* Shares rise 7 pct daily limit for 2nd day, bouncing from
* Company to sell shares overseas, could raise up to $350
* Demand strong for high-definition panels, requires tech
* Panel maker to cut capex, forgo dividend
By Faith Hung
TAIPEI, Feb 19 AU Optronics' plans to
raise as much as $350 million in an overseas share issue sparked
a surge in its shares, signalling that strong demand for
high-definition displays in tablets and TVs is breathing new
life into the loss-making panel maker's fortunes.
Shares in the Taiwanese company, which supplies screens for
Apple Inc's iPad mini, surged their 7 percent daily
limit for a second day in a row on Tuesday after it announced
plans to sell 640 million to 800 million shares as American
depositary receipts (ADRs).
"It's urgent and necessary for AU to raise the funds to
upgrade its technology," said Oscar Chung, a fund manager at
Capital Securities Investment Trust in Taipei, pointing to
rising demand for high-definition panels.
"This year will be the first in a few years that sees the
industry's gap between demand and supply narrowing," said Chung,
who manages $372 million and has been accumulating AU shares
The company did not put a figure on how much it aimed to
raise or how the money would be used, saying only that proceeds
from the sale will be used for raw material purchases. At AU's
latest share price, the issue could raise up to $350 million.
The company earlier this month posted a net loss for a
second year in a row in 2012 as panel oversupply weighed on the
The loss forced it to forgo a dividend payment, which it
announced along with the rights issue late on Monday. It also
said it would cut its capital expenditure budget by T$8.6
billion ($290 million).
"The cut in capex is in line with their peers in Taiwan. In
the past 10 years capex was for new capacity, but the industry
is in an oversupply situation now," said one technology analyst
at a European bank.
"They don't need to build capacity, the money should be
spent on new technology," the analyst said.
"The operating cash flow is improving and they should be
able to pay down debt. They are in a better financial position
compared with previous years so they should be able to negotiate
new loans and be in a better position to raise money in the
market as their customers are top-tier names, including Apple."
The company has T$77 billion cash in hand, which is more
than enough to cover short-term debt of T$54 billion out of
total borrowings of T$220 billion.
AU's stock has bounced more than 15 percent from a
three-month low hit late last week, as its prospects brighten.
It nevertheless is virtually flat with its level at the start of
last year, compared with a nearly 15 percent rise in Taiwan's
Its convertible zero coupon convertible bonds due in 2015
, while trading below par at $94/94.75, have
recovered from their June low of $76 as confidence improves in
its debt-servicing ability. The convertible bonds now trade like
straight debt as they are far out of the money.