Shares of Cheng Uei Precision Industry Co (正崴), one of Taiwan’s leading connector suppliers, plunged 1.5 percent yesterday after the company reported disappointing results for the first quarter of the year, dealers said.
The selling reflected global index provider MSCI Inc’s move to delete the stock from the Taiwan index of its MSCI Global Standard Indices, they said, which could reduce foreign investment in Cheng Uei.
Cheng Uei’s stock price fell to NT$57 yesterday, while the TAIEX closed up 0.09 percent.
Cheng Uei is an affiliate of Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker.
Cheng Uei chairman Gou Tai-chiang (郭台強) is the younger brother of Hon Hai chairman Terry Gou (郭台銘).
“The fall in Cheng Uei’s bottom line sparked downward pressure in the stock soon after the local bourse opened,” Asia Securities Investment Consultant (亞洲投顧) analyst Chang Chih-cheng (張智誠) said.
“Cheng Uei is one of the local electronics companies that fell victim to the Chinese yuan’s depreciation against the US dollar and incurred foreign exchange losses, which impacted its profitability in the quarter,” Chang said.
In a statement released on Thursday, Cheng Uei said it posted NT$250 million (US$8.3 million) in net profit during the first quarter — down 55.14 percent from a year earlier — on consolidated sales of NT$23.78 billion, or 12.07 percent less than last year.
First-quarter earnings per share stood at NT$0.5, compared with NT$1.13 earnings per share recorded in the same period last year.
Cheng Uei said it incurred about NT$100 billion in foreign exchange losses in the first quarter, compared with NT$160 million in foreign exchange gains it posted over the same period last year.
In the first quarter, its gross margin fell 0.59 percentage points from a year earlier to 9.61 percent, the lowest level in seven quarters, due to seasonal factors.
“In addition to the weaker bottom line, investors have been bothered by MSCI’s exclusion of Cheng Uei shares from its global standard indices,” Chang said. “As the MSCI indices are closely watched by foreign investors, it is likely that foreign interest in the stock will be affected.”
MSCI has moved Cheng Uei to the Taiwan index of the MSCI Global Small-Cap Indices.
The index adjustments will take effect after the local market closes on May 30.
Looking ahead, Cheng Uei said its operations for the second quarter are expected to still be haunted by slow-season demand and its consolidated sales for the three-month period could fall from a quarter earlier.
The firm added that a turnaround is unlikely to come until the third quarter.
“So, I expect Cheng Uei shares will continue to trend lower until the stock sees some technical support at about NT$55 amid dampened market sentiment,” the Asia Securities analyst said.
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