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September 20, 2017

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Inventec shares up on Q1 results

TAIPEI -- Shares of Inventec Corp. (英業達) moved higher Wednesday morning, a day after the Taiwan-based notebook computer original design manufacturer (ODM) service provider reported an improved bottom line for the first quarter, dealers said.

As of yesterday, shares of Inventec had added 3.04 percent to NT$27.15, with 23.14 million shares changing hands. The weighted index on the Taiwan Stock Exchange ended up 57.22 points, or 0.64 percent, at the day's high of 8,875.16.

Investors Cheer Dividend Plan

The buying was also sparked by Inventec's 2013 dividend proposal that offered a payout ratio of 80 percent, dealers said. The proposal still needs to be approved by the company's shareholders.

"The improving first quarter results largely reflected Inventec's efforts in adjusting its product portfolio by adding non-notebook computer devices to offset the weakness of the global PC market," MasterLink Securities analyst Tom Tang said.

At an investor conference held Tuesday, Inventec said it posted NT$1.89 billion in net profit in the first quarter, or NT$0.53 percent in earnings per share (EPS), up from NT$1.784 billion in net profit, or NT$0.50 per share, in the previous quarter. The sequential gains came despite consolidated sales falling 13 percent from a quarter earlier to NT$116.69 billion on seasonal factors.

The first quarter earnings also beat the NT$1.781 billion in net profit, or NT$0.50 per share, posted for the same period a year earlier.

Inventec said the increase in profit resulted from the stronger contribution of servers, handheld devices and solar energy product manufacturing operations to the company's sales.

"That's why Inventec enjoyed a higher gross margin in the first quarter, a traditional slow season for the global notebook computer business," Tang said.

Gross Margin Approaches 5%

During the January-March period, Inventec's gross margin was 4.97 percent, up 0.14 percentage points from the fourth quarter and also up from 4.91 percent for the same period of last year.

In the quarter, PCs accounted for more than 60 percent of the company's total sales, while servers, handheld devices and solar energy devices made up 25 percent, 10 percent and just under 5 percent, respectively, of total sales.

Inventec said it was raising its forecast for handheld device shipments in 2014 by 12-14 percent to 40 million-45 million units because of strong global demand. Inventec is one of the assemblers of China-based smartphone brand Xiaomi (小米).

Server shipments for 2014, meanwhile, could grow at a double digit pace on the back of rising orders from China's Lenovo Group (聯想集團) and U.S.-based Intel Corp., Inventec said.

"Many investors also picked up the stock soon after the local market opened because of the company's generous dividend payout proposal," Tang said.

Inventec proposed a NT$1.6 cash dividend, representing a payout ratio of more than 80 percent based on the ODM services provider's EPS of NT$1.97 in 2013.

Tang said his brokerage has forecast that Inventec will post an EPS of NT$2.22 for 2014.

"But due to recent gains, Inventec shares seemed to have reached a fair price based on the 2014 earnings prospects. My brokerage has issued a neutral recommendation on the stock," Tang said.

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