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SCMP Reporter

TPV Technology, which manufactures cathode-ray tube (CRT) monitors, is going flat out for a share of the growing liquid crystal display (LCD) market.
The company, listed in Hong Kong and Singapore, is shifting a greater portion of its production to LCDs, which take up less desktop space and are quickly replacing their bulky CRT cousins.
The move comes at a time when investors are chasing industrial export stocks. In addition, United States  corporations are stepping up capital budgets, which should benefit technology manufacturers such as TPV.
Investors have begun to tune into the strategy. TPV shares  have  risen 15.46 per cent over the past six months, closing at HK$2.80 yesterday. The Hang Seng Index has been flat over the same period.
TPV is the second-largest CRT monitor producer after Samsung Electronics. It ranks fifth in LCD monitor production, with manufacturing facilities located primarily in China. 
On Tuesday, the company released quarterly results that were stronger than expected, with net profit rising 34 per cent from the same period last year to US$14.4 million.
'Top-line growth was attributed to strong volume growth from both CRT monitors by 15 per cent and LCD monitors by 52 per cent,' ING Financial Markets analyst Paul Snelgrove said.
Demand for LCD monitors has been growing as consumers and corporations replace their CRT monitors with flat-panel displays - particularly thin-film transistor (TFT) LCD monitors.
According to Core Pacific-Yamaichi analyst Mona Chung, worldwide LCD monitor shipments grew 74.3 per cent last year. 
The trend is reflected in TPV's changing product mix. Last year, CRT monitor sales accounted for 56.77 per cent of revenue, compared with 38.58 per cent for LCD monitors. Production of CRT monitors is expected to fall to 47 per cent this year, with flat-panels accounting for 51 per cent of output.
But some analysts note strong growth in LCD sales reflected market share gains for the flat-panel segment - at a cost to CRT sales - rather than a general recovery in the personal computer industry.
In addition, increased competition and expanding capacity are putting pressure on the industry. 
LG Philips has announced plans to build a US$10 billion TFT-LCD factory. Samsung Electronics also plans to invest $17 billion in a facility to make flat screens for television and computer monitors.
This additional capacity would threaten TPV and Taiwanese rivals such as BenQ and Lite-On.
In order to maintain - not to mention grow - market share, TPV has lowered selling prices for LCD monitors, a move reflected in the company's declining profit margin. The average margin for LCD monitors is about 5 per cent, compared with 11 per cent for CRT monitors. 
Despite the margin pressure, analysts remain positive on the company. A Thomson First Call poll of 16 brokers found a consensus 'strong buy' rating for TPV with a HK$3.27 price target.
One fund manager said falling margins were just a fact of life in the hi-tech manufacturing industry. 'It is normal for technological companies, as long as the volume growth can counter the impact of declining selling prices,' the fund manager said.
Mr Snelgrove noted that prices for LCD monitors have stabilised recently, with 15-inch panels fetching about US$190.
In addition, the analyst said TPV could benefit as smaller players quit the industry. 'Despite the global CRT industry showing double-digit declines in units this year, we believe TPV would be a beneficiary of consolidation as other CRT monitor manufacturers may choose to exit the market,' he said, noting that TPV had won a contract to produce monitors for Sony Corp.
Analysts are also upbeat on the company's fundamentals, even after the recent climb in its shares.
UBS Investment Research analyst Raphael Volet said: 'The stock is still attractive at eight times forward earnings  and a return on equity of 18.6 per cent for this year and 17.5 per cent for next.'
But other analysts prefer rival Proview International because of its cheaper valuation. Proview trades at about 5.6 times forward earnings - even after a 110.53 per cent surge in the company's shares over the past six months.



TPV slims down with focus on LCDs