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September 25, 2017

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Hon Hai shares down on ho-hum iPhone presales

TAIPEI -- Shares of Hon Hai Precision Industry Co., which assembles iPhones and iPads for Apple Inc., came under pressure Friday morning as local media reported lackluster initial pre order sales of new iPhones on China Mobile, dealers said.

Concerns have been running deeper that Hon Hai will see consolidated sales in January fall due to the underwhelming sales report, they said.

A 1.4 percent drop in Apple's share price on Wall Street overnight added downward pressure on Hon Hai shares after Wells Fargo downgraded its recommendation for Apple, they added.

As of 11:39 a.m., shares of Hon Hai had lost 1.12 percent to NT$79.50 (US$2.65) with 26.17 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.73 percent at 8,549.30 points.

"Judging from Hon Hai's share performance, I think the iPhone sales report has dampened investor sentiment today," MasterLink Securities analyst Tom Tang said. Apple accounts for more than 40 percent of Hon Hai's total revenue.

According to the media report, China Mobile, the largest telecom services provider in China, posted pre-sold 100,000 units of Apple's latest iPhone 5S and iPhone 5C phones in two days — lower than market expectations.

Before the preorder sale, the market had high hopes that a deal between Apple and China Mobile, which was inked on Dec. 22, would significantly boost sales of the new iPhone models among the Chinese telecom operator's more than 760 million subscribers.

The report said that initial preorder sales numbers have left investors worried about Hon Hai's shipments in January following a significant increase in sales for the fourth quarter of last year.

"However, I think investors don't need to be too worried over China Mobile's preorder report as the first quarter is a traditionally slow season for Hon Hai. Any drop in sales in January from December will be a seasonal adjustment and has been widely expected," Tang said.

In November, Hon Hai's consolidated sales totaled NT$456.19 billion, up 19.22 percent from a month earlier and at a high for 2013. The market has widely expected its December sales will range between NT$450 billion and NT$460 billion, pushing fourth quarter sales to surpass NT$1 trillion on the back of peak season effects.

"Many foreign institutional investors still stand on the buy side to pick up Hon Hai shares on hopes the company will benefit from the launch of the next generation of iPhone later this year," Tang said.

"The impact from a slide in sales for the first quarter could be short-lived," Tang said.

According to Tang, foreign institutional investors bought a net about 150 million Hon Hai shares between Oct. 1 and Jan. 2. to boost their stake in the Taiwanese manufacturer to 43.58 percent from 43.06 percent.

Tang said even if downward pressure continues, Hon Hai shares are likely to find strong technical support at around NT$77.00.

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