Presented byKenneth Tsao / Citibank Taiwan
May, 2005
客戶關係管理與高科技業融資實務客戶關係管理與高科技業融資實務The Practice of Relationship Management &The Practice of Relationship Management &
Hi-tech Industry Financing Hi-tech Industry Financing
Practice of Relationship Management
Organization for Relationship Management
Spirit of Relationship Management
New Development of Relationship Management
Case Study
Practice of Financing Hi-tech Industry – take TFT-LCD as an example
Credit Fundamental & TFT-LCD Industry
Financial Analysis of TFT-LCD Industry
Stress test and Projection
Table of Contents
Loan Corporate Finance
Treasury Cash Trade ECM, DCM and M&A
Global Accounts High Low Medium High Medium Low
Local Large Corporate High High High High High High
Middle Market Medium Medium High High High Low
Financial Institution Medium Medium High Medium Medium High
Corporate & Investment Bank Organization
Customer Group V.S. Product Groups
Practice of Relationship Management
Contact Window between Bank and Customers
Four Major functions:
Customer Satisfaction / Service
Credit Monitoring / Decision
Business Origination / Execution
Cross-Selling Bank’s Products
Practice of Relationship Management
Customer Satisfaction/Service -- I
Information Collection:
Newspaper, Stock Price, Magazines...
Clients’ Financials/Trend
Research Reports...
Industry Information...
Promotion, Personnel
Corporate culture
Peers cross checking, competitors information…
Wallet size, Share of Wallet, Share of mind
Customer Satisfaction/Service -- II
Actions:
Identify Key Decision Makers.
Phone Call, Lunch/Dinner, Golf...
Be familiar with Key Decision Makers: family, birthday, hobbies, mobile phone…
Be familiar with Key Decision Makers’ working schedule
Customer Activities: Product seminar, Important Festivals
Attend customers’ events: Annual Dinners, investor seminar, …
Customer Satisfaction/Service -- III
Value Add:
Presentation skills
Sending research reports
Debt/Bond market update capabilities
Funding Suggestion / Financial Advisor
Product Knowledge
Industry Specialist
Market events, new market...
Solution provider
Safe Guard of Bank
Capability of Financial Analysis
Industry Knowledge
Plant Visit
Senior Management Assessment
Cross Checking
Dual Control Functions
Credit Monitoring
Identify Business Opportunities
Knowing your bank
What’s the position of your competitors
Product Knowledge
The desire to win “Mandate”
Execution Capability
Team work
Business Origination / Execution
Maximize Banks Revenue
Return on Asset, Return on Equity
Relationship with your product teams
Better Utilize Bank’s Resources
Good Reward System
Cross Selling Bank’s Products
How to be a Good Relationship Manager
Good Account Officer
Work Hard
People Sensitivity
Financial/Product Knowledge
Teamwork
Self-Driven
Integrity
RM
ECM
FX Trade
Corporate FinanceCash
Middle Office
Back Office
Global Connection
Cu
stom
er
Product Groups
How to be a good Relationship Manager
The Trend of Relationship Management
The Trend of Account Management
Industry Focus.
More Profit/Performance Driven.
New Products.
Balance between Account Officers / Product Groups.
Partnership Accounts.
Cross Border Coordination.
Relationship Management Case Study
Hard Working / Provide Solutions
Information Collection.
Relationship build up in 2000.
Introduce product teams.
Activities
Periodically Review: Share of Mind/Wallet
Relationship Trigger Event
Case Study I -- Relationship Build Up
From Simple Product to Sophiscated Products:
Cut in relationship by other bank’s mistake / 1996
Build up relationship by serious syndication loans / 1996 - 2001.
FX/Trade/Cash Service / 1996 - 2001
Capital Market Service / 2000 - 2001.
M&A Advisory / 2001.
Global Custodian Service / 2002.
Case Study II -- Cross Selling
Sensitive about Bank’s Asset:
Sign of weakness
Information collection / Relationship
Manage banks portfolio
Integrity
Dual Control Function
Case Study III -- Credit Monitoring
Actions:
Identify opportunities
Customer needs
Customer decision process
Where is your competitors?
Chasing Mandate
Key Decision Point and Win the Mandate
Follow up
Case Study IV -- Deal Implement
高科技產業融資實務 – 以 TFT-LCD 為例
Global TFT-LCD Industry
2005 Q1 Global TMC Review
The Fastest Growing Industry in the World
Due to the strong demand from the end users, global TFT-LCD industry growth rate in the past two years are over 30%
Looking forward, global TFT-LCD industry is expected to have over 20% yoy growth rate in 2004.
