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UBS Investment Research
Asia Tech Strategy
Too early to like PCs
Remaining negative on PC ODMs and switching Least Pref stocks
We replace Quanta with Compal in our Least Pref. list. Arthur Hsieh and Patrick
Chen downgraded Compal to Sell. Key –ve catalysts are exposure to Acer (c40%
of Compal's NB shipments) given its –ve pre-announcement; weight on margins of
diversification towards tablet PCs (c20% of R&D effort) which may not yield
significant revs (key customers are Acer and Lenovo); exposure to Japan for TV
shipments (50% of total); some disruption on power mgmt IC sourcing side (TI).
PC outlook remains challenging
Acer –vely preannounced indicating 1Q11 revs could drop below 10% QoQ due to
Europe and US weakness. Prior guidance was +3%. OM could fall below 2% vs.
guidance 2.8-2.9%. Guidance is flat PC shipments in 2Q. Some recovery in China
Sell In over past 2wks, alongside Sandy Bridge related channel refill seems
insufficient. Japan-related supply issues could mount and component px become
less favourable. Only support is valuation, corp demand and some China recovery.
Remaining cautious on Asia Tech - prefers Wireless, Memory and LCD
Asia Tech has underperformed Asia MSCI by 5% since late Jan - decent correction
but not sharp enough to ignore fundamental risks. The sector remains valued at
14.1x '11E PE with downside risks due to PC demand, margins pressure and
uncertainty over Japan. Supply-driven sectors such as LCD and Memory are
exception as for both, supply/demand is improving into 2Q.
Most and Least Preferred
Most Pref: Catcher, HTC, Lenovo, LGD, Samsung and TPK. Least Pref. ASMPT,
FIH, HCL, LG Innotek, SPIL and now Compal.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia Tech Strategy
Too early to like PCs
Remaining negative on PC ODMs and switching Least Pref stocks
We replace Quanta with Compal in our Least Pref. list. Arthur Hsieh and Patrick
Chen downgraded Compal to Sell. Key –ve catalysts are exposure to Acer (c40%
of Compal's NB shipments) given its –ve pre-announcement; weight on margins of
diversification towards tablet PCs (c20% of R&D effort) which may not yield
significant revs (key customers are Acer and Lenovo); exposure to Japan for TV
shipments (50% of total); some disruption on power mgmt IC sourcing side (TI).
PC outlook remains challenging
Acer –vely preannounced indicating 1Q11 revs could drop below 10% QoQ due to
Europe and US weakness. Prior guidance was +3%. OM could fall below 2% vs.
guidance 2.8-2.9%. Guidance is flat PC shipments in 2Q. Some recovery in China
Sell In over past 2wks, alongside Sandy Bridge related channel refill seems
insufficient. Japan-related supply issues could mount and component px become
less favourable. Only support is valuation, corp demand and some China recovery.
Remaining cautious on Asia Tech - prefers Wireless, Memory and LCD
Asia Tech has underperformed Asia MSCI by 5% since late Jan - decent correction
but not sharp enough to ignore fundamental risks. The sector remains valued at
14.1x '11E PE with downside risks due to PC demand, margins pressure and
uncertainty over Japan. Supply-driven sectors such as LCD and Memory are
exception as for both, supply/demand is improving into 2Q.
Most and Least Preferred
Most Pref: Catcher, HTC, Lenovo, LGD, Samsung and TPK. Least Pref. ASMPT,
FIH, HCL, LG Innotek, SPIL and now Compal.
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