Taiwan Executive Forum

Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: HSBC Securities (Taiwan) Corporation Limited View HSBC Global Research at: https://www.research.hsbc.com MiFIDII–ResearchIsyouraccessagreed?CONTACT us today  HSBC’s Taiwan Executive Forum takes place on 23-24 May at the Grand Hyatt in Taipei  Nineteen corporates are attending, represented by senior management  This report includes profiles of all presenting companies Following up on the success of our Taiwan Executive Forum in March 2016, this year’s event incorporates a half day of presentations by industry experts and managers across a variety of sectors followed by a day of small group meetings. We bring together leading business minds to help you find new opportunities. The Forum provides a platform for Taiwan executives and senior management to communicate their business strategies and industry outlook to institutional investors. We look forward to your participation. 18 May 2017 John Chung* Head of Research, Taiwan HSBC Securities (Taiwan) Corporation Limited john.chung@hsbc.com.tw +8862 6631 2868 Steven C Pelayo, CFA Head of Technology Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited stevenpelayo@hsbc.com.hk +852 2822 4391 Kailesh Mistry*, CFA Head of Financials Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited kailesh.mistry@hsbc.com.hk +852 2822 4321 Parash Jain* Head of Transport Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited parashjain@hsbc.com.hk +852 2996 6717 *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations Taiwan Executive Forum EQUITIES TAIWAN 23-24 May – Taipei  EQUITIES ● TAIWAN 18 May 2017 2 Stocks under coverage 3 Aspeed (5274 TT) 4 Catcher (2474 TT) 6 Cathay FHC (2882 TT) 8 Chailease Holding (5871 TT) 10 Chroma ATE Inc (2360 TT) 12 Compal Electronics (2324 TT) 14 Formosa Petrochemical (6505 TT) 16 Fubon FHC (2881 TT) 18 KYEC (2449 TT) 20 MediaTek (2454 TT) 22 Merry Electronics (2439 TT) 24 Nan Ya Plastics (1303 TT) 26 Silergy Corp (5274 TT) 28 Simplo Technology (6121 TT) 30 UMC (2303 TT) 32 Stocks not under coverage 34 All Ring Tech (6187 TT) 35 AU Optronics (2409 TT) 36 U-Ming Marine (2606 TT) 37 Wan Hai Lines (2615 TT) 38 Disclosure appendix 40 Disclaimer 43 Contents  3 EQUITIES ● TAIWAN 18 May 2017 Stocks under coverage  EQUITIES ● TAIWAN 18 May 2017 4 Aspeed (5274 TT) Business description  Aspeed is the largest global supplier of baseboard management controllers (BMCs) in the world, mainly for remote control of status parameters on servers at a different physical location from IT personnel. Key points  Stronger-than-expected demand: Management’s revenue growth guidance is 10-15% q-o-q on its BMC sales for 2Q17. Supply shortage is no longer an issue, and therefore Aspeed could meet strong demand from its key data centre clients. With strong demand, we expect Aspeed’s data center revenue to increase by double digit in 2017e and >25% in 2018e due to share gains on the new Purley platform.  Robust margin to continue: Aspeed’s gross margin on PC/AV products was in the range of 80-90%. In mid-2015, Aspeed launched its second generation PC/AV extension chip for indoor signage. With the instalment of the new chip to continue, management expects the exposure to second-generation chip within its PC/AV extension sales to go up to 60-65% for 2017, which should bode well for further margin expansion in its PC/AV product group.  New products launch: Aspeed unveiled a new solution for Internet cafés – individual PCs in an Internet café could be located in a centralised room outside the café for benefits such as efficient use of energy, easier maintenance/upgrade and lesser thefts/damage to PCs. We estimate revenue contribution from this new product to reach 2% for Aspeed in 2018e. Valuation and risks  Our TP of TWD571 is based on a PEG of 0.93x (average from May 2013 (IPO), which is equivalent to a 30.5x 2017e PE. We continue to like the hybrid cloud exposure of Aspeed and its promising outlook on the PC/AV product. However, we believe the shares look fully valued at the current level and offer limited upside. Therefore, we rate the stock Hold. Upside risk to our view: better-than-expected public cloud demand. Downside risk: the trend of OEMs to use their in-house BMC. HOLD TARGET PRICE (TWD) 571.00 MARKET DATA SHARE PRICE (TWD) UPSIDE/DOWNSIDE Market cap (TWDm) 22,165 Free float 76% 655.00 -12.8% Market cap (USDm) 734 BBG 5274 TT 3m ADTV (USDm) 3 RIC 5274.TWO (as of 12 May 2017 ) FINANCIALS AND RATIOS (TWD) 52-WEEK PRICE (TWD) Year to 12/2016a 12/2017e 12/2018e 12/2019e HSBC EPS 14.05 18.75 23.39 26.53 Consensus EPS 13.23 17.75 22.65 25.21 PE (x) 46.6 34.9 28.0 2