18.016.0
23.0
30.0
37.0
0
510
15
20
2530
35
40
FY00 FY01 FY02 FY03E FY04F
Global TFT-LCD Market S ize
US$bn
-11.1% 43.8%
30.4%
23.3%
Source: IDC (Dec. 2003)
Why TFT-LCD? A Flat World!
TFT-LCD is two times bigger than Foundry & DRAM
Global TFT-LCD industry has been “two times” larger than global foundry and DRAM in ’03/’04 and is expected to have higher growth rate in the next two years
What is TFT-LCD?TFT-LCD stands for Thin-Film Transistor Liquid-Crystal Display.
Three major components in TFT-LCD Module :
TFT Array Substrate (Glass) Backlight Unit Color Filter Substrate
The basic structure of a TFT-LCD panel may be thought of as two glass substrates sandwiching a layer of liquid crystal. The front glass substrate is fitted with a color filter, while the back glass substrate has transistors fabricated on it.
TFT-LCD Production Process
Bare Glass TFT Array Color Filter Substrate Assembly Cutting
LC InjectionPolarizer AttachingBacklight Unit AssemblyTFT-LCD Panel
Array Process
Module Process
Cell Process
TFT-LCD Panel by Generation
Credit Evaluation Points
2005 Q1 Global TFT-LCD Review
Industry Industry Structure Industry Cycles/Trends Market Share / Competitive Position KSFs vs. Strategy
Management Management Ability - in relation to Strategy, Economy,
Industry & Competitive Environment Management Integrity Ownership Organizational Structure
Credit Analysis - How to Determine a Company’s Risk?
Financial Analysis Historical Basis
Operating PerformanceGrowthMargins: Operating vs. Non-Operating
Liquidity & Cash FlowCash Cycle & Working CapitalCurrent Ratio: Short-Term Assets vs. Liabilities
Capital StructureLeverage: Borrowed vs. Self-FundedNet Worth
Credit Analysis (Cont.) - How to Determine a Company’s Risk?
Financial Analysis (cont.)Forecast
Assumption vs. Industry Outlook, Market Position and Company Strategy
Financing Flexibility vs. Funding Needs Level of Internal Generated Cash Banking Relationship Access toward Capital Market
Financing and Hedging Strategy Appropriateness Suitability
Credit Analysis (Cont.) - How to Determine a Company’s Risk?
Way-Out AnalysisSource of Way-out and Level of ReliabilitySupport or Security Appraisal
Relationship and Account StrategyShare of Wallet SizeCross-Sales Opportunity in Non-Lending ProductsCredit Strategy and Credit Limit
Risk SummaryRisks and Mitigates Associated with the ExposureJustification for Exception on Stability CriteriaExpectation on Future Risk Profile
Credit Analysis (Cont.) - How to Determine a Company’s Risk?
Price change on TFT-LCD Industry
2005 Q1 Global TFT-LCD Review
ASP update: February 2005 update - TV
The Outlook of TFT-LCD Industry
The outlook remains bright given LCD is the most popular display technology.
The growth of LCD TV market is critical for overall TFT-LCD industry.
The cyclical volatility in supply/demand should stabilize with LCD TV expansion.
Source: Lehman Brothers Oct., 2004
Global Top Ten TFT-LCD Players
Top 10 TFT-LCD players are from Korea, Taiwan and Japan in terms of production capacity.
Source: Display Search 1Q04 (page42)
Q4, 2003 TFT-LCD Realistic Capacity by Company
Financial ComparisonTFT-LCD Industry
2005 Q1 Global TFT-LCD Review
Taiwan TFT-LCD Customer Performance Sales Revenue
Source: The companies and Citibank’s estimate
* TFT-LCD realted sales accounts for 58% of CPT’s sales in 2004..
** Innolux, established in 2003, belongs to Hon Hai group. Its ramp-up of G4.5 and G5 lines is in 4Q,2004.
Taiwanese TFT-LCD players experienced strong sales growth in 2004. Their total FY04 revenue is expected to reach NT$493Bn, representing over 50% yoy growth.
