Sat, May 12, 2012 - Page 12 News List

Pegatron’s progress praised

By Kevin Chen  /  Staff reporter

Local contract notebook maker Pegatron Corp’s (和碩) record sales last month and strong sales guidance for this quarter have sent its share price 1.42 percent higher this week compared with last week, prompting several foreign brokerages to raise their target price yesterday.

The company’s 1.42 percent rise also bucked a 3.72 percent decline in the electronics stocks and a 3.89 percent fall on the main bourse this week, Taiwan Stock Exchange data showed.

In a note to clients, Credit Suisse analyst Thompson Wu (武光明) said his brokerage had upgraded Pegatron to “outperform” from “neutral” and it expects the stock to rise by nearly 20 percent over the next 12 months.

“Pegatron delivered two consecutive operationally in-line quarters, showing its manufacturing scale has stabilized, coupled with better cost controls,” Wu wrote in the note.

Overall, Wu said Pegatron’s solid performance had shown it to be a viable contract manufacturer with tier-1 PC vendors, such as Toshiba Corp, Acer Inc (宏碁) and Asustek Computer Inc (華碩), while at the same time proving itself a key secondary supplier of the iPhone to Apple Inc.

Credit Suisse put a target price of NT$51 on Pegatron shares, which closed at NT$42.8 yesterday, up 0.47 percent from the previous session. That was compared with HSBC Securities’ NT$45, UBS Securities’ NT$52, Barclays Bank’s NT$54 and Citigroup’s NT$60.

The new target prices came after Pegatron, a manufacturing spinoff of Asustek, on Wednesday reported a 21.6 percent month-on-month growth in revenue last month to NT$57.9 billion (US$1.97 billion) on a consolidated basis, a jump of 113 percent from a year ago. A day later, the company posted NT$1.28 billion in net profit for the January-to-March period, up 32 percent from the previous quarter and also up 328 percent from a year earlier, with earnings per share (EPS) at NT$0.57.

Pegatron told an investor conference on Thursday that it expects notebook shipments from this quarter to increase by between 30 percent and 35 percent from the first quarter. It also expects gross margin and operating margin to continue improving quarter on quarter through the year.

“[Pegatron’s] consolidated sales for April, mostly from non-Asustek notebook growth and iPhone shipments, was quite impressive, as its peers were all down more than 10 percent month-on-month," Barclays analyst Kirk Yang (楊應超) wrote in a separate note.

With Pegatron’s increased sales contributions from non-Asustek customers and its iPhone assembly business turning profitable, as well as a potential for it to make the iPad in the second half, the company is expected to further increase its earnings this year and next year, Yang said.

Pegatron is expected to see earnings per share of NT$3.77 this year and NT$6.02 next year, compared with NT$0.05 last year, according to the note.

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