06.01.2001
Declining trend for cable modem

• Prices for cable modems have seen substantial decline in 1Q01and 2Q01. A serious inventory backlog has plagued the industry sending prices 20-30% below last year's figures. We anticipate prices for cable modem to settle at US$90-108 by end 2Q01.

• Although we estimate the industry inventory problem to take at least 6 months to clear market leaders such Askey (2366 'Ya Xu') and Turbo (unlisted) will experience a limited impact. Both companies have strong shipment growth that will help compensate for price declines while they should also benefit declining component costs.

• We anticipate Askey to ship 550-600,000 units (verses company forecast of 1m units) of cable modems in 2001, and combined with the backing of new US client Scientific Atlanta, we expect solid performance. The first four months have already seen Askey ship around 110,000-120,000 units, which we feel this is in line with our forecast.

• VB Primasia Opinion: Askey priced at P/E 24x forecasted 2001 EPS. While most of the other downstream manufacturers are currently trading at P/E of around 20x, we believe Askey is slightly overvalued and recommend REDUCE for the time being.

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