Foreign brokerages mixed about Asustek amid Q4 loss fears

Foreign brokerages were mixed on the prospects for the stock of Taiwan-based PC brand Asustek Computer Inc. after the company said last week it could incur losses in the fourth quarter because of steep one-time costs.

In a research note, a European brokerage said it would take a wait-and-see attitude because Asustek's new management announced on Dec. 13 still needs time to gain familiarity with the business before improve its operations.

In the management reshuffle announced Thursday, S.Y. Hsu (???) and Samson Hu (???) will become Austek's co-CEOs beginning Jan. 1, 2019, and replace Jerry Shen (???). They are expected to help the company venture into the AIoT (AI + IoT) business.

The brokerage praised Asustek's decision to shift the client focus of its smartphone division from the general public to the niche market to appeal to gaming fans.

But it decided to keep its "underperform" rating on Asustek shares unchanged, while maintaining a target price of NT$183 (US$5.92).

On Monday, Asustek shares rose 1.21 percent to close at NT$209.50 on the Taiwan Stock Exchange following a 2.82 percent plunge on Friday after the company disclosed it would book a NT$6.2 billion one-time cost in the fourth quarter.

The cost will result from inventory adjustments, the amortization of advance royalties, and costs of business reorganization, the company said.

The costs are expected to knock down Asustek's earnings per share by about NT$8, which could plunge the company into negative territory in the October-December period, it said.

As a result, the European brokerage has lowered its forecast for Asustek's earnings per share from NT$12.53 to NT$6.18 for 2018.

A Japanese securities house was more upbeat, saying that despite the weaker bottom line for 2018, Asustek has insisted it will keep its promise to issue a cash dividend of NT$15 per share.

The Japanese brokerage said it has maintained a "neutral" recommendation and a target price of NT$217 on Asustek shares.

It also praised the management reshuffle, saying it showed Asustek was adapting to the rapidly changing market.

CNA cannot identify the brokerages because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or the wider market.

Source: Focus Taiwan News Channel