Synnex Technology International Corp (聯強), Asia’s largest distributor of information technology products and electronic components, has seen a 4.77 percent drop in its share price in the past month amid investor concerns over the company’s business performance in the light of US-China trade tensions.
In a note to clients on Friday, Yuanta Securities Investment Consulting Co (元大投顧) maintained its “buy” rating for Synnex, but cut its target price from NT$57 to NT$50, saying the company has seen limited effect from the trade dispute due to its low sales exposure in the US market.
“Most of its products are sold in Southeast Asia, China and Taiwan, with limited exposure to the US market,” Yuanta analyst Calvin Wei (魏建發) said in the note.
“We believe industrial PC makers will see limited impact from the dispute, as they can avert the US’ extra tariffs via their production bases in Taiwan,” Wei said. “However, it is still to be seen whether trade disputes will impact global demand for PCs and other products.”
Synnex’s sales in the US are mainly indirect sales of IC components to industrial PC clients.
Yuanta’s 12-month target price of NT$50 implies a 28.4 percent upside from Friday’s close of NT$38.95. The stock has fallen by 3.95 percent this year to date, while the broader market is up 3.42 percent in the same period, Taiwan Stock Exchange data showed.
While the market is cautious about Synnex’s shares, Wei said that its sales have actually improved lately, thanks mainly to rising shipments in the data center, artificial intelligence, Internet of Things, gaming and drone segments.
With sales in its data center business rising 21 percent, 18 percent in gaming products and 72 percent in handsets in the first half of the year, “we expect third-quarter sales to rise 21 percent quarter-on-quarter to NT$109.4 billion [US$3.58 billion], with year-on-year growth of 9 percent, due to a shortage of Intel Corp CPUs and a high base in the second half of 2017,” Wei said.
In the first eight months of the year, Synnex’s sales increased 12.55 percent annually to NT$247.75 billion and Yuanta said sales for the whole year could rise 11 percent annually to a record NT$403.7 billion, the note said.
Yuanta said that Synnex’s earnings per share would be NT$4.44 for the year and NT$4.62 next year, compared with NT$3.67 last year.
With a high dividend yield of nearly 8 percent, the stock remains a "decent defensive play" among local tech stocks, Wei said.
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