Taiwan Top 50 Corporates: Survey – Trends & Outlook Tony Tsai, Director Taiwan Ratings

Taiwan Top 50 Corporates: Survey – Trends & Outlook

Tony Tsai, Director

Taiwan Ratings

Sep. 8, 2005

2

Who Are In The Top 50

Computer hardware/Peripheral

Acer, BenQ, Delta Electronics, Foxconn Technology, LITE-ON IT, MiTAC, Tatung

Electronic contractmanufacturer

Hon Hai, Inventec Appliances, Lite-On Technology, UniversalScientific

Electronic distributor Synnex, World PeaceMotherboard Asustek, Micro-StarNotebook PC Quanta Computer, Compal Electronics, Inventec, WistronTFT-LCD AUO, CMO, CPT, QDIAuto Hotai Motor, China Motor, Yulon MotorAirlines China Airlines, Eva AirwaysOil CPC, Formosa PetrochemicalPetrochemical Formosa Plastics, Nan Ya Plastics, Formosa Chemicals &

Fibre, Chi MeiPower Taiwan PowerRetail President Chain StoreSemiconductor TSMC, UMC, ASE, Powerchip, PromosShipping Evergreen Marine, Yang Ming Marine, Wan HaiSteel China Steel, Yieh United, Chunghung SteelTelecom Chunghwa Telecom, Far EasTone Telecom, Taiwan Mobile

3

Top 50 Sector Breakdown

Oil4%

Petrochemical/Plastics

8%

Semiconductor10%

Shipping6%

Auto6%

Steel6%

Aviation4%

Others4%Telecom

6%

Electronics46%

4

Top 50 Electronics Sector Breakdown

ElectronicContract

Manufacturer17%

ComputerHardw are/

Components/Peripherals

30%

Notebook PC17%

Electronicsdistributor

9%

TFT-LCD17%

Motherboard9%

5

Taiwan Top 50 Companies

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

2000 2001 2002 2003 2004 2005 (F)

Net

Inco

me

(NT$

bil)

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

GD

P (%

)

Net Income (NT$ bil) GDP (%)

Top 50 Corporates' Total NetIncome & GDP Growth

6

Key Findings

Taiwan top 50 reported record high aggregated profits in 2004

Taiwan top 50 profitability trend in line with Taiwan’s GDP growth

High-tech sector has the highest and the lowest operating margins

Auto sector has the lowest leverage ratio ， while airlines sector has the highest leverage ratio

Majority of Taiwan 50 companies had adequate to strong financial ratios and good cash balances in 2004

Old economy sector had very favorable industry conditions in 2004

Semiconductor and TFT-LCD sectors had down cycle since 2H2004

Electronics sector still faces pricing and margin pressure

7

Earnings cycle had peaked, slowdown in 2005

Taiwan top 50 aggregated earnings expected to decline 29% in 2005

Slowing economic growth in the globe and in Taiwan

High oil price impact and cool down measures in China

Old economy sector faces less favorable pricing environment in 2005

TFT-LCD and semiconductor sectors will report biggest profit declines

But leading players among top 50 will maintain sound financial ratios

Clear divergence of operating performance because of size

Stalemate of cross straits relations constrains long-term growth and could undermine long-term competitiveness

Investors and bankers should watch out for weak players in the high-tech sector

8


Pretax and EBITDA Interest Coverage

0.0

5.0

10.0

15.0

20.0

2000 2001 2002 2003 2004

Med

ian

Pret

ax In

tere

stC

over

age

(x)

0.0

5.0

10.0

15.0

20.0

25.0

Med

ian

EBIT

DA

inte

rest

cove

rage

(x)

Median pretax interest coverage (x) Median EBITDA interest coverage (x)

9


55.9

29.9

44.3 49.446.4

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2000 2001 2002 2003 2004

Median FFO/ Total debt(%)

10


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2000 2001 2002 2003 2004

Med

ian

RO

PC

(%)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Med

ian

oper

atin

g m

argi

n (%

)

Median ROPC (%) Median Operating margin (%)

ROPC and Operating Margin

11


30.032.029.9

36.2

28.8

0.05.0

10.015.020.025.030.035.040.045.0

2000 2001 2002 2003 2004

Median Total debt/capital(%)

12

Operating Margin Comparison

7.9

5.3

7.66.2

5.2

16.6

12.5

17.115.6

19.2

0

5

10

15

20

2000 2001 2002 2003 2004

Med

ian

oper

atin

g m

argi

n (%

)

