AU Optronics Corp. (ADR) (AUO)

chouhung (99.24) Submitted: 4/22/08 10:16 AM : Start Price: $19.00 AUO Score: -8.63

Earnings for Q1 just announced today (4/22), earnings of $1.12 per ADR topped expectations of $0.52, primarily due to cost containment and despite seasonal q-q sales slowdown of 5% for large displays and 24% for small displays. Asia and emerging markets still primary drivers, offsetting US decline. Some price competition ahead, but demand remains strong at 90% capacity utilization. Company announced plans to build new 10G or 11G plants in a few years, which is in line with its historical expansion and matches with the growth of China's emerging middle class. Overall, this earnings report clears up a lot of worries about the seriousness of management and the underlying business. As expected, the company used US-style accounting methods, counting the cost of employees' 1.5 month annual bonus as a business cost.

Here are the recent quarterly earnings per ADR and my off-the-cuff estimates for earnings next quarter:
Q2/07: $0.23 (actual)
Q3/07: $0.88 (actual)
Q4/07: $1.30 (actual)
Q1/08: $1.12 (actual)
Q2/08: $0.88 (guess)
=> current annualized earnings (Q2/07-Q1/08): $3.53
=> forward annualized earnings (Q3/07-Q2/08): $4.18

Current price: $19.55
current P/E: 5.54
forward P/E: 4.68

And you thought a P/E of 7 was low last quarter!

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