7660
77
3016
10583 89
33 27
152
126 118
4058
0
50
100
150
200
AU Chi-Mei CPT Hannstar QDI
FY02 FY03 FY04F
(NT$Bn)
Taiwan TFT-LCD Customer PerformanceOperating Margin
Due to increasing demand and improving yield rate, all Taiwanese TFT- LCD players reported handsome operating profit in 1H04. However, the unexpected price drop impaired their margins in 3Q04.
Source: The companies
* CPT numbers only represent TFT-LCD business
30% 29%
24%
18%
22%
32%
28%25%
21%
10%12%
10%8%
23%
-3%-5%
0%
5%
10%
15%
20%
25%
30%
35%
AU Chi-Mei CPT* Hannstar QDI
1Q04 2Q04 3Q04
Global TFT-LCD Players Performance
All global TFT-LCD players showed decreased EBITDA margin in 3Q04 due to declining panel price.
Source: The companies
* The figures of LCD-Division of CPT and Samsung
46% 45%43% 43%
37% 35% 34%
25%
30%
25%
33%
25%
19%17%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Samsung* LGP AUO CMO QDI CPT* Hannstar
1Q04 3Q04
Profit Margin still maintain at good level after the price downturn in 2004
AUO CMO CPT QDI Hannstar
Net Sales 160,171 128,458 115,140 58,081 40,048
Growth Rate % (YoY) 52.7% 55.5% 29.4% 110.6% 21.5%
Operating EBITDA 36,915 37,253 25,205 16,902 9,660
Operating Profit 30,000 22,682 12,763 7,667 4,107
Operating Margin (%) 18.7% 17.7% 11.1% 13.2% 10.3%
Net Income 26,224 21,365 11,784 7,784 2,979
Net Margin (%) 16.37% 16.63% 10.23% 13.40% 7.44%
(In NT$MM)2004E
Taiwan TFT-LCD Players Performance in 2004
Capital Structure is improved in 2004 due to Equity injection and profit generation
AUO CMO CPT QDI Hannstar
Cash & Marketable Sec. 21,439 10,092 34,136 33,284 19,789
Total Debt 85,921 48,552 38,285 53,829 40,628
- Short-term debt 1,000 4,707 1,500 9 920
- Current portion of LT debt 7,296 8,653 17,748 4,796 13,797
- Long-term debt 77,625 35,192 19,037 49,024 25,911
TNW 115,921 101,135 98,158 60,610 56,555
Current ratio 1.8 1.3 1.3 2.5 1.4
Tangible Leverage 1.0 0.7 0.8 1.2 0.9
Cash Cycle Days 28 56 5 60 38
Days of Inventory(Year End) 59 58 50 75 59
Days of Receivable(Year End) 74 83 95 70 52
Days of Payable(Year End) 105 85 140 85 73
(In NT$MM)2004E
Taiwan TFT-LCD Players Performance in ‘04 (cont’d)
Heavy Capex is the major cash outflow v.s. cash generation from operation and fund raising
AUO CMO CPT QDI Hannstar
I. Cash Source
Gross operating fundgeneration
56,915 37,253 25,205 16,902 9,660
Net change in working capital -20,304 -9,496 -1,367 -4,525 -5,748
Increase in ST Debt 699 1,500 0 0 0
Increase in LT Debt 59,615 7,493 2,174 27,800 16,580
Sub-total of cash source 96,925 36,750 26,011 40,177 20,492
II. Cash Use
CAPEX -81,709 -50,000 -32,005 -31,500 -30,811
Increase in investment 0 177 -100 -1,292 0
Repayment of ST Debt 0 0 -2,214 0 -670
Repayment of LT Debt -6,892 -6,499 -3,324 -6,070 -6,125
Dividends Paid -5,223 -1,430 0 0 0
Sub-total of cash use -93,824 -57,752 -37,642 -38,862 -37,606
Others -1,912 6,942 17,377 15,343 11,601
Change in cash andmarketable sec.
