Acer stock up on turnover

Stock turnover in Acer Inc (宏電) more than tripled yesterday from the previous day's turnover and was the third highest in the TAIEX. However, besides the rise in a stock market index, analysts were unclear why Acer's stock experienced the sudden increase in turn-over, the highest since the middle of June.

Acer rose 4.26 percent to NT$41.6 on turnover of 43.07 million shares, up from 14.03 million the previous day. Acer Inc is a core unit of Acer Group (宏基集團), the world's third largest PC manufacturer, and is Asia's largest maker of desktop and notebook computers. The stock has slumped from a high of NT$100 at the beginning of the year.

"The government funds are probably buying the stock," said Alfred Ying, head of research at Primasia Securities. "If the funds enter the market to buy stock, they usually buy Acer," he said. The United Daily Evening News reported yesterday that the four government funds had been active in the market and Acer Inc was one of the stocks purchased.

An analyst at China Securities said Acer has also been encouraging investors to buy the stock by frequently saying in the media that the company's stock price is quite undervalued compared to its potential earnings.

Acer has remained confident, in public at least, that it would reach its target revenue for the year of NT$150 billion. Its recorded sales of NT$55.71 billion for the first half of the year were 15 percent lower than the same period last year and 37 percent of its full-year target. July sales figures, yet to be released, are expected to be around NT$9 billion to NT$10 billion. Based on its own projection, Acer's earnings per share would be NT$3.19. The figure is at the lower end of securities houses estimates.

But for Ying, even if Acer does reach its sales target for the year, it'll be because of the company's stra-tegy of continuing to realize long-term investments. "Acer's become more of a holding company, rather than having its own business," said Ying. "Their core business is OK, but the other PC makers continue to get new orders." As a result, Ying is recommending his clients buy PC producers such as Compal (仁寶電腦) and Quanta (廣達). Compal's share price fell 0.75 percent yesterday to NT$66.5. Quanta fell 1.38 percent to NT$143.

Chitung Liu, regional head of technology research at UBS Warburg in Taipei, said that, given the current share price of Acer Inc, its downside is quite limited. However, "as far as long-term prospects go, we need to find out more regarding their future strategy," he said. The present outlook for the company is somewhat mixed, he said.

Nevertheless, despite the unclear outlook, fairly robust PC growth and Acer's low price bode well for the share in the short term. "I think, based on today's price, its upside is probably 15 to 20 percent," said Primasia's Ying. "In the short term, if Acer continues to be a target of government funds, its price will probably move."

Predictions that PC demand is expected to grow 18 to 19 percent this year is "not strong, not bad," said Ying, but the second half of the year is the big season for PC makers, he said.

In the longer term, a local securities firm recommended in a recent analysis report that Acer form a strategic partnership with AT&T and Cisco, and move into future high-growth products such as I-phones and set-up boxes.