Analysts see faster sales, profit growth for Synnex

By Kevin Chen  /  Staff reporter

Fri, Aug 16, 2013 - Page 14

Increased exposure to tablet computers and game consoles, coupled with potential changes in Apple Inc’s iPhone distribution strategy in China, could accelerate Synnex Technology International Corp’s (聯強國際) earnings and revenue growth in the second half of the year, analysts said yesterday.

However, the stock has underperformed the benchmark TAIEX by 24 percent so far this year, a reflection of its inferior product mix and lackluster margins, they said.

Analysts’ remarks came after Synnex, Asia’s leading distributor of information technology products and electronics components, released its latest financial results.

Synnex’s second-quarter net profit rose 21 percent to NT$1.5 billion (US$49.9 million), or earnings per share (EPS) of NT$0.97, from NT$1.3 billion in the same period last year, the Taipei-based company said in a statement. On a quarterly basis, net profit increased 56 percent from the first quarter, company data showed.

For the first six months of the year, the company’s net profit fell 15 percent year-on-year to NT$2.5 billion, or EPS of NT$1.6, while consolidated revenue increased 4 percent to NT$152.4 billion over the same period.

China is expected to lift a 13-year ban on the sale of video game consoles, “if they are manufactured in Shanghai’s new free trade zone,” Credit Suisse analyst Thompson Wu (武光明) said in a note yesterday. “If so, Synnex could see a boost in its Xbox sales.”

In addition, Wu and JPMorgan analyst Alvin Kwock (郭彥麟) said Apple may be looking for a new distribution channel to launch its low-cost iPhone in China.

“We believe Synnex’s channel coverage in both mature and rural China could be a valuable asset to Apple,” Wu said.

Kwock said JPMorgan’s research suggests the US consumer electronics giant may loosen its control over authorized retailers and choose to collaborate with distributors in the next 12 months.

“Synnex has been working with Apple in India (via Redington), and we think it will also be a likely partner for Apple in China” to help the US company hit its sales target and double its channels in China, Kwock said in a separate note.

For the current quarter, UBS analyst Patrick Chen (陳鈞寧) forecast that Synnex’s revenue would increase 11 percent quarter-on-quarter and 6 percent year-on-year, driven by tablets, servers and networking products, with gross margin improving to 3.8 percent from 3.7 percent in the second quarter as these products command higher margins.

Revenue in the quarter ending June reached NT$78.78 billion, up 6 percent year-on-year and 7 percent higher than the previous quarter, company data showed.

Synnex shares rose 1.56 percent to NT$42.20 yesterday, down 21.12 percent since the beginning of the year.