Mon, Aug 14, 2006 - Page 12 News List

BenQ's losses to drop slightly in Q2, says Macquarie

By Lisa Wang  /  STAFF REPORTER

Aided by asset sales, BenQ Corp (明基), the world's No. 6 mobile phone vendor, is expected to see a drop in its quarterly losses in the second quarter, according to a research note issued by Macquarie.

The investment house predicted that BenQ would report a loss of NT$4.1 billion (US$125.4 million) for the April-June period after pocketing in NT$5 billion in proceeds from selling its optical storage division to local rival, Lite-On IT Corp (建興電子), and selling shares in its peripherals manufacturing affiliate, Darfon Electronics Corp (達方).

"This would [still] be a very poor result," Macquarie said in a brief on the Taiwanese handset sector last week.

BenQ posted NT$5 billion in losses in the first three months of the year after taking over Siemens AG's money-losing handset unit last October. Macquarie maintained its "underperform" rating on the stock, saying that it was not expecting any meaningful improvement in the company's operating margin.

Macquarie's projection was only half of the NT$8 billion in quarterly losses some analysts projected after the nation's top flat-panel maker, AU Optronics Corp (友達光電), said last month that it booked NT$400 million in one-time loss from its 5 percent holding in BenQ for last quarter.

BenQ, however, said "the second-quarter bottom-line will be lower than that."

The company is scheduled to release its second-quarter results on Aug. 24.

In April, BenQ told investors that it would make big progress in reducing losses in the second quarter on expectations that handset shipments would jump 30 percent sequentially from 7 million in the first quarter and the average selling price would rise 10 percent quarter on quarter.

Macquarie's top pick among handset makers is High Tech Computer Corp (宏達電), which earned an "outperform" rating and price target of NT$1,228 from the research house.

Macquarie also said it preferred handset component makers such as keypad maker Ichia Technology Inc (毅嘉科技) and connector manufacturer Cheng Uei Precision Industry (正崴精密) over handset manufacturers.

The two stocks were also rated as "outperform" with their target prices set at NT$57 and NT$200, respectively.

For longer-term investors, Macquarie advised that the expected weakness in orders in the latter part of the fourth quarter would provide a better entry point.

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