The Nation



Hana Microelectronics

Enjoying sunshine and tailwinds

Hana Microelectronics Plc (HANA)


- We reiterate our Outperform recommendation on HANA and lift our TP to Bt33.5

from Bt25.0 to reflect the better outlook for global electronics demand and multiple

supportive factors, including the weakening of the THB, capacity addition and

expected insurance claim payment. On a recurring yield of over 6% while trading at

7.7x 2014E PER adjusted for net cash, HANA remains attractively valued, in our view.


- Beneficiary of a well-balanced portfolio. 2014 should be a good year for HANA,

given the upturn in global electronics demand, especially in consumer electronics. A

full-year recovery of its IC business - from the impact of the late-2011 floods - could

leverage HANA further during an upturn, as it benefits from better economies of

scales. At the same time, we expect its microelectronics business to grow steadily

given its relatively high exposure in the non-consumer electronics segment, which

has longer product life cycles and can provide a more stable earnings stream.

- Solid management with strong balance sheet. Despite having net cash

equivalent to about 30% of total market capitalization, HANA's management still

shows a solid track record of delivering strong profitability relative to peers. We

believe this is mainly driven by an ongoing focus on production cost reduction as

HANA essentially positions itself as an outsource production unit of the global OEMs.

- Multiple sweet spots in 2014E. HANA is embarking on a series of capacity

expansions with a m ore than 40percent floor space addition over the next 12 months.

Coupled with the weakening of the THB over the past few months, HANA is

positioned to be a prime beneficiary during an upturn cycle in global electronics

demand. Moreover, HANA expects to receive an additional Bt1bn (Bt1.2/sh)

insurance claim for business interruption from the floods, in 1H14. It is likely HANA

will pay the insurance payment as a special dividend, which would bump up the yield

to over 7% in 2014E.

Earnings and target price revision

- We increase our EPS estimate by 31% in 2014 and 16% in 2015, on better IC and

PCBA outlook. TP is raised to Bt33.5 from Bt25.0. Our TP is now rolled over to end-


Price catalyst

- 12-month price target: Bt33.50 based on a Sum of Parts methodology.

- Catalyst: Increasing yield, tech sector sentiment, tech product life cycle, forex

Action and recommendation

- Maintain Outperform with a new TP of Bt33.5. HANA remains our sector top pick,

trading at 11.2x forward PER in 2014E with over a 7% yield.

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