Foxconn International Holdings Ltd. (2038) climbed by a record in Hong Kong trading after HSBC Holdings Plc. and Citigroup Inc. raised ratings, saying it may return to profit by supplying Apple Inc. (AAPL:US) and Amazon.com Inc. (AMZN:US)
FIH, a contract maker of phones for Nokia Oyj (NOK1V) and Sony Ericsson, added 39 percent to HK$3.80 as of 2:20 p.m. in Hong Kong, headed for the biggest gain since it began trading in February 2005. About 200 million shares traded, more than 17 times the three-month moving average, according to data compiled by Bloomberg.
A transfer of some orders for iPhones from Hon Hai Precision Industry Co. (2317), the majority owner of FIH, and a new smartphone for Amazon will help FIH boost output and reverse a first-half loss that drove down shares, the two brokerages wrote in reports. Amazon is working with FIH to develop its first smartphone, Bloomberg News reported in July.
“These new customers (Apple and Amazon) should help lift utilization and hence return FIH to profit,” Taipei-based HSBC analysts Yolanda Wang and Joyce Chen wrote in a report today, raising their recommendation to overweight from underweight. Revenue will rise 41 percent in fiscal 2013 while operating margin will improve to 2.5 percent from -5.5 percent, Taipei- based HSBC
Hon Hai Precision, the world’s largest contract manufacturer of electronics and the Taipei-based flagship of the Foxconn Technology Group, owns 69.5 percent of Foxconn International through its Foxconn Far East Ltd. unit. Its stock lost 1.2 percent to NT$87.50 at the 1:30 p.m. close of trading in Taipei today.
Foxconn International is unaware of any reason for today’s share price movement, it said in a Hong Kong exchange filing today. Spokesman Vincent Tong wasn’t available at his office and didn’t immediately reply to an e-mail from Bloomberg News.
Foxconn International, with major clients including Nokia, Motorola Mobility Holdings Inc. and Sony Ericsson, will start producing iPhones late this year or early next year, Daiwa Securities Group Inc. Taipei-based analyst Birdy Lu wrote in an Oct. 10 report. The stock climbed 17 percent on Oct. 11.
Last month’s share price surge, spurred by expectations of iPhone orders, may be “unwarranted,” Goldman Sachs Group Inc. analyst Robert Yen wrote at the time. Hon Hai is unlikely to give iPhone orders to FIH, Deutsche Bank AG’s William Yang wrote.
“FIH has been the poster child for the decline of traditional handset brands -- Nokia, Motorola and Sony Ericsson, which together accounted for 90 percent of FIH’s sales back in 2007,” Citigroup Taipei-based analysts Kevin Chang and Jonathan Gu wrote in a Nov. 2 report. Hon Hai transferred some iPhone orders to FIH starting last month, they wrote.
“With Internet/software companies getting into the smartphone space, FIH now has a golden opportunity to resume growth,” wrote Chang and Gu, who changed their rating to buy from neutral and raised their price target by 45 percent to HK$5.80.
“We note that Amazon, Google, Microsoft, Xiaomi, Baidu, Tencent are all trying to launch smartphones and none has in- house manufacturing.”
Today’s climb stems FIH’s decline this year to 26 percent following a 7.7 percent drop last year and 40 percent in 2010. Its six-month loss widened 12-fold to $226 million for the period ending June 30, according to data compiled by Bloomberg.
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