1,189 -14,060 5,746 16,658 -5,513
III. Cash flow key ratios
Debt / Op. EBITDA*** 1.51 1.30 1.52 3.18 4.21
Interest Coverage Ratio 23.76 26.40 26.63 25.12 8.56
Debt Service Coverage**** 5.90 3.70 1.35 3.09 0.65
(In NT$MM)2005F (Stress Test)
Taiwan TFT-LCD Players Performance in ‘04 (cont’d)
Way-Out AnalysisTFT-LCD Industry
2005 Q1 Global TFT-LCD Review
Taiwan TFT-LCD Portfolio
ADR US$660MM (2Q02) ECB US$250MM (4Q02) ECB US$145MM (4Q02) ECB US$180MM (1Q03) ECB US$175MM (1Q03)ADR US$480MM (2Q04) ECB US$200MM (3Q03) GDR US$89MM (4Q03) GDR US$306MM (4Q03) GDR US$200MM (3Q03)
GDR US$579MM (4Q03) ECB US$230MM (1Q04) ECB US$270MM (1Q04) ECB US$250MM (4Q03)ECB US$225MM (4Q04) ECB US$295MM (4Q04) ADR US$300MM (1Q04)
: Citigroup arranged ECB US$140MM (4Q04)Total: US$1140MM Total: US$1029MM Total: US$689MM Total: US$1051MM Total: US$1065MM
HannstarAUO CMO CPT QDI
Active ECM & Global Loan Fund Raising: Total 18 ECM transactions with amount of US$4,974MM during 2002-2004. Meanwhile, there are also 10 significant syndications happened during 2002-2004.
US$MM Total Syndication AmountCitibank participate
FY02 3,873 FY02/03 5,058
FY04 6,653
Limited Credit Appetite on Term Exposure:
TFT-LCD syndication loan: Large size & longer tenor (e.g. US$2BN 7-year syndication for AU and ChiMei in 2004); Major in local currency; Club deal type syndication.
Source: The companies as of Nov. 2004
Taiwan TFT-LCD players Fund Raising in 2004
Total fund-raising of Taiwanese TFT-LCD players amounts to around US$12bn in 2004.
Purpose Instrument Amount (US$MM) Timing RemarksSyndication 1,818 2Q04 NT$60BnADR 480 2Q04
Module Plant Syndication 150 4Q04 ChinaSyndication 1,303 1Q04 NT$43BnSyndication 2,015 2Q04 NT$66.5Bn
ECB 230 1Q04
Cash Injection 436 2Q04 NT$14.4BnSyndication 1,152 2Q04 NT$38BNECB 225 4Q04 ECB 270 1Q04SPO 291 2Q04 NT$9.6BnLocal CB 326 2Q04 NT$10.76BnSyndication 909 3Q04 NT$30BnECB 295 4Q04ADR 300 1Q04 ECB 140 4Q04Syndication 606 1Q04 NT$20BnCash injection 182 2Q04 NT$6Bn
G5/6 Fab
G5/6 Fab
CPT
QDI
AUO
CMO
G6/G7 Fabs
G5.5/G7 Fabs
Hannstar
Innolux
G5/6 Fab
G4.5/G5 Fabs
G3 G3.5 G4 G4.5 G5 G5.5 G6 G7
Samsung 1 1 11 (120K)
1 (2Q04, 120K)1 (2Q05, 60K)
LG Philips 1 1 2 (170K) 1 (3Q04, 90K)
AU 3 11 (1Q04; 50K)1 (4Q04, 70K)1 (1Q05, 60K)
1 (1Q05, 90K) Halt
Chi Mei 1 (75K) 1 (65K) 1 (88K)1 (1Q04; 120K)1 (3Q05, 90K)
1 (1Q05;120K)
Halt
CPT 1 (35K) 1 (65K)1 (75K)
1 (1Q05; 75K)1 (2Q05; 90K)
Hannstar 21 (3Q04; 20K)1 (2Q05; 100K)
Halt
QDI 1 (45K) 1 (3Q04; 60K) 1 (3Q05; 60K)
Innolux 1 (4Q04;30K) 1 (4Q04; 30K)
Sharp 1 2 1 (1Q04) 1 (3Q06)
Substrate Size(mm x mm)
550x650600x720620x750
680x800 730x9201100x12501000x1200
1,300x1,500 1,500x1,8001,500x1,850
1,870x2,200
Price Drop Leads to Expansion Slow-down of Taiwanese Players
Due to 2H04 unexpected ASP drop and overcapacity concern, AUO and CMO have announced to postpone their next-generation fabs (slow ramp-up in G6 and delay in G7) while Hannstar decided to halt their G6 investment.
