Compal Communications shares jump

Compal Communications Inc (華寶通訊), a leading Taiwanese handset supplier, expects shipments to triple this year due to massive orders from key customers, including Motorola Inc, a company official said yesterday.

In the first quarter, Compal Communications, a handset manufacturing affiliate of laptop computer maker Compal Electronics Inc (仁寶電腦), expects to make 6 million handsets versus 5.4 million units during the previous quarter, company spokesman Dennis Ko (柯典明) said.

"The first quarter will be a better period than the fourth quarter [of last year], which is usually seen as the peak season for the industry," Ko said.

The firm targets a shipment of over 20 million units this year, which would make it Taiwan's top handset maker, he said.

The company's handset shipments hit 8.6 million units last year. Volume started to increase in the second half of the year, after the company squeezed out BenQ Corp (明基電通) to become Motorola's primary local partners.

As Compal Communications now only supplies low-end models to the world's No. 2 mobile phone vendor, its gross margin could slide slightly this year, company chairman Ray Chen (陳瑞聰) said.

The company's gross margin reached 16.7 percent last year, making Compal Communications the most profitable handset manufacturer in the industry.

The exuberant outlook has attracted investors’ interest to push higher Compal Communications shares by nearly 4 percent to NT$78.5 on the benchmark Taiwan Stock Exchange yesterday.

Roland Wee (李健仁), an analyst with ABN AMRO Asia Ltd, gave an out-weight rating to Compal Communications suggesting investors buy the stock at target price of NT$84.

“Compal Communications is one of local handset makers having solid design capabilities and strong cost control abilities,” Wee said in Taipei.

With similar reasons, Merrill Lynch gave a Buy on Compal Communications on increased outsourcing in the latest report with target price at NT$100.

But the research house gave Sell’s on BenQ partially due to the loss of Motorola and parent company Compal Electronics.

With the manufacturing advantages, Compal Communications is expected to double its earnings this year to NT$2.9 billion, or NT$8.5 a share, compared to NT$2.5 billion, or NT$4.67, last year, Wee projected.