Largan shares continue to hit new heights

Shares in smartphone camera lens supplier Largan Precision Co. (???), a supplier to Apple Inc., continued to set records, closing at a new high on the local equity market on Friday amid optimism about the firm's bottom line, dealers said.

The stock also pushed up the broader market as foreign institutional investors returned from the New Year holiday and resumed buying local equities, they said.

Largan shares closed up 2.35 percent to finish the day at NT$4,145.00 (US$129.53) on the Taiwan Stock Exchange, with the weighted index ending up 0.15 percent at 9,372.22. The closing price on Friday was the highest since Largan was listed on the local main board in March 2002.

The stock soared 7.14 percent to pass the NT$4,000 mark for the first time on Thursday, while also pushing the broader market to an increase of 0.77 percent. Largan is currently the most expensive stock in Taiwan.

"Only institutional investors can afford such an expensive stock, like Largan," MasterLink Securities analyst said. "I think foreign institutional investors stood on the buy side today after recording net buying of 308,000 Largan shares yesterday."

As of Thursday, foreign institutional investors owned a 52.07 percent stake in Largan. Shares in Taiwan are usually sold in minimum blocks of 1,000 shares, meaning investors would have to spend at least NT$4.145 million to buy Largan stock, out of the reach of most retail investors.

A U.S-based brokerage issued a research note earlier this week, indicating an increase in its target price on Largan shares from NT$4,500 to NT$5,000. The brokerage said that Largan's gross margin, the difference between revenue and cost of goods sold, is expected to fall only 0.6 percentage points sequentially, even though the industry entered its slow season this quarter.

"The NT$5,000 target price continued to prompt investors to chase Largan shares today," Tang said. "The company has taken a lead over its peers in global smartphone camera lens production and continues to be the most important camera lens supplier to iPhones so its growth momentum is expected to continue and investors are willing to give a high valuation to the stock."

Tang said that MasterLink Securities expected Largan to post NT$160.23 in earnings per share for 2016, increasing to NT$201.81 in 2017.

"As long as foreign institutional investors keep buying into Largan shares, I do not expect any stiff technical resistance in the short term after the stock passed the crucial NT$4,000 mark yesterday," Tang said.

Dealers said that the latest buying in Largan shares was also a result of the company's December sales report which indicated an increase of 5 percent in consolidated sales from a month earlier to NT$5.45 billion, the highest since November 2015, when the figure stood at NT$5.51 billion.

However, Largan said that sales in January could fall due to the reduced number of working days in the month, with the six-day Lunar New Year holiday starting on Jan. 27.

Source: Focus Taiwan News Channel