FIH Climbs on Reports of IPhone-Led Profit: Hong Kong Mover

Rose by a record in Hong Kong after HSBC Holdings Plc. and Citigroup Inc. raised ratings, citing a return to profit on orders for Apple Inc. (AAPL)’s iPhone and Amazon.com Inc. (AMZN)'s new device. FIH added 34 percent to HK$3.67 as of the midday break in Hong Kong, headed for the biggest gain since it began trading in February 2005. Over 156 million shares traded, more than 13- times the three-month moving average, according to data compiled by Bloomberg. The benchmark Hang Seng Index fell 0.4 percent.

Employees of Hon Hai Precision Industry Co. Ltd. work along a production line in the Longhua Science and Technology Park, also known as Foxconn City, in Shenzhen, China. Photographer: Thomas Lee/Bloomberg

A transfer of orders for iPhones from Hon Hai Precision Industry Co. (2317), as well as a smartphone for Amazon.com will help Foxconn International boost factory utilization and return the company to profit, the two brokerages wrote in reports. Amazon is working with FIH to develop its first smartphone, Bloomberg News reported in July.
“These new customers (Apple and Amazon) should help lift utilization,” Taipei-based HSBC analysts Yolanda Wang and Joyce Chen wrote in a report today, raising their recommendation to overweight from underweight. Revenue will rise 41 percent in fiscal 2013 while operating margin will improve to 2.5 percent from -5.5 percent, they wrote.
Foxconn International, whose major clients include Nokia Oyj (NOK1V), Motorola Mobility Holdings Inc. and Sony Ericsson, will start producing iPhones late this year or early next year, Daiwa Securities Group Inc. Taipei-based analyst Birdy Lu wrote in an Oct. 10 report.
`Golden Opportunity'
Hon Hai Precision, the world’s largest contract manufacturer of electronics and the Taipei-based flagship of the Foxconn Technology Group, owns 69.5 percent of Foxconn International through its Foxconn Far East Ltd. unit. Its stock lost 1.4 percent in Taipei trading.
The company is unaware of any reason for today’s share price movement, it said in a Hong Kong exchange filing today. Spokesman Vincent Tong wasn’t available at his office and didn’t immediately reply to an e-mail from Bloomberg News.
“FIH has been the poster child for the decline of traditional handset brands - Nokia, Motorola and Sony Ericsson, which together accounted for 90 percent of FIH’s sales back in 2007,” Citigroup Taipei-based analysts Kevin Chang and Jonathan Gu wrote in a report dated Nov. 2. Hon Hai transferred some iPhone orders to FIH from last month, they wrote.
“With internet/software companies getting into the smartphone space, FIH now has a golden opportunity to resume growth,” wrote Chang and Gu, who changed their rating to buy from neutral and raised their price target by 45 percent to HK$5.80. “We note that Amazon, Google, Microsoft, Xiaomi, Baidu, Tencent are all trying to launch smartphones and none has in-house manufacturing.”
Today’s climb stems FIH’s decline this year to 27 percent following a 7.7 percent drop last year and 40 percent in 2010. Its six-month loss widened 12-fold to $226 million for the period ending June 30, according to data compiled by Bloomberg. more info