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   Mar.23, 2015

  •  Taiwan Property & Asset Plays Weekly Briefing
  •  Taiwan Financials Weekly Briefing
  •  Taiwan Airlines Weekly Briefing

  Taiwan Land Development Co. (台開 2841 TT, NR, NT$17.25)  Mar.24, 2015
Unlocking the potential of the company's extraordinary land bank
  • * Company set a record profit last year with gains from land sales and investment property revaluation.
  • * Development of investment properties remains a key growth catalyst as company boasts 225k–ping of land bank with fair value of NT$15bn.
  • * Although it's still unprofitable, the Kinmen BOT project continues to gain traction.
  • * As company launched Hualien development project in partnership with Starwood Group, TLDC’s ongoing transition into a tourism play offers intriguing long-term upside.

  EPISTAR (2448 )    Mar. 18, 2015

  • Despite a 45% earnings miss in 4Q14 resulting from NT$82m ECB valuation loss, Epistar posted a good margin result at 15.2% vs. our forecast of 13.9%. The outperformance was attributed to (1) 2% better than expected sales in 4Q14 thanks to rush orders, and (2) higher sales exposure to lighting and niche products that generally carry better GMs. The impact from better GM was offset by the 33% higher-than-expected op. expenses connected to improving operations at the newly acquired Formosa Epitaxy subsidiary.
  • A weaker than expected 1Q15 only marked a temporary slowdown. We cut our 1Q15 sales estimate by 17% to NT$6.9bn. This adjusted forecast recognizes several factors, including: (1) a low UTR of around 50% across all GaN LED factories in January-February, (2) a weak performance at ForEpi, which is still in a tuning period with monthly sales only 55%-60% of the previous year’s level, and (3) a relatively poor product mix. We therefore also cut our 4Q14 projections of GM/EPS by 2.4 ppt and 42% respectively, to 15.8%
  • Demand for lighting will begin to pick up in 2Q15, earlier than usual. Taiwan's LED players have already observed heating demand from lighting brands in March rather than after mid-year as was the case in past years. Demand for both TV and four-element LEDs is recovering, on top of peak seasonality. We expect Epistar to deliver 40% q-q growth on 80%-90% UTR in 2Q15 and a high GM at 23.6% on the back of higher exposure to lighting (30% of 2015F sales, GM>20%) and four-element LEDs (GM: 20%-40%).
  • Lighting will lead Epistar to a more profitable year in 2015. Epistar is set to deliver higher profitability in 2015 in spite of its conservative expansion plan, which leads us to cut its top and bottom-line forecasts by 16% and 26% for 2015. It will enjoy GM improvements brought by higher sales exposure to lighting and auto LEDs, as well as strong growth in demand for ELC and flip-chip LEDs to new and existing TV clients. We expect its 2015 GM to reach 20.6% (+1.6 ppt y-y) and EPS of NT$2.70.
  • We sustain our LT/ST ratings at "Buy" and target price at NT$69. Our view that Epistar will deliver strong growth in 2015 is unchanged. We believe Epistar has been undervalued and should justify to its ongoing improvement; moreover, a currently undemanding valuation of 1.0x 2015F PBR provides a good entry point. We therefore suggest investors to accumulate on weakness.

Stock Info

 TAIEX 9667.83 
 Electronics Index 389.53 
 Financials Index 1117.99 

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