Taipei, July 21 (CNA) Shares of contract PC maker Pegatron Corp. staged a rally in Thursday morning trade on local media reports that the company has just secured large orders from U.S. consumer electronics giant Apple to churn out iPads and iPhones, dealers said.
The orders taken by Pegatron were the result of Apple’s intention to shift part of its orders from Hon Hai Precision Industry Co. Ltd., the world’s largest contract electronics producer, in a bid to broaden its supply chain, the report said.
During the trade, Pegatron rose 3.98 percent to NT$35.25 (US$1.22) with 14.11 million shares changing hands, while Hon Hai fell 1.5 percent to NT$91.80. The benchmark weighted index was down 0.04 percent at 8,702.38 points.
“The speculation of Apple’s orders to Pegatron has been circulated in the market since last week, and today’s media reports triggered massive interest in the stock,” Grand Cathay Securities analyst Mars Hsu said, referring to the large trading volume.
While Pegatron and Hon Hai declined to comment on any specific customers, Hsu said the speculation could be true.
Hon Hai has served as the major contract maker for Apple, assembling iPhones and iPads largely through its broad production base in China.
“To lower risks, any company, including Apple, does not want to place all of its eggs in one basket. It is necessary for Apple to find another assembler or more,” Hsu said.
Although some foreign brokerages doubt few contract electronics makers can rival Hon Hai’s production capacity to satisfy Apple’s appetite, Hsu said Pegatron could be a good partner of the U.S. customer.
“Judging from sales of Pegatron in the first half of this year, I estimate Pegatron’s capacity utilization stood at a little more than 50 percent. The company has the capacity to serve Apple,” Hsu said.
In that six month period, Pegatron, which is the production arm of PC vendor AsusTek Computer, posted NT$185.80 billion in revenue. Hsu said the Apple order reports have prompted many retail investors to buy into the stock, while selling in Hon Hai emerged to take profit from the gains posted from the previous session.
“Amid concerns over slowing global demand, local PC makers have been under great pressure in recent sessions with valuations on the decline,” Hsu said.”Pegatron’s share price appears attractive.”
Hsu said there is some room for the stock to go higher before it moves closer to technical resistance at the range of NT$37-NT$38.