05.14.2001
GVC reports steady orders, but will not shine this year

• Major local handset maker GVC (2322 'Zhi Fu') has confirmed that shipment of GSM handsets to LG (Korea) is scheduled for early 3Q01. The company expects monthly volume of 150k-200k units from 2Q01 onwards. GVC's handset shipment reached around 230k units in 1Q01.

• The company estimates it will ship 1.8m - 2m units in 2001, a target we feel is overly optimistic. In the initial stages of the LG deal, we expect volume will be small as CDMA is still the dominant system in Korea. Also, we do not expect to see significant shipment of GPRS in 4Q01 as planned, and anticipate rollout may even be delayed to early next year.

• GVC's other main business line is communication equipment. In 2001, the company expects broadband ADSL equipment to account for less than 10% of total communication equipment shipment. GVC is trying to keep inventory down by focusing less on high inventory lines such as ADSL equipment. Nonetheless, we believe that the low share of broadband ADSL equipment in total production is mainly due to a lack of orders.

• VB Primasia Investment Opinion We are concerned about the low level of broadband equipment shipment and GVC's achieving its 2001 target on handsets. We are NEUTRAL on this counter.

BennyLo@Primasia.com +886-[0]2-2547-8869