Foreign brokerage maintains ‘buy’ rating on Hon Hai shares

Taipei, An Asiabased brokerage has maintained a buy recommendation on shares in Hon Hai Precision Industry Co., the world's largest contract electronics maker, saying the company's fundamentals remain sound.

In a research note earlier this week, the Asian securities house said concerns over the succession at Hon Hai have already been factored into its share price after Terry Gou announced in midApril that he would take part in the opposition Kuomintang (KMT) presidential primary and step down from the chairmanship.

After Gou stepped back from the daytoday operations of Hon Hai, the board of directors chose Liu Youngway who was in charge of the group's semiconductor business, to succeed him in June.

In July, Gou lost to Kaohsiung Mayor Han Kuoyu in the primary for the 2020 presidential race.

Local political commentators are watching to see what Gou does next, amid speculation that he could run as an independent.

However, after the KMT primary results were announced on July 15, shares in Hon Hai gained 2.43 percent the same day as investors had high hopes Gou would spend more time leading the company.

The brokerage said Hon Hai enjoys good fundamentals, citing its second quarter sales report, in which the company reported that consolidated sales rose 10.07 percent from the first quarter to NT$1.16 trillion (US$37.42 billion), the highestever AprilJune period for the company.

Based on second quarter sales, the brokerage estimated Hon Hai's operating margin the difference between sales, cost of goods sold and operating expenses for the second quarter to be 1.7 percent, up from 1.5 percent over the same period of last year.

The brokerage said it has left its target price of NT$110 on Hon Hai shares unchanged.

On Friday, Hon Hai shares closed down 0.25 percent to end at NT$78.40.

A brokerage from the United States has delivered a similar upbeat message on Hon Hai, saying the company will benefit from an improvement in the bottom line of its Hong Konglisted subsidiary FIH Mobile Ltd. as the unit could turn a profit in 2020.

Currently, Hon Hai owns a 62.8 percent stake in FIH Mobile, which announced earlier this month that its net loss for the first half of this year will be reduced sharply to around US$85 million or less, from a net loss of US$348 million over the same period of last year.

The U.S. securities house said as Hon Hai already has extensive global operations the impact of the ongoing trade disputes between the United States and China on the group could be relatively small.

The brokerage has left its overweight rating and a target price of NT$100 on Hon Hai shares unchanged.

Source: Focus Taiwan News Channel