Electronics companies Non-electronics companies

13

EBITDA Interest Coverage Comparison

8 7.6

16.8

20.9 21.4

8.8

4.8

8.2

13.6

23.7

0

5

10

15

20

25

2000 2001 2002 2003 2004

Med

ian

EBIT

DA

Inte

rest

Cov

erag

e (x

)


14

FFO/Total Debt Comparison

41.2

59.8

50.3

60.8

51.5

64.7

44.6

32.5

26.5

54.8

20

40

60

80

100

2000 2001 2002 2003 2004

Med

ian

FFO

/Deb

it (%

)


15

Total Debt/Capital Comparison

28.4

31.9

24.2 24.8

30.128.8

36.2

29.932

30.0

10

20

30

40

50

2000 2001 2002 2003 2004

Med

ian

Deb

t/Cap

tial (

%)


16

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2000 2001 2002 2003 2004

Med

ian

Ope

ratin

g M

argi

n (%

)

Computer Hardware/Components/Peripherals Electronic Contract ManufacturerMotherboard Notebook PC

TFT-LCD

Operating Margin Comparison-Electronics Sector

17

0.05.0

10.015.020.025.030.035.040.045.050.055.0

2000 2001 2002 2003 2004

Med

ian

Deb

t/Cap

ital (

%)

Computer Hardware/Components/Peripherals Electronic Contract Manufacturer Motherboard Notebook PC TFT-LCD

Debt to Capital Comparison-Electronics Sector

18

Who Has The Highest Interest Coverage?

50 150 250 350 450 550 650 750 850 950

Delta Electronics Inc.

China Steel Corporation

Hon Hai Precision Industry Co.

Foxconn Technology Co.

Powerchip Semiconductor Corporation

Taiwan Semiconductor Manufacturing Co.

LITE-ON IT Corp.

Yulon Motor Co. Ltd.

Asustek Computer Inc.

Chunghwa Telecom Co. Ltd.

(x)

The highest EBITDA interest coverage in 2004

>1,000

851.5

296.3

123.4

74.9

60.9

61.2

59.1

68.2

87.6

19

Who Has The Lowest Interest Coverage?

8.2

5.4

5.4

5.0

1.4

0 2 4 6 8 10

Taiwan PowerCompany

Eva AirwaysCorp.

World PeaceIndustrial Co.

ChinaAirlines ,Ltd.

Tatung Co.

The lowest EBITDA interest coverage in 2004

(x)

20

Who Has The Highest Operating Margin?

30.4

32.1

39.1

46.9

48.2

51.6

53.4

55.2

61.3

61.5

0 10 20 30 40 50 60 70

Chi Mei Optoelectronics Corp.

AU Optronics Corporation


Far EasTone Telecom. Co. Ltd.

Taiwan Mobile Co.

Promos Technologies Inc.

United Microelectronics Corp.

Chunghwa Telecom Co.

Powerchip Semiconductor Corp.

Taiwan Semiconductor Manuf. Co. Ltd.

The highest operating margin in 2004

(%)

21

Who Has The Lowest Operating Margin?

3.8

3.7

2.7

2.6

2.5

2.5

2.2

1.9

1.9

0.7

0.0 1.0 2.0 3.0 4.0

Inventec Appliances Corporation

BenQ Corp.

Hotai Motor Co.

Micro-Star International Co.

Acer Inc.

World Peace Industrial Co.

Synnex Technology InternationalCorporation

Wistron Corporation

Inventec Corporation

Tatung Co.

The lowest operating margin in 2004

(%)

22

Who Has The Largest Cash Balances?

36

36

38

43

44

47

50

65

105

128

10 30 50 70 90 110 130

Lite-On Technology Corporation

Powerchip Semiconductor Corporation


Quanta Display Inc.

Chunghwa Picture Tubes,Ltd


Quanta Computer Inc.




The largest cash on hand in 2004

(NT$ bil.)

23

Who Had The Largest Total Debt In 2004?

59

60

64

67

73

74

116

141

151

568

Formosa Chemicals & Fibre Corporation



Formosa Plastics Corporation



Nan Ya Plastics Corporation

China Airlines ,Ltd.

Formosa Petrochemical Corp.

Taiwan Power Company

(NT$ bil.)

24

Who Had The Largest FFO in 2004?

39

40

40

54

62

66

68

80

92

160

10 60 110 160

Chinese Petroleum Corp.










(NT$ bil.)

25

Who Has The Lowest FFO/Total Debt?

14.8

14.0

10.4

7.5

-1.1

2 0 2 4 6 8 10 12 14 16

Eva AirwaysCorp.

Taiwan PowerCompany

World PeaceIndustrial Co.

ChinaAirlines ,Ltd.

Tatung Co.

