Taiwan Semiconductor Co LTD (TSM)

(3 November 2016)

TSM Business Overview

TSMC is the world’s first dedicated semiconductor foundry. As the founder and a leader of the Dedicated IC Foundry segment, TSMC has built its reputation by offering advanced and “More-than-Moore” wafer production processes and unparalleled manufacturing efficiency. From its inception, TSMC has consistently offered the foundry segment’s leading technologies and TSMC COMPATIBLE® design services.

TSM Fundamentals

• Price to Earnings: 24.07
• Earnings Per Share: $1.70
• Market Cap: 159.6B
• Current Ratio: 2.14
• Return on Equity: 23.54%
• Dividend Yield: 2.71%
• Total Debt to Equity Ratio: 20.23

Balance Sheet ($ in NT Billions)

• Total Assets decreased $85.8.
• Total Current Liabilities decreased $141.18.
• Total Equity increased $86.56.
• Inventory Turnover Days decreased from 54 days to 44 days.

Income Statement ($ in NT Billions)

• Net Revenue increased $38.6, or 17.4%
• Net Income increased $24.25, or 33.4%.
• Basic Earnings Per Share increased from $2.80 in 2Q to $3.73 in 3Q.
• Return on Equity increased by 7.8% from 23.4% to 31.2%.

Cash Flow Statement ($ in NT Billions)

• Net Cash provided by operating activities increased $19.73.
• Capital Expenditures increased $30.19.
• Cash Dividends were paid out in amount of $155.58, which is significant compared to last quarter where they did not pay a dividend.
• Free Cash Flow is down $10.46.

Highlights from 10-Q & News

• Renesas Electronics and TSMC Announce 28nm MCU Collaboration for NextGeneration Green and Autonomous Vehicles ( 2016/09/01 )
• TSMC’s Board approved the acquisition from VisEra Holding Company of 86.9% shareholding in VisEra Technologies Company Ltd. and 6.9% shareholding in Xintec Inc. to simplify investment structure ( 2016/08/02 )

Entry and Exit Points

Entry Points

• $28
  • It has good support at the $28 level.

Exit Point

• $50
  • It currently is around its all time high, with that being said, I can’t give a good estimate on what I believe the “this-is-way-overvalued-get-out” number, but given consistent balance sheets, continued growth, and a solid dividend, I’m going to go with $50.