Whichever tech gadget you have, you can be sure that at least some parts are ‘Made in Taiwan’. Exports there are booming, as does demand for technology. Having fast-growing economies in Asia contributes to all that. Most of the tech stocks in Taiwan, have not shown any considerable sign of recovery after the 2000-bubble-burst, nevertheless technology world-demand as a whole has increased drastically- we can even say it stands up pretty good against the current economic woes.
One company that I think is undervalued is Advanced Semiconductor Engineering (ASX), a provider of semiconductor packaging and testing services. It had its IPO in late 2000, certainly a bad time for a tech stock, and initially traded at about $6. The stock struggled, and volatility still scares eventual buyers off. It hit a low at the end of 02 at $2.5, and a high in mid-07 at $6.7. Currently trading for little less than $3.8. 2002 revenue was $1.3 billion, and in 2007 it was $3.1 billion. Lots of organic expansion, a clean balance sheet, and limited debt make this stock very attractive for me. The stock is a bargain, trading at a 10 price-earnings-ratio for expected 09 revenues.
Of course in order to invest in a company, it also has to show some sign of future prosperity. In this case there is absolutely no lack of it. The company can only benefit from increasing demand for tech, having to provide more and more tests for the products that leave (and stay in) the country, and having to deliver semiconductors packaging. The tech industry is also switching to a new RAM memory system for computers, called DDR3, replacing the current DDR and DDR2. This type of double-data-rate system requires more testing than the other types of semiconductors, and unlike DDR2, DDR3 is actually proven to higher data throughput and lower current consumption in a noticeable way. Plus, the company will also benefit from a sector switching to new generations of chips, called 18 inch wafers. Those require new tests, too and will benefit a company like ASE that has always been on top, as far as innovation is concerned.
My bet is, to buy this stock either for a long- or short-term investment strategy. Due to lowering commodity/ transportation costs (short-term), increasing consumer spending (in developing countries as well as in others), increasing spending on technology as a percentage of a person’s income, new testing technology and requirements, new semiconductor systems, and hopefully a better relationship between China and Taiwan in the long-term.
