Primax buoyed by merger benefits

Primax Electronics’ (4915) acquisition of Danish acoustic solution manufacturer Tymphany is beginning to show results and is expected to drive consolidated revenue in 2014 to NT$51 billion and a new record. Primax chairman Liang Li-sheng stated that he hopes the company will become a leader in the high-end mobile acoustics market through Primax’s wireless technologies and integration capabilities coupled with Tymphany’s acoustic technologies. Institutional investors optimistically forecast that, since Primax fundamentals are strong and shares are at their highest since listing, the stock can be expected to move higher in the short-term.

Growth momentum for Primax’s mobile phone component business has been strong this year and aggressive layout in the Chinese market in recent years is bearing fruit. The company has secured relevant lens module orders from ZTE, Huawei, and Xiaomi. Recent market rumors also indicated that Primax will be the primary lens supplier for Amazon’s new smartphone set to be released in June. Institutional investors expect the part of revenue accounted for by lens modules produced for Chinese brands to increase from 30% last year to 50%. With further contributions from U.S. clients such as Amazon and Apple and the restocking season in the latter part of the year, Primax’s consolidated revenue is expected to grow 20% compared to the first half of the year.

Benefiting from growth in wireless acoustic products and camera modules, Primax posted 2014 Q1 consolidated revenue of NT$11.6 billion, for an annual growth rate of 9.64%, consolidated gross profit margin of 12.28%, net income of NT$323 million, for an annual growth rate of 40.35%, and a net income per share of NT$0.75. The company’s consolidated revenue for April was NT$4.67 billion, the highest result since Q4 2011, and a monthly growth rate of 4.41%. Driven by growing camera module and acoustic product shipments, Q2 consolidated revenue is expected to grow compared to Q1 and annual revenue will move up quarter by quarter.

Liang stated that since music sources have become digitized, acoustic products have transformed from living room devices to mobile device peripheral products. In terms of market size, over 2.5 billion mobile device users worldwide, over NT$1.5 billion in new and used mobile devices annually, and a market worth over US$10 billion will assist Primax in capturing a new business opportunities. In addition, mobile phone camera modules account for 25% to 28% of revenue. In the past, Primax supplied overseas brands. This year, China’s high-end brands have been growing very quickly and brands from other countries also have ongoing projects. It is estimated that the camera module business will grow 15% to 20% this year. In the future, Primax is optimistic regarding increasing camera module shipment volume, revenue, and profit.

On May 19, foreign investors purchased 54,000,000 shares of Primax which accounts for 12.5% of the float, attracting a great deal of attention from the market. The market estimates that since the majority shareholder transferred ownership for a price of only NT$34 per share, this transaction seems purely profit-based.

Seven years ago, Primax became the first Taiwan stock to bring in private placement funds to delist in order to break through operational bottlenecks. Two years ago, it relisted after adjusting its financial structure. It was also the first Taiwan stock to relist after delisting. During this time Primax transformed into an international company with a large stake held by foreign investors. Currently, foreign investors hold a 63% stake in the company.