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IPad Demand May Spur `Panel King' TPK to Double After Initial Share Sale

By Tim Culpan - 2010-10-28T17:08:04Z

TPK Holding Co.’s stock may double within 12 months after trading begins on the Taiwan Stock Exchange today, driven by rising demand for Apple Inc.’s iPad and iPhone, according to analyst estimates.

TPK, the largest supplier of touch-panels, priced its initial public offering of shares at NT$220 each on Oct. 22. The stock may rise to NT$512, according to the median of estimates from SinoPac Financial Holdings Co., CLSA Asia Pacific Markets and four other brokers surveyed by Bloomberg News. Freddie Liu, the Taipei-based company’s chief financial officer, declined to comment on the estimates.

TPK, which says it gets 70 percent of its sales from Apple, plans to use the NT$6.2 billion ($201 million) raised to more than double capacity for making iPad panels. Shares of Wintek Corp., TPK’s nearest rival, have climbed 84 percent this year after surging more than fourfold last year.

“TPK really is the ‘Touch Panel King,’ and it will be hard for others to catch up in the short term,” said Calvin Shao, who rates the stock “buy” at SinoPac Securities Co. “Touch panels have the greatest momentum in the technology industry and TPK has the best technology.”

The company says its projective-capacitive touch technology, which it invented, is quicker and more accurate than the alternatives, according to its website. TPK was originally an acronym for touch, point-of-sale and kiosks, said Liu, referring to what were once its products’ major uses.

First iPhone

Work with Apple to develop touch-panel screens began in 2004, culminating with the release of the iPhone three years later, said Chairman Michael Chiang, who was in the audience when Apple Chief Executive Officer Steve Jobs unveiled his company’s smartphone in January 2007.

“People say that without TPK, there’d be no iPhone; in fact, without the iPhone, TPK wouldn’t be here today,” Chiang said at a press briefing in Taipei yesterday. “Initial development took nearly three years and a lot of effort.”

Jill Tan, a Hong Kong-based spokeswoman for Apple, declined to comment.

TPK will spend as much as $70 million to expand capacity for the 10-inch touch screens used in the iPad to 3 million units per month by June, from 1.2 million now, Liu said. It will increase monthly capacity for the 3.5-inch screens used in iPhones to 10 million from 7 million, he said.

The company will also use the IPO proceeds to pay debt, Liu said.

iPad Growth

Apple sold 7.5 million iPads in the financial year ending Sept. 25, with that figure to triple to 23.9 million next year, according to estimates from William Fearnley Jr, an analyst at Janney Montgomery Scott LLC. IPhone shipments may climb 34 percent to 53.4 million units, he wrote in an Oct. 19 report.

“TPK has dominated the market in recent years, but competition is increasing,” said Eric Kao, an analyst at KGI Securities Co. in Taipei, who doesn’t have a rating on the stock.

Kao said TPK will supply about 50 percent of iPhone touch panels this year, with Wintek and Chimei Innolux Corp. supplying the rest. Those two companies and Samsung Electronics Co. may take market share from TPK as they develop their own technologies, he said.

TPK’s sales for the first nine months of 2010 more than doubled from a year earlier to NT$13.4 billion, with net income climbing 67 percent to NT$2.6 billion, the company said in a statement yesterday.

Earnings per share this year may be NT$20, increasing to NT$30 next year, according to the median estimate of five analysts surveyed by Bloomberg News. That puts the median price estimate at 17.1 times estimated 2011 earnings, compared with the 12-times estimate for Wintek, according to Bloomberg data.

“TPK is in a great position to defend its relationship with Apple and benefit from Apple’s steady stream of electronics products,” said SinoPac’s Shao. “Because of their market share, TPK’s stock price deserves the price premium.”

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.