Hon Hai's shares rise on bond plan

Shares of Hon Hai Precision Industry Co (鴻海精密) climbed yesterday on news that the company had raised NT$18 billion (US$540 million) selling bonds which can be converted into shares.

Hon Hai, the nation's largest electronics company by sales, plans to issue NT$18 billion in convertible bonds due 2011 to boost its working capital, Taiwan Securities Co (台証證券), an underwriter, said yesterday.

The conversion price for the bonds sold to domestic investors was NT$316.55, or a premium of 45.74 percent against the stock's average closing of NT$217.20 over the previous five sessions, Taiwan Securities said.

The zero-coupon convertible bonds, Taiwan's largest issue so far this year, have a three-year put option and are convertible into ordinary shares at NT$316.55 per share, the underwriter added.

Shares in Hon Hai climbed 2.8 percent to close at NT$224 yesterday, outpacing a 0.91 percent gain in the benchmark TAIEX index.

On Tuesday, Hon Hai reported a record profit in the third quarter on demand for iPod music players and Razr cell phones. Net income rose 36 percent to NT$15.07 billion in the three months ending on Sept. 30, according to company spokesman Edmund Ding (丁祈安).

Hon Hai also makes parts for Nokia Oyj and Motorola Inc, the world's two biggest mobile-phone makers, and Sony PlayStation game consoles.

"Mobile phones and music players are still significant growth drivers for Hon Hai," Ding said. "International makers are still handing out more orders that were previously produced at home, which continued benefiting contract makers like Hon Hai," he added, without however providing company names.

Hon Hai's net income climbed 38.3 percent to NT$37.82 billion in the first nine months of the current year, while revenue increased 34 percent to NT$590 billion.

The company's net profit margin widened to 6.4 percent in the nine months, from 6.2 percent a year ago.

Analysts said more growth for the firm was expected for next year as global demand for higher-margin consumer gadgets rose.

Including Hon Hai, Taiwanese companies have issued approximately NT$60 billion worth of convertible bonds this year, with more set to come along in the near future.

Asustek Computer Inc (華碩電腦), the world's largest motherboard maker, completed a domestic convertible bond issue on Wednesday, raising NT$12 billion.

Asustek fixed the conversion price of its zero-coupon convertible bonds at NT$105.4, or a premium of 30.5 percent. Shares of Asustek rose 0.13 percent to NT$82 yesterday.

The nation's top two memory chip makers, Powerchip Semiconductor Corp (力晶半導體) and Nanya Technology Corp (南亞科技), also have similar bond issue plans.