TOKYO Japan Display Inc, the world's biggest maker of screens for tablets and smartphones, set the price of its stock listing at the bottom of its guidance range after foreign investors gave the offering a cool reception.
Japan Display is tapping one of Asia's best-performing stock markets this past year to raise money for capital investment while a government-backed fund cashes out part of its investment. The company priced the offering at 900 yen per share, which puts the offering's total value at 318.5 billion yen ($3.08 billion).
The company also cut the portion of the offering for overseas investors to 37.5 percent from 45 percent, with bankers noting concerns about its heavy dependence on Apple Inc's (AAPL.O) iPhones and iPads, which make up 30 percent of its business, and declining screen prices.
Small and mid-sized screens are typically tailored to individual supply contracts, so prices are difficult to track, but NPD Display Search senior vice president Yoshio Tamura said the average price of five-inch screens for Chinese smartphone makers fell a steep 34.7 percent from March 2013 to February of this year.
He added, however, that the worst appears to be over.
"Since the drop in the latter half of 2013 was so great, we expect the price to bottom out," he said.
Japan Display, formed in 2012 from the merger of struggling display units at Hitachi Ltd (6501.T), Sony Corp (6758.T) and Toshiba Corp (6502.T), last week set a range of 900 to 1,100 yen for the offering as it prepares for a March 19 listing on the Tokyo Stock Exchange.
That had already marked a modest retreat from a reference price of 1,100 yen announced with its original listing plan last month.
CONCERNS OVER OUTLOOK
Japan Display is offering nearly 60 percent of its expanded share capital in the listing, which will also raise 126 billion yen from the sale of new shares, to fund spending on display manufacturing facilities.
The offering will also allow state-backed Innovation Network Corp of Japan, which is selling down its stake to a little over one-third from 86.7 percent, to roughly double its money on its initial investment of 200 billion yen.
The company may issue an additional 16.2 billion yen in shares as an over-allotment, bringing the total value of the offering to about 335 billion yen.
While foreign investors have shown concern about the outlook, for the current financial year to end-March the company is forecasting a sharp jump in operating profit to 30.4 billion yen, up from 1.8 billion yen the year before, due mainly to the startup of its Mobara factory east of Tokyo.
Hiroyuki Fukunaga, chief executive of Investrust, was sanguine about the prospects for the company's business in small screens.
"That market is still expected to grow, so I do expect their sales and profits to grow," he said.
Japan has seen a pickup in share offerings as stock prices have rallied, buoyed by the reflationary economic policies of Prime Minister Shinzo Abe. The benchmark Nikkei average .N225 has surged nearly three-fourths in the past 17 months.
Joint global coordinators for the Japan Display IPO are Nomura (8604.T), Morgan Stanley (MS.N) and Goldman Sachs (GS.N).
($1 = 103.3250 Japanese yen)
(Additional reporting by Dominic Lau and Sophie Knight; Writing by Edmund Klamann; Editing by Christopher Cushing and Matt Driskill)