Computer
Investors should own companies that have “quality franchises” and can benefit from the latest categories of personal computers, Credit Suisse analyst Manish Nigam said. The brokerage raised its ratings on Hon Hai, Acer and Asustek to “outperform” and added the companies to its recommended technology portfolio.
A measure of technology stocks on the MSCI Asia-Pacific excluding Japan Index has jumped 29 percent this year on speculation that demand for computers and other electronics will increase as companies launch additional products and spending rebounds. Thats more than three times the 9 percent gain in the regional benchmark index and the best performer among 10 industry groups.
“Given the sectors large outperformance and the fact that poor quality and stretched balance sheets have actually run hard over the past month, we believe its time to rotate back into quality franchises and medium-term growth themes,” the analyst wrote in a report today.
Hon Hai, the worlds largest contract electronics maker, has gained 43 percent this year, while Acer, the No. 3 computer vendor, has also jumped 43 percent. The stocks were previously rated “neutral” at Credit Suisse. Asustek, the maker of the Eee PC laptop computer, was upgraded from “underperform.” The shares have climbed 15 percent in Taipei trading in 2009.
Acer, Asus
“In the Asian downstream space, we like Acer as the best PC brand player,” Credit Suisse analysts Robert Cheng and Jill Su wrote in a separate report. “We believe Asustek is past its worst and should see improvement in its sales and margins beginning 2Q09.”
Acer is planning to offer products that more easily synchronize data between devices, Aymar de Lencquesaing, Taipei- based Acers head of mobile-phone products, said today in a Bloomberg Television interview from Singapore. De Lencquesaing added the company expects to offer a handset equipped with Google Inc.s Android operating system by the end of the year.
Both Acer and Asustek have also introduced slim laptops with Intels consumer ultra-low voltage processors to reach more customers.
Still, gains this year mean technology stocks have become more expensive. The MSCI Asia excluding Japan Information Technology Index is valued at 25 times reported earnings, the highest in more than six years. The broader regional index has a multiple of 14 times.
Compal Downgrade
The brokerage lowered its rating on Compal Electronics Inc., the worlds second-largest maker of notebook computers that supplies to Acer, to “neutral” from “outperform” following a 61 percent surge in the stock this year.
Its technology portfolio includes shares of AU Optronics Corp., the worlds third-biggest maker of liquid-crystal displays, and Delta Electronics Inc., the worlds largest maker of computer power supplies. Taoyuan Hsien, Taiwan-based Delta was upgraded to “outperform” from “neutral” by the brokerage.
Acer gained 2.2 percent to NT$60.80 in Taipei trading today. AU Optronics lost 1.7 percent, halting a two-day, 9.4 percent rally, while Delta slipped 1.5 percent to NT$64.50. Asustek fell 1.6 percent to NT$42.50, while Hon Hai retreated 0.4 percent to NT$91.60.