Industry riding upward cycle again

Rebounding telecommunications and automotive sectors a boon for electronics exports

Thanks to a solid rebound in the global semiconductor industry, Thailand's export-oriented electronics companies are expected to register double-digit sales and profit growth this year.

After the cyclical downturn in the past few years, electronics firms posted a sharp increase in revenue in 2002 fourth-quarter earnings, as exports received a boost from healthy growth in the telecommunications and automotive sectors.

Among the eight SET-listed electronics firms, L.E.K. Consulting has analysed and ranked the companies to determine total shareholder returns, or TSR, of one, three, five and 10 years.

The best performer for shareholder returns was Cal-Comp Electronics (Thailand) Plc, with gains of 34.5% on a one-year basis, with a market capitalisation of 9.97 billion baht, compared with the sector average of one-year yields of 6.3% on market capitalisation of 56.36 billion baht.

Delta Electronics (Thailand) Plc, the largest firm in terms of market capitalisation, at 32.38 billion baht, scores 5.8% for one-year TSR, slipping to -2.9% for three-year TSR but regaining lost ground in the five-year TSR with 10.3%.

Circuit Electronics Industry Plc produced the poorest total shareholder return over one year, at -39.6% on 342 million baht in market capitalisation. Hana Microelectronics Plc, capitalised at 10.19 billion baht, registered -7.9% for one-year TSR. Hana's three-year TSR is -7.4% but the five-year yield has been a respectable 8.7%.

That said, Draco PCB Plc, capitalised at only 312 million baht, delivered a one-year return of 40.6%. Three- and five-year yields stood at 4% and 8.3%.

Cal-Comp's sales rose 12.45% year-on-year on revenues of 25.23 billion baht in the first nine months of last year. Net profit rose 6.85% to 1.29 billion baht and earnings per share increased to 4.29 baht from 4.02 baht.

According to Steve Yeh, finance controller of the Taiwan-based electronic products giant, Cal-Comp expects revenue to maintain growth levels of 15% to US$870 million (about 36.97 billion baht) this year, bolstered by diversification into telecoms with a new mobile-phone factory in China.

Cal-Comp is looking to raise revenue derived from the telecom sector to 60% this year from 28%. The firm's factory, its first in mainland China, in Suzhou which will make CDMA handsets, is projected to generate up to $20 million in its first year of operations. The plant, scheduled to open in the second quarter this year, will be the first of five planned in China to feed the booming mainland telecom market.

Delta, the manufacturer of power-supply units, flat-screen LCD monitors and DC fans for computer and telecom equipment, forecasts revenue sales to rise 5% to $950-$970 million this year, up from $944 million last year.

The company expects upward of 10% growth next year from continuing demand for telecom equipment and consumer electronics devices. Kulwadee Kawayawong, an executive in the Delta president's office, said the company was concentrating on developing a new range of high-end products as well as exploring new markets in Europe and Asia excluding China.

``We will avoid a dip in [the] PC [market] and stiff competition in low-end products this year, in order to overcome the competition from China where [there is a] cheaper production base,'' she said.

Ms Kulwadee said Delta expected another repeat of healthy sales with a shift in focus to higher value-added products and improved margins. It also aims to reduce the proportion of its US sales to 50% this year from 60%.

Hana Microelectronics, meanwhile, expects double-digit sales this year spurred by increasing demand for integrated circuits products, according to chief executive Richard Han. Last year, Hana realised sales of eight billion baht, up from 6.78 billion in 2001.

Higher revenue would also be helped by cost-cutting measures such as the relocation of manufacturing facilities from Ohio in the United States to Hana's plant in Ayutthaya and shifting some product lines to Shanghai from the Lamphun plant.

An industry analyst at SCB Securities projects flat revenue growth for the electronics sector in the first half of this year as a result of jitters over a US-led war against Iraq.

However, electronics firms are likely to see a significant increase in second-half earnings _ provided the US-Iraq war is short-lived _ on robust demand for telecoms equipment and industrial electronic devices.

Overall, investors in the electronics sector scored better with short-term plays than over the long term, where the TSR seeps into negative territory.

While one-year yields stand at 6.3%, three-year (-8.1%), five-year (-7.6%) and 10-year (-7.26%) TSR figures suggest that investors' funds could have been better utilised elsewhere in the long run.

_ Srisamorn Phoosuphanusorn

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