Stress TestTFT-LCD Industry
2005 Q1 Global TFT-LCD Review
Stress Test Price v.s. Display Search Price
Stress Test PriceRed Line
Display Search ForecastBlue Line
Source: Display Search, Nov., 2004
Taiwan TFT-LCD Stress Test ASP Assumption (revise date: 11/25/2004)
Year: 2004F 2005F 2006F 2007F 2008F 2009F 2010F 2011F 2012F
Price Movement - Monitor Below 13.3" Ave. Unit Price stress 200 170 160 150 140 130 120 120 120
13.3" Price Changes (%) 8.1% -15.0% -5.9% -6.3% -6.7% -7.1% -7.7% 0.0% 0.0% 14.1" Ave. Unit Price (USD)stress 185 140 126 110 100 95 95 95 95
14.1" Price Changes (%) 2.2% -24.3% -10.0% -12.7% -9.1% -5.0% 0.0% 0.0% 0.0% 15" Ave. Unit Price (USD) stress 200 135 115 110 105 100 100 100 100
15" Price Changes (%) 2.0% -32.5% -14.8% -4.3% -4.5% -4.8% 0.0% 0.0% 0.0% 17" Ave. Unit Price (USD) stress 240 150 135 125 120 115 115 115 115
17" Price Changes (%) -10.1% -37.5% -10.0% -7.4% -4.0% -4.2% 0.0% 0.0% 0.0% 19" Ave. Unit Price (USD) stress 300 190 170 150 140 135 135 135 135
19" Price Changes (%) -21.1% -36.7% -10.5% -11.8% -6.7% -3.6% 0.0% 0.0% 0.0%
Price Movement - TV 20" LCD TV Panel Ave. Unit Price (USD) 320 210 180 160 150 140 140 140 140
20" Price Changes (%) -20.0% -34.4% -14.3% -11.1% -6.3% -6.7% 0.0% 0.0% 0.0% 27" LCD TV Panel Ave. Unit Price (USD) 710 450 360 330 300 270 270 270 270
27" Price Changes (%) - -36.6% -20.0% -8.3% -9.1% -10.0% 0.0% 0.0% 0.0% 32" LCD TV Panel Ave. Unit Price (USD)1,020 650 520 465 450 410 410 410 410
32" Price Changes (%) -15.0% -36.3% -20.0% -10.6% -3.2% -8.9% 0.0% 0.0% 0.0% 37" LCD TV Panel Ave. Unit Price stress 1,730 900 750 630 600 550 550 550 550
37" Price Changes (%) 0.0% -48.0% -16.7% -16.0% -4.8% -8.3% 0.0% 0.0% 0.0% 42" LCD TV Panel Ave. Unit Price stress N/A 1,800 1,260 945 756 642 550 550 550
42" Price Changes (%) - -30.0% -25.0% -20.0% -15.1% -14.3% 0.0% 0.0% 47" LCD TV Panel Ave. Unit Price stress N/A 3,200 2,600 2,300 2,000 1,750 1,550 1,350 1,200
47" Price Changes (%) - -18.8% -11.5% -13.0% -12.5% -11.4% -12.9% -11.1% 50" LCD TV Panel Ave. Unit Price stress N/A 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000
50" Price Changes (%) - -9.1% -10.0% -11.1% -12.5% -14.3% -16.7% -20.0%
Stress Test Worksheet –Take AU as an example (1)Production Monthly motherglass Panels per
Capacity (K) motherglass 2003F 2004F 2005F 2006F 2007F 2008F 2009F 2010FL2-Gen 3.5 (610*720) 45.0 Below 13.3" 15.0 6 90 90 90 90 90 90 90 90 14.1" 20 6 120 120 120 120 120 120 120 120 17" 10 4 38 38 38 38 38 38 38 38 Yield Rate 90% 90% 90% 90% 90% 90% 90% 90% Capacity utilization 96% 96% 90% 90% 90% 90% 90% 90%L3-Gen 3.5 (610*720) 35.0 14.1" 9.0 6 54 54 54 54 54 54 54 54 17" 26 4 104 104 104 104 104 104 104 104 Yield Rate 90% 90% 90% 90% 90% 90% 90% 90% Capacity utilization 97% 97% 90% 90% 90% 90% 90% 90%L5-Gen 3.5 (600*720) 60 14.1" 25 6 150 150 150 150 150 150 150 150 17" 35 4 140 140 140 140 140 140 140 140 Yield Rate 95% 95% 95% 95% 95% 95% 95% 95% Capacity utilization 97% 97% 90% 90% 90% 90% 90% 90%L6-Gen 