Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM): A Valued Stock

Denver, CO, 04/07/2014, (Avauncer.com) –  Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM)’s shares were up by 18% in last 12 months and last closed at $19.77. The spike was due to solid performance with increasing sales and profitability in its last quarter that influences the investors’ confidence. It is believed that TSMC continues to report strong sales growth in coming periods considering market outlook and solid inventory backup to support customer demand.

TSMC’s performance

In 4Q2013, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM)’s revenues were ~$4.8 billion (NT$145.81 billion), increased by 9.5% year-over-year due to strong demand for mobile devices. It improved gross margin to 44.5% and operating margin to 32.8%. But, weak seasonal demand from IC companies and continued reduction in inventory from fables companies will affect TSMC’s profitability in coming periods.

Strong Demand

The rapid change in technology influences the semiconductor industry to innovate new products that lead to more competition. The growing demands for mobile devices including Smartphone and 3G and LTE services drive the chip sales and open opportunities to offer advanced mobile chips to device makers.

TSMC is having the competitive advantage of being the world’s largest contract chip manufacturer. It also has a strong relationship with large numbers of integrated circuits makers enhance large opportunities.

In addition, the demand for TSMC is high with increasing orders for Qualcomm’s 4G chips, MediaTek’s 3G chips, Broadcom’s communication chips and Advanced Micro Devices’s processor.

Outlook

TSMC expects solid growth in coming periods especially in Smartphone segment and anticipates an increase in revenue ~$4.5-$4.6 billion (NT$136- NT$138 billion). The Company also expects growth in profitability with growth of 47% and operating margin of 35% in the coming period.

Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) has strong financial strength with high return on equity. As of December 31, 2013, the Company’s return on equity (ttm) was 24% above industry (semiconductor) average and trailing 12 months P/E (ttm) ratio was $16.46.

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