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On 10/20/09, Herman <[email protected]> wrote: > > > > Extracted from Goldman Sach's report dated 20 October 2009: > > > > Expect 4% of industry capacity to be affected for 2-3 months > > Corning announced after the October 19 close (JST) that its glass plant in > Taichung, Taiwan was affected by a power outage. The company previously > expected volume to rise by about 5% qoq in Oct-Dec, but it announced that > because of this incident 4Q volume could remain flat or fall slightly. > Corning is working to assess the specific impact, but our channel checks > indicate that 5 of the plant's 14 furnaces were affected, which we estimate > is about 4% of the LCD glass industry's production capacity, and that these > furnaces will need repairs that will prevent them being restarted for 2-3 > months. > > > > Positive for Asahi Glass/Nippon Electric Glass; neutral for panels > > Two industry implications: > > (1) Impact for glass makers: We think Samsung Corning Precision, Nippon > Electric Glass (5214.T, Neutral; Oct. 19 closing price ¥960), and Asahi > Glass (5201.T, Buy, Conviction List; Oct. 19 closing price ¥794) are likely > to compensate for shipment shortfalls at Corning's Taiwan plant, and that > near-term volume is likely to be slightly higher at each firm. We think > glass supply/demand could be tighter than we previously expected in Oct-Dec > and Jan-Mar. If price declines are smaller, we believe consensus estimates > for glass maker earnings could rise for FY09 and FY10. We think this is > positive news for Nippon Electric Glass and Asahi Glass. We maintain our buy > rating for Asahi Glass, and keep the stock on our Conviction List. (2) > Impact for panel makers: We think LG Display, Samsung and Innolux are less > impacted by this incident. Note that Innolux is sheltered by a guaranteed > supply contract with Corning. We expect panel prices will still hold up in > the next two months, supported by glass supply constraint, and that risk to > our 4Q09 earnings forecast should be on the upside. However, this is not > going to change the industry overcapacity downward trend. We believe the > effect of a seasonal slowdown in demand will still be greater than the > impact of a glass shortage. We retain a Buy on LGD, Neutral on AUO and > Innolux and Sell on CMO. > > > > ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- > > > > Extracted from Danareksa's report dated 29 September 2006: > > > > It's a world-class glass producer with a leading market share. AMFG is a > subsidiary of Asahi Glass of Japan, a major global player in the production > of glass. It commands some 41% capacity share in Indonesia, with over 95% > market share of domestic automotive glass and 40% of flat glass. > > > > AMFG produces two types of glass: > > > > 1. Flat glass > > This product is used in buildings (33%) and the automotive industry (67%). > Capacity utilization is 98%. The product contributes 80% to total sales. > Some 60% of the product is sold to the export market. > > > > 2. Automotive glass > > The product is processed from flat glass. Capacity utilization is around > 85-90%. Some 20% is sold to the export market, and 80% is sold to the OEM > market. The Company's market share in the OEM segment is 95%. It also has > 60-65% market share in the ARG (Auto Repair Glass) market, with the > remainder accounted for by Mulia and other players (Armada, Adiputro, etc). > The main export market is Asia, whereby 20% is sold to the Japanese market. > > > > The Company currently operates four lines of production. It does not plan to > increase the production capacity in the near-term as with only 5% growth in > domestic demand, the management believes that the current capacity will > suffice to meet additional demand. The management estimates that to add one > line of production with capacity of 160,000 metric tons, it would need to > invest some US$60-100mn. > > ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- > > AMFG has just finished its Cold Repair project at F3-Jakarta furnace and > resumed operation on Sep 5, 2009. The repair was initially estimated to take > 6-7 months to complete, commencing on Apr 1, 2009 and to lower production > capacity by 25%. Slightly ahead of schedule. This will only be reflected in > its 4Q09 results. AMFG also diversified into producing high quality flat > glass by adding CVD (Chemical Vapour Deposition) to it's A-2 production line > (furnace) in Sidoarjo, by investing USD 24.52mn. > > > > Back in 2006, Danareksa valued AMFG based on several valuation methods. "On > a DCF screen, assuming 5% terminal growth and 17.6% WACC, AMFG is > theoretically worth in excess of Rp5,000/share. From an NAV perspective, we > reckon it is worth closer to Rp8,500/share. If one takes a more conservative > stance, based on its normalized earnings of some Rp200b, a 10x PER suggests > AMFG is worth Rp4,600/share, which is what our TP is." > > Glass is used in the automotive, property and electronics manufacturing (LCD > TV) sectors. Indonesian proxy of automotive and property sectors like ASII, > CTRA, ELTY and others have rebounded strongly this year. While we can not > say that AMFG deserves the same treatment, at least it is worth to look > into, considering its relatively laggard performance, neglected sector and > very POOR liquidity. AMFG has been out of analysts' and investors' radar for > the past 3 years. Share price reached its record high at Rp 4725 in mid Oct > 2005, Rp 3500 on 31 Jan 2008 and at Rp 1800 as per yesterday's (19 Oct 2009) > close. Some (most likely, individual) investors may have already trimmed > down their positions due to illiquidity and absorbed by value investors whom > have longer investment horizon period. Therefore, we think that liquidity > may improve as and when price heads higher. We may not be surprised to see > that there are not many willing sellers at this level, but we think there > will be willing sellers when the price reaches Rp 2500 and or above. > > AMFG suffered Rp 413mn loss in 1H09 resulting from the Cold Repair and CVD > projects which lowered the company's production by around 25%. 2H09 will > certainly better. AMFG is currently trading at 0.53x of its 1H09 book value > of Rp 3409. 3 years ago, AMFG traded around 1x P/BV. >
