Hon Hai shares could trend higher next week amid earnings optimism

Taipei, Aug. 23 (CNA) Shares of Hon Hai Precision Industry Co., the world's largest contract electronics maker, are expected to continue an uptrend next week amid lingering optimism toward its earnings prospects for the second half of this year, market analysts said Saturday. Investors are likely to pick up Hon Hai shares over the next few sessions and raise their holdings in the stock as they are glad to receive the dividends the manufacturer will pay after it goes ex-dividend on Aug. 28, analysts said. Buying in a stock which goes ex-dividend generally shows investors' confidence in the stock's earnings outlook even if the share price of the stock will be subtracted by the same amount of the dividend it will pay on the going ex-dividend day. In the past five trading sessions, shares of Hon Hai gained 2.33 percent to close at NT$110.00 (US$3.67) on Friday, outperforming the main board, where the weighted index rose about 1.88 percent. On Friday alone, Hon Hai shares rose 1.38 percent after foreign institutional investors bought a net 11.91 million shares of the stock on the back of an upbeat mood toward the company, which has been dubbed one of "Apple concept stocks", assembling iPad and iPhone for the U.S. consumer electronics giant. Hon Hai will issue a dividend of NT$3 for each share investors hold, which is comprised of a cash dividend of NT$1.8 and a stock dividend of NT$1.2. Cash dividends will total more than NT$23.63 billion and stock dividends will be valued at more than NT$15.75 billion. In the second quarter, Hon Hai posted NT$20.19 billion in net profit for the second quarter, up 3.29 percent from a quarter earlier. Its earnings per share for the second quarter rose to NT$1.37 from the first quarter's NT$1.33. Looking forward, analysts said, Hon Hai will benefit from the launch of Apple's new iPhone and iPad, likely in September, to boost the Taiwanese supplier's bottom line for the third quarter and even for the second half of the year. The market has widely expected that Apple will unveil two new larger iPhone models, one with a 4.7 inch display screen and the other with a 5.5 inch display in September, to boost its iPhone shipments to 87 million-90 million in the second half of the year, which could act as a catalyst to boost Hon Hai's earnings growth. In addition, Hon Hai's efforts to transform itself from a pure manufacturer into a technology services provider to boost its profit margin, have been hailed by foreign institutional investors. Analysts said that Hon Hai's consolidated sales for the second quarter could rise at a high single-digit pace from a quarter earlier, and the growth momentum is expected to peak in the fourth quarter, when sales could rise 45-50 percent from a quarter earlier to hit a new quarterly high. (By Jalen Chung and Frances Huang)