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Shares of E Ink rebound, but demand concerns may cap gains

2012/06/20 12:11:25

Taipei, June 20 (CNA) Shares of E Ink Holdings Inc., one of Taiwan's leading electronic paper display (EPD) suppliers, staged a strong rebound Wednesday after a recent sell-off following disappointing first quarter results, dealers said.

The current rebound may be short-lived, however, because strong competition from tablet computers and Apple's iPad could continue to limit EPD demand and E Ink profits even as the industry enters the third quarter, its peak season, dealers said.

As of 11:36 a.m., shares of E Ink had added 4.52 percent to NT$31.25 (US$1.05) with 8.63 million shares changing hands. The index of the over-the-counter market, where the stock is traded, was up 0.53 percent at 105.08 points.

"The stock suffered tremendous downward pressure in recent sessions. It seems that its low valuation is propelling bargain hunters to act now," Horizon Securities analyst Benson Huang said.

The company's shares had fallen more than 12 percent as of Wednesday since E Ink announced its worse-than-expected first quarter results in late April.

E Ink reported a net loss of NT$787 million, or a loss per share of NT$0.73 for the quarter, compared with NT$1.28 billion in net profit, or earnings per share of NT$1.19, recorded in the fourth quarter of 2011.

"The sell-off has made the stock appear attractive, and that's why some foreign institutional investors have called for investors to take advantage of the share price," Huang said.

According to Credit Suisse, E Ink has been included on its buy list on expectations that the stock will make a comeback due to its low valuation.

"But investors should trade the stock with caution as uncertainty over global demand for EPDs remains in place," Huang said.

Huang said E Ink's first quarter results did surprise the market, saying that the company had been expected to post earnings per share of NT$0.4-NT$0.5 by taking into account inventory adjustments by its major customers, in particular Amazon.

Earlier this week, E Ink told its shareholders that demand is expected to recover in the second half of this year as the business enters its peak season, but Huang had his doubts.

"I am not that upbeat as demand for EPDs is still facing strong competition from tablet computers and Apple's iPad," Huang said. "It's possible E Ink will suffer a 10-15 percent decline in its average selling price for 2012 from a year earlier."

"The stock remains shadowed by market uncertainty. I expect the share price may face stiff resistance as it moves closer to around NT$32.6 over the next few sessions," he said.

(By Frances Huang)