SINGAPORE Better than anticipated quarterly results from assembly and test firms STATS ChipPAC and United Test and Assembly Center (UTAC) signal further growth ahead for both firms, analysts said Oct. 31.
STATS ChipPAC reported a third quarter loss of $1 million on Oct. 27, compared to a loss of $7.4 million for the same period in 2004, and forecast a return to profit in the fourth quarter.
Despite the modest loss, industry analyst Jonathan Koh of UOB Kay Hian Securities said the company's performance "exceeded expectations" and was a sign the firm was "finally getting some synergy from the merger" that created it last August, when Singapore's ST Test and Assembly Services and U.S.-based ChipPAC joined forces in a deal worth $1.2 billion.
"The company is growing its business without significantly increasing its costs," Koh said. "The [fourth quarter] guidance is surprising, but it does seem to be attracting more customers and looks set to ramp up production."
On Oct. 26, UTAC posted record profits of $10.5 million for the third quarter, almost tripling its earnings year-on-year. The firm expects its profits to rise up to 15 percent by the end of 2005.
Koh attributed the company's strong growth to its "very good set" of memory and mixed signal offerings.
UTAC "is gaining market share in both; the memory side is doing very well. It has capacity constraints but there's also quite a good flow of customers on the mixed signal side, especially in MP3s and Bluetooth," he added. "We expect the company will do even better in Q4 as it always delivers on its guidance."
Terence Wong, chief investment analyst at SIAS Research, said the results showed both firms were "on the mend" after mergers that took an initial toll on shareholder value.
"There's a rising tide [in the industry] that's lifting all boats," he added, "All of it driven by the consumer sector."