4 (680*880) 50 15" 50 6 300 300 300 300 300 300 300 300 Yield Rate 95% 95% 95% 95% 95% 95% 95% 95% Capacity utilization 100% 95% 95% 90% 90% 90% 90% 90%L8A-Gen 5 (1100*1250) 50 17" 50 12 600 600 600 600 600 600 600 600 Yield Rate 80% 85% 90% 90% 90% 90% 90% 90% Capacity utilization 50% 80% 90% 90% 90% 90% 90% 90%L8B-Gen 5 (1100*1300) 70 17" 35 12 840 420 420 420 420 420 420 26"/ 27" 35 6 210 210 210 210 210 210 210 Yield Rate 70% 90% 90% 90% 90% 90% 90% Capacity utilization 50% 80% 90% 90% 90% 90% 90%L8C-Gen 5 (1100*1300) 70 17" 35 12 420 420 420 420 420 420 26"/ 27" 35 6 210 210 210 210 210 210 Yield Rate 70% 90% 90% 90% 90% 90% Capacity utilization 25% 90% 90% 90% 90% 90%L9-Gen 6 (1500*1850) 90 19" 20 20 400 400 400 400 400 400 32" 35 8 280 280 280 280 280 280 37" 35 6 210 210 210 210 210 210 Yield Rate 50% 80% 80% 80% 80% 80% Capacity utilization 30% 65% 80% 90% 90% 90%L10-Gen 7 (1870*2200) 60 42" 60 6 360 360 360 360 Yield Rate 60% 80% 80% 80% Capacity utilization 75% 90% 90% 90%Overall Capacity Utilization Rate 87.7% 83.2% 67.9% 85.2% 86.6% 90.0% 90.0% 90.0%
Stress Test Worksheet –Take AU as an example (2)
Monthly Shipment (K units) 2003F 2004F 2005F 2006F 2007F 2008F 2009F 2010FBelow 13.3" 78 78 73 73 73 73 73 7314.1" 289 289 269 269 269 269 269 26915" 285 271 271 257 257 257 257 25717" 492 955 1,097 1,401 1,401 1,401 1,401 1,40119" 60 208 256 288 288 28826"/27" 74 188 340 340 340 340 34032" 42 146 179 202 202 20237" 32 109 134 151 151 15142" 0 162 259 259 259Total Monthly Shipment (K) 1,144 1,666 2,031 2,803 3,072 3,240 3,240 3,240
Total Sales 2003F 2004F 2005F 2006F 2007F 2008F 2009F 2010FBelow 13.3" (,000 USD) 163,590 186,624 148,716 139,968 131,220 122,472 113,724 104,97614.1" (,000 USD) 628,215 641,684 452,239 407,015 355,331 323,028 306,877 306,87715" (,000 USD) 670,320 649,800 438,615 353,970 338,580 323,190 307,800 307,80017" (,000 USD) 1,577,324 2,749,346 1,973,916 2,269,814 2,101,680 2,017,613 1,933,546 1,933,54619" (,000 USD) 11,400 35,360 38,400 40,320 38,880 38,88026"/27" (,000 USD) 626,220 1,014,930 1,469,664 1,347,192 1,224,720 1,102,248 1,102,24832" (,000 USD) 327,600 908,544 999,936 1,088,640 991,872 991,87237" (,000 USD) 340,200 982,800 1,016,064 1,088,640 997,920 997,92042" (,000 USD) 1,837,080 2,351,462 1,996,877 1,710,720Total Sales (,000 USD) 3,039,449 4,853,674 4,707,616 6,567,136 8,165,483 8,580,085 7,789,743 7,494,838exchange rate 34.5 33.0 32.0 32.0 32.0 32.0 32.0 32.0Total Sales (NT$MM) 104,861 160,171 150,644 210,148 261,295 274,563 249,272 239,835Sales growth 38.5% 52.7% -5.9% 39.5% 24.3% 5.1% -9.2% -3.8%Blended ASP (US$) 221 243 193 195 222 221 200 193
Total COGS (NT$MM) 94,287 106,005 158,504 190,900 202,415 189,264 187,634Implied COGS (% of sales) 58.9% 70.4% 75.4% 73.1% 73.7% 75.9% 78.2%Deprciation (% of sales) 16.8% 22.7% 17.4% 13.9% 13.2% 12.7% 11.6%
Profit Margin will be hit significantly under the Stress Test in 2005
AUO CMO CPT QDI Hannstar
Net Sales 150,644 125,961 117,344 55,255 41,311
