Hon Hai shares hit new high in over 6 years

Taipei--Shares of Taiwan-based manufacturing giant Hon Hai Precision Industry Co. (??) hit a new high in more than six years on Monday, as foreign brokerages issued upbeat reports, urging investors to buy into the stock amid the manufacturer's efforts in business transformation, dealers said.

With its share price hitting an intraday high of NT$121.00 (US$3.99), a new high since Feb. 9, 2011, when Hon Hai shares closed at NT$120.00, market capitalization of the stock breached NT$2.09 trillion in the Monday morning session.

The strength of Hon Hai served as one of the drivers, along with gains posted by contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, ???), to the broader market.

Shares of Hon Hai gained 6.77 percent to close at NT$120.00 with 138.10 million shares changing hands, while TSMC rose 2.38 percent to end at NT$215.00 after going ex-dividend. The weighted index on the main board closed up 136.26 points, or 1.31 percent, at 10,513.96, the highest level in 27 years.

TSMC and Hon Hai are the top two stocks in the local equity market in terms of market capitalization.

"At a time when Wall Street remained stable, foreign institutional investors tended to raise their holdings in the emerging markets like Taiwan, where large-cap stocks in the bellwether electronics sector appeared attractive," Hua Nan Securities analyst Henry Miao said.

"Hon Hai has been one of foreign investors' favorites, in particular, and several foreign brokerages raised their target prices of the stock, encouraging investors to raise their holdings," Miao said.

Miao said that investors have been impressed by a research note issued by an Asian brokerage that has even upgraded its target price of Hon Hai shares from NT$150 to NT$200, the highest level among all foreign brokerages that have been following the stock.

In the research paper, titled "Lifting the Veil on the Enigmatic Empire," the brokerage said that Hon Hai has become an integrated high-tech firm from a pure contract manufacturer by rolling out robots and components with high profit margins, while the Taiwanese firm has entered the Internet of Things turf and engaged in biotech and e-commerce business.

Hon Hai also has its own brand -- Japanese brand Sharp -- after the company acquired a 66 percent stake in the firm in August 2016 for US$3.5 billion.

The Asian brokerage has reiterated an "outperform" recommendation on Hon Hai shares, describing Hon Hai as the "integrator for tomorrow."

Other foreign brokerages have also raised their target prices on Hon Hai shares to NT$126-NT$132, which also prompted investors to buy, Miao said.

In addition, "some investors are happy with Hon Hai's plan to issue a NT$4.5 cash dividend per share for its 2016 earnings, the highest cash dividend payout in the company's history."

"As long as Hon Hai and other tech heavyweights continue their strength, further gains on the broader market are possible," Miao said.

CNA cannot identify the brokerage because media outlets in Taiwan are not allowed to do so when price forecasts are made for specific stocks.

Source: Focus Taiwan News Channel