Casetek hit by downgrades on Apple exposure

By Helen Ku  /  Staff reporter

Sat, Mar 01, 2014 - Page 13

Macquarie Capital Securities Ltd has downgraded its rating for Casetek Holdings Ltd (鎧勝) on concerns over the metal casing manufacturer’s high sales exposure to Apple Inc.

In a client note issued on Wednesday, Macquarie Capital analyst Ellen Tseng (曾雅蘭) said Casetek’s record-high revenue of NT$36.54 billion last year were supported mainly by Apple’s iPad Air and iPad Mini products, which contributed more than 70 percent to its sales last year.

However, due to increasing channel inventory and slowing seasonal demand for iPads, Tseng forecast that Casetek’s sales would fall 31 percent sequentially to about NT$7.77 billion this quarter.


On a quarterly basis, Casetek’s sales might decline further next quarter, “as there is only limited function enhancement for Apple’s newly refreshed iPad during the first half of the year,” Tseng said.

Tseng downgraded Macquarie’s rating for Casetek to “neutral” from “outperform,” with the target price cut to NT$184 from NT$185, citing “lack of new iPad refresh cycle in 2014 coupled with limited progress in client diversification.”

Casetek shares closed at NT$175 on Thursday. The stock had fluctuated on Wednesday and Thursday after the company released fourth-quarter results that missed analysts’ estimates.

While Casetek’s management on Tuesday told an investors’ conference that the company is shipping “non-tablet” casings to new clients from next quarter, Tseng forecast that the new customers would contribute only 1.6 percent to the company’s sales this year.


Given the minor sales contribution, Casetek’s annual sales are forecast to drop 5.72 percent to NT$34.56 billion this year, according to the report.

Meanwhile, in a report released on Thursday, Barclays PLC analyst Dale Gai (蓋欣山) offered a rating of “underweight” on Casetek, with a target price of NT$170, citing the maturing iPad cycle and single client risk.

According to Barclay’s research, Apple’s orders for casings used in its MacBook and iPad products contributed up to 85 percent of Casetek’s sales last year.


However, Apple’s dominance of Casetek’s capacity and operating platform limited the Taiwanese firm’s flexibility in gaining substantial orders from non-Apple clients and compete with rivals such as Catcher Technology Co (可成), Gai said.

In addition, Casetek’s earnings performance may also suffer from Apple’s reduction of its metal casing costs this year and next year, along with falling average selling prices in the tablet market, Gai added.