Hon Hai Precision Industry Co (鴻海精密) shares yesterday morning moved sharply higher, after the company last week announced plans to reduce its capital and increase shareholder returns, dealers said.
The buying came after Hon Hai subsidiary Foxconn Industrial Internet Co (FII, 富士康工業互聯網) on Saturday said that it received formal approval from the China Securities Regulatory Commission for an initial public offering in Shanghai, they said.
Hon Hai, one of the top large-cap stocks on the local stock market, yesterday helped drive the weighted index on the Taiwan Stock Exchange above 10,900 points, dealers said.
The stock attracted strong buying soon after the local equity market opened as investors took cues from Hon Hai’s plan to cut its capital by 20 percent to NT$138.63 billion (US$4.66 billion), they added.
“Amid slower sales growth in contract manufacturing operations, Hon Hai’s move to reduce its capital is expected to boost its return on equity by about 20 percent,” Hua Nan Securities analyst Kevin Su (蘇俊宏) said.
“It is no surprise that investors rushed to pick up Hon Hai shares this morning to take advantage of the relatively low valuation of the stock, which had been hammered by worries over iPhone X sales,” Su said.
Su said FII’s listing in Shanghai has paved the way for Hon Hai to raise funds in China, where stocks have higher valuations than in Taiwan.
“The Internet business is still booming,” Su said. “The FII listing is simply seizing the chance for growth.”
The company reported that net income in the first quarter of this year slid 14.51 percent annually to NT$24.01 billion from NT$28.17 billion a year earlier, strained by a stronger New Taiwan dollar. Earnings per share were NT$1.39.
Aggregate revenue during the period rose 5.49 percent to NT$1.03 trillion.
Despite the decline, Hon Hai posted sequential gains in operating efficiency in the first three months of this year, with gross margin expanding to 6.19 percent, compared with 6.10 percent in the previous quarter, and operating margin rising to 2.4 percent from 1.87 percent, while operating expenses improved to 3.79 percent of revenue compared with 4.23 percent in the previous period.
The company said its gross margin grew because it was unburdened by iPhone X production costs that were booked in the final quarter of last year.
The world’s largest contract electronics maker also said that it would distribute more than NT$10 billion in bonuses to employees, who are expected to receive an average of NT$1.36 million under the bonus payout plan.
Hon Hai chairman Terry Gou (郭台銘) is expected to receive NT$6.48 billion in cash, as he owns about 1.62 billion Hon Hai shares.
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