Growth Rate % (YoY) -0.6% -1.9% 1.9% -4.9% 3.2%
Operating EBITDA 36,202 22,673 14,361 12,709 4,317
Operating Profit 2,035 1,638 -3,897 -804 -3,736
Operating Margin (%) 1.4% 1.3% -3.3% -1.5% -9.0%
Net Income -1,644 -1,620 -6,418 -1,027 -5,052
Net Margin (%) -1.10% -1.29% -5.47% -1.90% -12.23%
(In NT$MM)2005F (Stress Test)
TFT-LCD Stress Test Result 2005
Balance Sheets still show a healthy status
AUO CMO CPT QDI Hannstar
Cash & Marketable Sec. 13,030 6,541 18,135 10,037 3,182
Total Debt 197,209 88,192 78,597 67,603 30,911
- Short-term debt 0 27,000 1,500 9 5,000
- Current portion of LT debt 9,633 9,243 10,414 14,174 4,792
- Long-term debt 112,992 51,949 66,683 53,420 21,119
TNW 109,943 105,553 101,740 67,853 62,424
Current ratio 1.4 0.9 1.3 1.1 0.9
Tangible Leverage 1.4 1.1 1.2 1.3 0.7
Cash Cycle Days 28 80 35 95 48
Days of Inventory(Year End) 74 65 60 85 69Days of Receivable(YearEnd)
59 95 105 90 52
Days of Payable(Year End) 105 62 130 80 73
(In NT$MM)2005F (Stress Test)
TFT-LCD Stress Test Result 2005 (Cont’d)
Heavy Capex will drive the cash level down
AUO CMO CPT QDI Hannstar
I. Cash Source
Gross operating fundgeneration
36,202 22,673 14,361 12,709 4,317
Net change in working capital 2,536 -7,600 -6,025 -3,637 -664
Increase in ST Debt 0 22,293 0 0 4,080
Increase in LT Debt 45,000 26,000 58,060 18,570 0
Sub-total of cash source 83,739 63,366 66,396 27,641 7,733
II. Cash Use
CAPEX -76,030 -60,000 -71,878 -53,975 -20,000
Increase in investment 0 0 -100 0 0
Repayment of ST Debt -1,000 0 0 0 0
Repayment of LT Debt -7,296 -8,653 -17,748 -4,796 -13,797
Dividends Paid -3,934 0 0 0 0
Sub-total of cash use -88,260 -68,653 -89,726 -58,771 -33,797
Others -3,887 1,736 10,000 7,882 9,457
Change in cash andmarketable sec.
-8,408 -3,551 -13,330 -23,248 -16,607
III. Cash flow key ratios
Debt / Op. EBITDA*** 3.39 3.90 5.47 5.32 7.16
Interest Coverage Ratio 9.84 7.00 5.25 12.53 3.28
Debt Service Coverage**** 2.70 1.80 1.09 0.84 0.71
(In NT$MM)2005F (Stress Test)
TFT-LCD Stress Test Result 2005 (Cont’d)
Appendix:Individual Names Analysis
(Example)
DiscussionAccount Name: AU Optronics
Taiwan PRC
ProjectsG5 Phase II Fab(70K/MG/Month);Color Filter Plant
Module Assembly(300K/month)
Capital NT$10bn US$50MM
Term Loan NT$25bn US$100MM
Total amount NT$35bn US$150MM
USD Nil NilNTD NT$9Bn NilTotal amount NT$9Bn Nil
Working Capital Total amount US$200MM US$80MMFinanced by cash on hand and STomnibus facilities provided bylocal banks; already in place
ST US$700MM US$30MMLT US$430MM (IRS) Nil
Total amount US$1,130MM US$30MM
Nil NilOthers
Customer Needs
FX Hedging
Country
Term Loan RefinancingRefinanced by NT$15bn undrawnsyndicated term loan closed byChinatrust last Nov.
Projected Sales Increase in 2003 (%) 28.52%
CAPEX Funding
Taiwan G5 Phase II Fab & ColorFilter Plant: Citibank and eitherother banks have been mandatedto arrange NT$25bn 7-yrsyndicated term loan. Expect toclose by the end of SEP03.
PRC: We are in the discussionwith the company for itsUS$100MM term financing.