Electron Sector

Recovery signal seen in orders

Electron Sector

Book-to-bill ratio recovers for consecutive 2 months

SEMI book-to-bill ratio in December 2012 has been reported at 0.92x,

increasing for consecutive 2 moths due to the demand for semiconductor

equipment in December 2012 that has risen by 28.6% MoM (but decreasing by

16.2% YoY) to US$924.1m. Meanwhile, the supply has increased only by

10.6% MoM (but dropping by 22.6% YoY) to US$10.1bn. The increase of SEMI

book-to-bill ratio (leading indicator of electronics industry) during the past 2

months has shown the recovery signal of the global demand for electronics

devices, in line with the global economy that has already improved more stably.

This is under our expectation of the overall look of semiconductor business in

2013 that would brighten due to continuous growth of consumption. In 2013,

the growth of semiconductor sales all over the world is projected at 4.5% YoY,

recovering from 2012 with 3.2% YoY deceleration (reference: the WSTS, World

Semiconductor Trade Statistics).

Positive sentiment from book-to-bill ratio to help offset short-term effect from THB appreciation

The increased SEMI book-to-bill ratio is considered a positive sentiment for 6

companies of the electronics part sector under our coverage, especially HANA

and SMT with revenue from IC packaging business of around 30% and 5% of

the total revenue respectively. The sector's operating result (extraordinary

revenue from flood insurance not included) in 2013 is projected to recover

constantly by 28% YoY due to the following supports. 1) The electronics

industries all over the world that tend to recover in 2013. 2) The return of full

production capacity of those factories damaged by the flood crisis. 3) The

operating expenses that has decreased to normal level due to no expenses in

factory restoration after passing the flood crisis. Nevertheless, investors should

keep an eye on the risks from THB that is likely to appreciate continuously

which would affect sales of companies under our coverage since the revenue is

mostly in a form of international currencies (mainly USD) while some expenses

are in form of THB. At present, THB stands at B29.97/USD which is slightly

lower than our assumption (B30/USD). From our study, B1 of appreciation

would result in 3.4% decrease in our 2013 profit forecast of the electronics part

sector.

Maintain "Neutral"… choosing DELTA as top pick

We reiterate our recommendation of "Neutral" for the electronics part sector,

choosing DELTA (BUY, FV@B36) as a top pick since it's a big cap with 2013 PER

at only 10.16x which is lower than the sector's average at 11.12x. Moreover,

investors can count on the dividend yield at B1.7/share (payment once a year),

considered 5% p.a.