Largan shares breach NT$4,000 mark after Apple shares hit high

2018/03/13 12:54:00 fontsize-small fontsize-default fontsize-big
Largan shares breach NT$4,000 mark after Apple shares hit high

Taipei, March 13 (CNA) Shares in Taiwan-based Largan Precision Co., a smartphone camera lens supplier to Apple Inc., continued their rebound by passing the NT$4,000 (US$137) mark in the morning session on Tuesday, as investors encouraged by Apple's record high share price overnight picked up the stock, dealers said.

It remains to be seen whether Largan shares will remain strong as the market has been focused on the company's sales since it reported a two-year low in revenue for February, they said.

As of 11:43 a.m., shares in Largan had gained 1.64 percent at NT$4,020 with 541,000 shares changing hands on the Taiwan Stock Exchange, where the weighted index or the Taiex rose 0.55 percent to reach 11,062.97 points.

Soon after the local equity market opened, buying in Largan shares vaulted the stock past the nearest technical resistance at the 60-day moving average of NT$3,966 after Apple shares closed at a record high of US$181.73 on the U.S. market overnight, dealers said.

"The stock had been consolidated for some time after it dipped to an intraday low of NT$3,400 on Feb. 26," MasterLink Securities analyst Tom Tang said. "With other major heavyweights in the Apple supply chain rising, Largan had lagged behind them and it was time for the stock to play catch-up."

Tang referred to Taiwan Semiconductor Manufacturing Co., which is believed to supply the A11 processor for the latest iPhone and iPhone assembler Hon Hai Precision Industry Co. The two stocks have driven the upturn of the broader market in recent sessions.

Tang said it appears foreign institutional investors have resumed buying Largan shares for bargain hunting over the past four sessions with net buying of 409,00 shares, but the amount has so far not been significant.

"Judging from today's movement, foreign institutional investors are possibly staying on the buy side," Tang said. "Whether aggressive institutional buying will start depends on Largan's reported sales figures after a slow February. Investors need real numbers before pouring large funds into such a high-priced stock."

Despite recent selling, Largan remains the most expensive stock on the local market.

In February, Largan posted NT$2.22 billion in consolidated sales, the lowest for two years, down 37 percent from a month earlier and 35 percent from a year earlier. The plunge in February sales largely reflected the reduced number of working days in the month which included the six-day Lunar New Year holiday.

Largan said demand from its clients appeared weak in February in the wake of slow season effects in the first quarter, but as the number of working days increases in March, sales will grow, accordingly.

Market analysts said Largan has felt the pinch resulting from a fall in orders placed by Apple since December as global demand for the signature iPhone has slowed.

In addition, Largan has been affected by inventory adjustments among Chinese smartphone brands, which cut orders to the Taiwanese firm.

In the first two months of this year, Largan's consolidated sales fell 20 percent from a year earlier to NT$5.73 billion.

In a recent research note, a U.S.-based brokerage reduced its target price on Largan shares from NT$3,500 to NT$3,200 and left a "neutral" recommendation on the stock unchanged, citing fierce competition in the dual camera lens market.

The brokerage remains cautious about shipments of the iPhone X and has lowered its forecast for Largan's earnings per share by 3 percent to NT$204.1 and NT$227.1 for 2018 and 2019, respectively.

In addition, the U.S. securities house has also cut its forecast for Largan's 2018 revenue by 4 percent to NT$53.65 billion.

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

(By Han Ting-ting, Jeffrey Wu and Frances Huang)

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