Foreign shareholders target Nanzi Electric over stock discount, privatization potential

Taiwanese printed circuit board (PCB) manufacturer Nanzi Electric (2316) is facing increasing pressure from foreign shareholders who are demanding actions to boost shareholder value, with some even suggesting privatization as a possibility. The core of their concern lies in the company's stock trading at a substantial discount, reportedly over 70%, compared to its net asset value.

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Currently, Nanzi Electric's trading price is discounted by more than 70% compared to its net asset value.

Activist fund Palliser Capital, which holds a 4.3% stake, and Singaporean investment firm Metrica Partners, holding approximately 1.5%, have both sent letters to Nanzi Electric's board. They argue that the market's valuation of the company significantly undervalues its actual assets. Metrica Partners highlighted that Nanzi Electric's stake in Chinese company WUS Printed Circuit (WUS) alone, estimated at over NT$130 billion based on WUS's market value, far exceeds Nanzi Electric's own market capitalization of around NT$30 billion.

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The market valuation of Nanzi Electric is far lower than the actual value of the assets it holds.

Beyond the valuation gap, shareholders are scrutinizing Nanzi Electric's capital allocation, dividend policies, corporate governance, and investor relations. Metrica Partners pointed to the company's low dividend payout ratios, questioning why more capital isn't returned to shareholders, especially when the stock trades well below asset value. They also raised concerns about the potential impact of WUS's planned Hong Kong H-share listing on Nanzi Electric's holdings, seeking clarity on dilution or restructuring effects and how minority shareholders might benefit.

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If we look solely at the equity interest in WUS Printed Circuit held by Nanzi Electric, its market value may exceed Nanzi Electric's overall market value by more than 4 times.

Further criticisms include complex cross-shareholdings within the Nanzi Electric group, questions about the fairness of related-party transactions, and insufficient investor communication, particularly the limited disclosure of information in English. Market observers suggest that these persistent concerns from foreign investors could transform Nanzi Electric from a simple PCB stock into one driven by asset value reassessment and corporate governance improvements. Potential catalysts include increased dividends, share buybacks, asset disposals, better investor communication, or even a privatization bid.

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The company focuses on its core business, which is in a phase of rapid growth in response to AI market demand, and all funds are fully focused on core business investment, so it is not appropriate to be distracted by non-core business.