Sat, Nov 23, 2013 - Page 14 News List

Apple diversification to aid Catcher, Ju Teng: Citigroup

By Helen Ku  /  Staff reporter

If Apple Inc decides to contract PC makers Compal Electronics Inc (仁寶) and Wistron Corp (緯創) as iPhone and iPad assemblers next year, computer and handset casing makers Catcher Technology Co (可成科技) and Ju Teng International Holdings Ltd (巨騰) are likely to be the biggest beneficiaries, Citigroup Inc said in a report.

That is because Compal and Wistron would be more likely to source components produced by Catcher and Ju Teng, rather than Apple’s current contract makers or their subsidiaries, the report said.

“We believe that Hon Hai and Pegatron could lose part of their share of iPhone and iPad assembly orders to Wistron and Compal next year and in 2015. Casing companies would benefit,” Citigroup analyst Wei Chen (陳思維) said in the report released on Thursday.

Citing original design manufacturers’ competitive nature, Chen said Compal and Wistron are unlikely to source from competitors Hon Hai Precision Industry Co (鴻海精密) and Pegatron Corp (和碩), which are currently the major assemblers of Apple’s iPad and iPhone products.

Based on the same reasoning, it is also unlikely to see the world’s second and third-largest contract laptop makers source its components from Hon Hai’s subsidiary Foxconn Technology Co (鴻準), currently the exclusive supplier of iPhone casings, or Pegatron’s subsidiary Casetek Holdings Ltd (鎧勝), which supplies metal casings used in Apple’s iPads, he added.

While Catcher has been Apple’s metal casing provider for the company’s iPad and iPad Mini lineups, Chen forecast Catcher would take more new orders for iPhone 5s products, which is equipped with metal casings.

Ju Teng, listed on the Hong Kong stock market, is likely to receive orders for Apple’s iPhone 5c product, which is equipped with unibody plastic casings, he said.

“Considering Hon Hai’s loss of iPhone and iPad assembly orders next year, we believe that casing orders are likely to flow out in the same proportion,” Chen said.

“As newcomers [like Compal and Wistron] lack internal casing capacity and are unlikely to source from a competitor, Catcher could become the biggest beneficiary,” he added.

For next year, Chen forecast Catcher would ship 10 million to 15 million units of casings used in iPad and iPhones.

As a result, Chen raised Catcher’s net profit forecast to NT$12.85 billion next year, compared with his previous estimate of NT$10.77 billion.

As for Ju Teng, Chen forecast the Hong Kong-based casing maker would receive new orders for plastic casings used in iPhone 5c.

Ju Teng’s net profit is expected to grow 11.69 percent to HK$917 million (US$118 million), from this year’s HK$821 million forecast by Chen.

Chen raised his rating for Catcher’s stock from “neutral” to “buy,” with its target price lifted to NT$255 from NT$166. Chen retained his “buy” rating on Ju Teng, with a target price cut to HK$7.1 from HK$7.3.

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