Brokerage keeps 'underperform' rating on Asustek after sales report

2018/09/11 17:34:45 fontsize-small fontsize-default fontsize-big
Brokerage keeps 'underperform' rating on Asustek after sales report

Taipei, Sept. 11 (CNA) A Japanese brokerage has maintained its "underperform" rating on shares of Taiwan-based PC brand Asustek Computer Inc. after the company reported lower-than-expected sales for August.

In a research note Tuesday, the brokerage said escalating price competition in the emerging PC markets has affected Asustek's sales, while the vendor is also faced with tariff threats imposed by the United States and China.

In addition to keeping its "underperform" rating, the Japanese securities house also maintained a target price of NT$229 (US$7.44) on Asustek, according to the research paper.

On Tuesday, shares of Asustek fell 0.58 percent to close at NT$256.00, with 1.21 million shares changing hands on the Taiwan Stock Exchange, while the broader market ended up 0.25 percent at 10,752.3 points.

Soon after the local equity market opened, Asustek shares came under pressure as investors cut their holdings, taking into account the company's August sales, and stock remained weak throughout the session.

For the month of August, Asustek posted NT$31.1 billion in brand revenue, up 21 percent from a month earlier but 10 percent lower than a year earlier. It reported consolidated sales of NT$33.7 billion, a 17 percent monthly increase but an 11 percent drop from a year earlier.

The Japanese brokerage said it had expected Asustek to post NT$98.4 billion in brand sales for the third quarter of the year, but the company's combined sales for the months of July and August accounted for only 58 percent of that amount.

Asustek said its shipments in those past two months were lower than expected due to a delay in new product offerings, escalating global competition, and the trade tensions between the U.S. and China, which have hurt consumer sentiment.

Asustek has been encountering stiff price competition in the Europe, Middle East and Africa (EMEA) markets, and its smartphone operations will continue to impact its bottom line, the brokerage said, expressing cautious sentiment about Austek's profit margin and sales for the second half of this year.

CNA cannot identify the brokerage 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.

(By Jeffrey Wu and Frances Huang)
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