 11.2
PC
Acer Inc 2353 TT TWD 49.2 4.9 5.4 (9.1) 9.8 582,632 652,311 26.1 12.0
ASUSTeK 2357 TT TWD 43.0 6.2 6.1 (9.4) (1.6) 595,598 611,429 (21.2) 2.7
Simplo Technology 6121 TT TWD 87.0 11.1 12.3 5.1 10.8 30,792 37,050 33.4 20.3
10 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
Components
AAC Acoustic Technologies 2018 HK HKD 3.6 0.6 0.6 29.3 11.0 2,514 2,884 28.8 14.7
Sunny Optical 2382 HK HKD 0.6 0.1 0.1 (62.8) 21.5 1,333 1,543 (3.6) 15.8
LED
Epistar Corp 2448 TT TWD 30.5 1.5 1.9 (60.8) 22.2 11,205 11,742 9.8 4.8
Everlight Electronics 2393 TT TWD 47.3 5.0 4.6 (22.6) (7.0) 11,533 12,316 13.6 6.8
Seoul Semiconductor 046890 KS KRW 10,300.0 271.7 542.0 (23.7) 99.5 300,549 396,742 13.8 32.0
Solar
Gintech Energy 3514 TT TWD 101.5 16.8 22.4 341.1 32.8 18,649 30,812 173.1 65.2
Motech Industries 6244 TT TWD 85.8 10.6 13.5 1.0 27.9 24,446 30,318 55.9 24.0
Sino-American Silicon Prod 5483 TT TWD 70.0 10.2 11.8 16.9 16.1 9,752 12,993 34.5 33.2
Solargiga Energy 757 HK HKD 2.3 0.3 0.4 (54.0) 49.3 1,649 2,725 62.4 65.2
Others
Uchi Technologies UCHI MK MYR 1.0 0.2 0.2 (16.7) (0.6) 132 131 (15.6) (1.1)
SEMCO 009150 KS KRW 39,000.0 1,082.1 1,661.1 (26.0) 53.5 3,326,185 3,572,391 (5.5) 7.4
ASM Pacific 522 HK HKD 24.3 3.0 2.4 (7.5) (19.1) 5,625 5,030 4.3 (10.6)
11 BNP PARIBAS
JOHNNY CHEN ASIA TECH STRATEGY 13 NOVEMBER 2008
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only to “major institutional investors’ (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended)
and is not intended for the use of any person or entity that is not a major institutional investor. Major institutional investors receiving
this report should effect transactions in securities discussed in the report through BNP Paribas Securities Corp. BNP Paribas
Securities Corp. is a member of the New York Stock Exchange, the National Association of Securities Dealers and the Securities
Investor Protection Corporation. Reproduction, distribution or publication of this report in any other places or to persons to whom such
distribution or publication is not permitted under the applicable laws or regulations of such places is strictly prohibited.
Information on Taiwan listed stocks is distributed in Taiwan by BNP Paribas Securities (Taiwan) Co., Ltd.
Distribution or publication of this report in any other places to persons which are not permitted under the applicable laws or regulations
of such places is strictly prohibited.
BNP Paribas and/or its affiliate(s) had an investment banking relationship with Solargiga Energy and ZTE Corporation within the past
12 months.
BNP Paribas and/or its affiliate(s) makes a market in the securities of Chartered Semiconductor and Foxconn International Holdings.
Recommendation structure
All share prices are as at market close on 10 November 2008 unless otherwise stated. Stock recommendations are based on
absolute upside (downside), which we define as (target price* - current price) / current price. If the upside is 10% or more, the
recommendation is BUY. If the downside is 10% or more, the recommendation is REDUCE. For stocks where the upside or downside
is less than 10%, the recommendation is HOLD. In addition, we have key buy and key sell lists in each market, which are our most
commercial and/or actionable BUY and REDUCE calls and are limited to at most five key buys and five key sells in each market at
any point in time.
Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility
may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
*In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst
doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target
price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current
market price and our assessment of current fair value.
12 BNP PARIBAS