The China Post with Business Today
Right before Hon Hai Precision Industry held its recent shareholders meeting, Allen Cheng, head of Macquarie Group’s technology and telecommunication research team in Greater China, issued a 226-page report on the tech giant, in which he prescribed a target price of NT$200 for Hon Hai.
The report generated a lot of interest in the market and drove Hon Hai share prices up immediately, lifting the company’s market cap past NT$2 trillion. Will Hon Hai shares reach NT$200 and if so, how long will the recent surge take to get there? Without a doubt, those are the questions most people are asking. We have observed three positive signs:
Three positive signs: – Foxconn Interconnect Technology to be listed in HK – Sharp returns to Tokyo Stock Exchange’s First Section – New iPhone to be launched
First, according to an investigation by Business Today, operations are accelerating for the initial public offering of Foxconn Interconnect Technology (FIT), a branch separate from Hon Hai, at the Hong Kong stock exchange. The IPO is expected to be complete by July at the earliest and with a price-to-earnings ratio at least on par with that of Hon Hai (which currently stands at 11 times). Hon Hai will indirectly hold 93 percent of FIT shares. A follow-up surge effect for FIT prices is something worth expecting.
Before it became a standalone company, FIT was the department responsible for Hon Hai’s manufacturing of connectors, which was Hon Hai’s core business before it became a giant. FIT accounted for a relatively high ratio of its parent company’s revenue. FIT’s IPO plan was put on hold six months ago. Now it returns as “FIT (HK.6088)” and the company’s chance of being listed in Hong Kong has drastically increased.
Secondly, Sharp is expected to refile its application as soon as the end of June to have its stocks return to the First Section of the Tokyo Stock Exchange. This means a lot to Sharp, which has recently returned to profitability, as well as for Hon Hai. Sharp has experienced turbulent financial struggles and has seen its share prices plummet. Returning to TSE’s First Section would help lift the share prices of Hon Hai Group, which holds 66 percent of Sharp.
The third piece of good news is that Hon Hai will conduct a dividend exclusion of NT$4.5 per share. This is the first time the company is issuing its dividends fully in cash. As its share price has shown a relatively good dividend yield ratio and this year coincides with the launch of a major new iPhone model, the share prices for Hon Hai (the biggest assembling contractor of iPhone) should reflect this positive news.