Siliconware Margins Down

Wed. September 03, 2008; Posted: 07:10 AM

Sep 03, 2008 (Zacks Investment Research via COMTEX) -- SPIL | Quote | Chart | News | PowerRating -- Siliconware Precision Industries Co., Ltd.'s (SPIL) results for the second quarter were worse than our estimates. We are discouraged to see capacity utilization falling below 95% for most business divisions, which is a cause of concern. The company has increased its Capex budget for 3Q08 although is experiencing severe pricing pressure in its memory testing business. There is an indication of further erosion in gross and net operating margins in 2008 due to reduction in average selling prices in all three segments computing, communication and consumer. It is for this reason that we lowered our revenue estimates while lowering our earnings estimate of 2008. We were shocked by the revenue weakness due to its dependence on its top customers and the uncertainty in global financial markets has not left much upside to the stock, in our opinion, at this time. It is for this reason that we are maintaining our Hold rating on shares of SPIL. Shares of Siliconware Precision Industries are currently trading at 12.5x our 2008 earnings estimate of $0.55 and 8.8x our new 2009 estimate of $0.78. We have fixed our price target at $7.20 based on the company selling between 13.0x 13.2x our new 2008 EPADR estimate of $0.55, and we will have more visibility after 3Q08. We still expect the company to outperform its peers, but believe that growth for the company and industry as a whole has started to slow, and a P/E in this range better reflects the uncertainty in the market over the coming quarters. Udayan Mukherjee contributed to the report. Read the full analyst report on SPIL

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For full details on Siliconware Precision Industries Company Ltd. ADS (SPIL) click here. Siliconware Precision Industries Company Ltd. ADS (SPIL) has Short Term PowerRatings of 4. Details on Siliconware Precision Industries Company Ltd. ADS (SPIL) Short Term PowerRatings is available at This Link.

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