The lowest FFO/total debt in 2004

(%)

26

Who Has The Highest Leverage?

46.6

48.8

51.0

51.4

51.5

51.9

52.6

54.8

62.3

72.8

0 10 20 30 40 50 60 70 80

Quanta Display Inc.

Chung Hung Steel Corporation

Advanced Semiconductor Engineering Inc.

Eva Airways Corp.

Wan Hai Lines Ltd.

Yieh United Steel Corporation


Eva Airways Corp.


China Airl ines ,Ltd.

The highest total debt/ total capital in 2004

(%)

27

Who Are The Most Profitable?

28.0

29.8

31.8

36.4

41.3

43.5

49.9

50.3

51.6

92.3

0 10 20 30 40 50 60 70 80 90 100


Hon Hai Precis ion Industry Co.




Nan Ya Plastics Corporation



China Steel Corp.


The most profitable in 2004

(NT$ bil.)

28

Who Are The Most Profitable?

8.5

13.0

16.3

17.3

20.6

23.5

24.3

30.8

32.8

35.2

0 5 10 15 20 25 30 35 40

Asustek Computer Inc.

Chinese Petroleum Corp.

Hon Hai Precis ion Industry Co.


Nanya Plastics Corporation




China Steel Corp.


The most profitable in 1H2005

(NT$ bil.)

29

Who Are The Least Profitable?

0.1

0.1

-8.4

-7.4

-1.2

-1.7

-3.7

-3.7

-1.7

-9.2

10.0 8.0 6.0 4.0 2.0 0.0

Universal Scientific Industrial Co.


Promos Technologies Inc.




Tatung Co.


Quanta Display Inc.

Advanced Semiconductor Engineering

The least profitable in 1H2005

(NT$ bil.)

30

Standard & Poor’s Ratings Matrix

Financial Profile

Business Profile Minimal Modest Intermediate Aggressive Highly leveraged

Excellent AAA AA A BBB BB

Strong AA AA A- BBB- BB-

Satisfactory A BBB+ BBB BB+ B+

Weak BBB BBB- BB+ BB- B-

Vulnerable BB B+ B+ B B-

31

Taiwan Ratings Corporate Ratings List

Issuer Taiwan Ratings Corp. Standard & Poor's

Rating Outlook Rating Outlook

Chunghwa Telecom Co. Ltd. twAAA Stable AA- Negative

Taiwan Semiconductor Manufacturing Corp. twAAA Stable

China Steel Corp. twAAA Stable

Chinese Petroleum Corp. twAAA Stable A+ Stable

Taiwan Power Co. twAAA Stable A+ Negative

Taiwan Cellular Corp. twAA Stable

Far EasTone Telecommunication Co. Ltd. twAA Stable BBB+ Stable

Hon Hai Precision Industry Co. Ltd. twAA Stable BBB+ Stable

United Microelectronics Corp. twAA Stable BBB+ Stable

Mai-Liao Power Corp. twAA- Stable

Formosa Chemicals & Fibre Corp. twAA- Stable BBB+ Stable

Formosa Petrochemical Corp. twAA- Stable BBB+ Stable

Formosa Plastics Corp. twAA- Stable BBB+ Stable

32



Rating Outlook Rating Outlook

Nan Ya Plastics Corp. twAA- Stable BBB+ Stable

Wan Hai Lines Ltd. twA+ Stable BBB Stable

Ho-Ping Power Co. twA+ Stable

Compal Electronics Inc. twA+ Stable BBB- Stable

Nan Ya Printed Circuit Board Corp. twA+ Stable

Taiwan Sugar Corp. twA+ Stable

Chi Mei Corp. twA Stable

Yangming Marine Transport Corp. twA Stable

Taiwan Acceptance Corp. twA Stable

Yulon Motor Co. Ltd. twA Stable

Asia Cement Corp. twA Stable

Yuan Ding Investment Corp. twA Stable

BenQ Corp. twA Negative

33



Unimicron Technology Corp. twA- Positive

Cathay Real Estate Development Co., Ltd. twA- Stable

Nanya Technology Corp. twA- Stable

Fortune Motors Co. Ltd. twA- Stable

Carplus Auto Leasing Corp. twA- Stable

Shinshin Credit Corporation twBBB+ Stable

Long Bon Development Co., Ltd. twBBB+ Stable

China Airlines twBBB Stable

Advance Data Technology Corporation twBBB- Stable

Yageo Corp. twBB+ Stable

Ritek Corp. B+ Stable

Macronix International Co., Ltd. B Negative

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Taiwan Top 50 Corporates: Survey – Trends & Outlook Tony Tsai, Director Taiwan Ratings

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