Flex PCB remains the most investable
theme for 2012; OW(V)-rated Flexium is
our preferred play
 Neutrals with a twist: TV demand
recovery to help Tripod; HDI capacity
overload could hurt Unimicron
 PC demand at Nanya PCB weaker than
expected, downgrade to UW from N
Still riding the flex wave. We continue to see flex PCB as
the most investable theme in the PCB space in 2012. We
believe that concerns over the sustainability of market share
gains are unwarranted, given the large opportunity. Despite
the recent gains, both Flexium and Career Tech still have
only 2.8% and 4.2% global market share, respectively. That
said, with both stocks up more than 30% in the month ahead
of the Lunar New Year break (Taiex up just 9% over the
same period), we see potential for the shares to consolidate
when trading restarts. However, with greater further upside
to our estimates, we would buy Flexium on weakness.
Neutral ratings with a twist. We remain Neutral on Tripod,
Unimicron and Kinsus, but we see Tripod as better
positioned to benefit from a secular rebound in LCD TV
demand (20% of total revenue), which could help the
company grow revenue by more than the 3% expected by
consensus. Conversely, we see increasing risks for
Unimicron, as large chunks of HDI capacity continue to
come online (particularly at Ibiden) and ASP pressure
remains intense. We continue to expect profitability
challenges at Kinsus’s conventional PCB arm (Piotek) as the
key hurdle to turning more positive on the stock.
Downgrade Nanya PCB to UW from N. We believe that
company-specific issues are leading to dramatic declines in
PC-related demand at Nanya PCB. We expect 1Q12 revenue
to decline by 24% q-o-q (consensus: -7% q-o-q) and for
2012 EPS to turn negative for the first time ever. While we
expect the company to return to profitability in 2013, the
lack of earnings in 2012 leads us to apply a 1x book value
multiple. Our target price is now TWD55, down from
TWD89, based on the end-2012e book value.